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Unearthing Malaysia’s RM1 Trillion Rare Earth Industry: Economic Promise and Environmental Challenges

Malaysia is sitting on a gold mine – but not one with literal gold. The country holds significant potential for a lucrative rare earth element mining industry. Recent discoveries reveal that Malaysia possesses substantial reserves of three non-radioactive rare earth elements (NR-REEs), estimated at 16.1 million metric tonnes, with a commercial value of approximately RM1 trillion.

In an Utusan Malaysia report, Universiti Malaysia Pahang Al-Sultan Abdullah associate professor and director of the Centre for Mineral Sustainability and Resource Recovery Technology, Mohd Yusri Mohd Yunus noted that these NR-REE sources are estimated to reach a price of RM2 million per metric tonne with a total market value of RM809.6 billion. He further highlighted the importance of these elements in the development of green energy sources.

The three NR-REE elements are the main elements needed in the production of high-power magnets to produce electric motors for hybrid/electric cars, wind turbines and household and industrial electrical appliances. Without the three rare earth elements, the transition to green energy would be impossible to implement. – Mohd Yusri Mohd Yunus[1]

With electric vehicles (EV) becoming more and more popular, the demand for rare earth elements is also increasing. Malaysia’s economy will certainly benefit from exploiting this resource – but at what cost?

What Are Rare Earth Elements?

Source: The Diplomat

Rare earth elements (also known as rare earth metals, or rare earth oxides, or lanthanides) are a set of 17 silvery-white soft heavy metals.

The 17 rare earth elements are: lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), promethium (Pm), samarium (Sm), europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb), lutetium (Lu), scandium (Sc), and yttrium (Y).

Contrary to their name, rare earth elements are abundant in the Earth’s crust. However, they are seldom found in large, concentrated deposits on their own; instead, they are typically found among other elements[2].

What Are Rare Earth Elements Used For?

Many don’t realise this, but rare earth elements are practically everywhere around us. Technologies we often take for granted, such as hybrid and electric vehicle engines, green technologies, and smartphones, are among the major consumers of rare earth elements. Additionally, these elements are utilised in high-performance magnets, hard disks, wind turbine generators, special metal alloys, and even glass. 

As the usage and availability of such technologies continue to grow, the mining and refinement of these elements have become a lucrative business. For countries like Malaysia, they represent a significant economic concern[2].

Mohd Yusri estimates that the production of electric vehicle (EV) technology batteries and high-performance magnets will require between 40,000 to 70,000 metric tonnes of these elements by 2030[1].

Today we can also watch movies without the help of external speakers or earphones/headphones. How is this technology evolving? The rare earth elements Nd and Pr are the answer to this technology. Magnets produced using this rare earth element are permanent magnets that are much stronger than common magnets (AlNiCo or ferrite magnets) today. With NdPr magnets being smaller in size and more powerful than AlNiCo or ferrite magnets, today’s phones are versatile portable speakers. – Mohd Yusri Mohd Yunus[1]

Source: Benar News

Malaysia’s Rare Earth Treasure Troves

Malaysia is no stranger to mining rare earth elements. Previously, two plants operated in Perak, the Asian Rare Earth (ARE) and the Malaysian Rare Earth Corporation Plant (MAREC). Both were subsequently closed down due to environmental concerns and the disposal of radioactive waste[3].

Despite this, the Malaysian government has expressed interest in exploiting this valuable resource once again[4], and no wonder given that our country is rich in rare earth elements such as monazite and xenotime, both of which are of critical importance to high-tech electronics and renewable technologies[5].

Furthermore, according to the country’s Minerals and Geoscience Department, rare earth minerals are found in ten of the country’s 13 states, spanning both the Malay Peninsula and Borneo Island. For instance, Perak is sitting on 1,687,500 tonnes of lanthanide, valued at around $20.25 billion[5].

A worker walking past a steamroller at the site of a Lynas plant in Gebeng, Malaysia. Source: Fulcrum

Three other valuable elements—Praseodymium priced at RM 577,212 per metric tonne, Neodymium at RM 593,336 per metric tonne, and Dysprosium worth RM 1.96 million per metric tonne—are not only widely found in Perak but also in Terengganu, Kelantan, Pahang, and Kedah[1].

One area rich in REEs is situated near Kampung Pong in the northwestern state of Perak. This small, quaint Siamese village, accessible by a winding and hilly tarred road that allows only one vehicle to pass through at most stretches, is the closest settlement to a pilot NR-REE mining project that commenced operations in March 2022[6].

Rare Earth – The Economic Benefits 

According to Nik Nazmi Nik Ahmad, the Minister of Natural Resources, Environment, and Climate Change, Malaysia currently possesses approximately 16.1 million tonnes of non-radioactive rare earth elements, estimated to be worth about RM 809.6 billion[5]. Notably, Prime Minister Anwar Ibrahim aims to capitalise on this valuable resource, with plans to ban the export of REEs as part of his government’s economic initiatives for 2023-2025[4].

Hence, the government will come out with a policy which bans the export of rare earth raw materials to prevent any exploitation, loss of resources and in turn guarantee a maximum return to the country. – Prime Minister Anwar Ibrahim[7]

According to the Prime Minister, implementing this ban will enhance domestic processing capabilities and prevent the loss of resources, addressing global concerns about China’s control of such minerals.

This move will also enhance the [raw rare earths] processing in the country while providing additional revenue to Malaysia. – Prime Minister Anwar Ibrahim[7]

The Prime Minister further mentioned the development of a detailed map and a comprehensive business plan to strengthen domestic processing, guaranteeing the sustainability of the value of rare earth metals, including those found in bauxite.

Detailed mapping of rare earth elements and an overall picture of a business model combining upstream, midstream and downstream industries will be developed to ensure that the value supply chain of rare earth elements remains in the country. – Prime Minister Anwar Ibrahim[5]

Anwar assured Parliament that the rare earth industry is expected to contribute as much as RM 9.5 billion to the country’s gross domestic product in 2025, creating nearly 7,000 job opportunities[8].

However, as the closures of ARE and MAREC demonstrate, there are some severe, negative environmental and social impacts that the mining and refinement of rare earth elements can cause.

The Ensuing Health Costs

Tragically, these detrimental impacts were already observed in Bukit Merah, Ipoh, Perak. 

In 1982, Japan’s Mitsubishi Chemicals opened the Asian Rare Earth refinery in the village of Bukit Merah, Ipoh, Perak. Authorities welcomed the facility as an advanced foreign investment expected to create jobs for the underserved in Malaysia’s north. However, it ended up leaving behind a dark legacy that continues to haunt the village to this day.

A local resident, identified only by his surname Ng, aged 79, was awarded a contract to dispose of radioactive waste from the then-new facility in 1982. The plant’s Japanese operators informed him that the waste could be used as fertiliser. However, what they didn’t disclose was that the waste he casually hauled away and disposed of in fields and rivers around Bukit Merah, home to 15,000 people, contained thorium, a carcinogenic radioactive chemical. This oversight forever ruined his life.

Look at my hands. The skin is peeling. When I go to a local bar, the women just take off, afraid that if I touch them they will be infected. – Ng, Bukit Merah hauling operator[9]

Ng’s suffering was not isolated; the entire Bukit Merah community went from an idyllic farming locale to a dilapidated wreck. Upon the plant’s opening, villagers promptly raised concerns about stinging smoke and foul odours. Unfortunately, local ignorance led to shockingly reckless waste disposal practices.

At one time, we dug a pit near a river in Bukit Merah and buried the waste. Occasionally, lumps of wet thorium sludge would fall off the lorry and school children would walk pass it. – Ng, Bukit Merah hauling operator[9]

The indiscriminate dumping of radioactive waste had severe health consequences for Bukit Merah’s residents. Residents, along with activists, claim that the village and surrounding areas have experienced increased rates of leukemia, birth defects, infant deaths, congenital diseases, miscarriages, and lead poisoning in the years following the plant’s opening.

“Mitsubishi’s rare-earth refinery is Malaysia’s worst industrial tragedy,” said T. Jayabalan, a public health consultant who lived in Bukit Merah in the late 1980s, fighting for the plant’s closure and documenting leukaemia cases. 

During his fight against the plant, he documented at least 11 deaths due to blood poisoning, brain tumours and leukaemia[9].

S. Panchavarnam vividly recalls the pungent and choking smell she endured while working at a timber mill next to the plant in 1987. Pregnant at the time, she often fell ill.

The Mitsubishi factory has caused a lot of pain. We are suffering in silence. – S. Panchavarnam[9]

Another bitter memory she has of this dark time was having to clean up the refinery’s waste after heavy rains caused it to flow down into the timber yard. Due to the lack of protective gear, Panchavarnam developed painful swellings on her legs and hands.

Panchavarnam said that her daughter, Kasturi, now 35, has encountered health challenges since birth, causing her to leave college at the age of 19. Kasturi was born with only one kidney, a short neck, and low-set eyes, and she continues to undergo treatment for persistent headaches.

The rare earths factory has brought pain to our lives. When she comes home from work, she will just sit in the corner of the room quietly. –  S. Panchavarnam[9]

Mitsubishi Chemicals closed the plant in 1994 following a mounting public outcry, but the government has neither admitted nor denied radiation poisoning in the village. The only compensation provided by the company was a RM 500,000 lump sum to the local community to aid victims in 1994[9].

Why Rare Earth Mining Needs To Be Responsible And Sustainable

When Malaysia granted a licence for Australian mining company Lynas to operate a new rare earth plant in Gebeng, Pahang, it unsurprisingly dug up unhappy memories of Bukit Merah and drew much protest and criticism.

Why did the government renew the operating licence for another three years? – Hon Eng Kee, vice-chairman of Perak Anti-Lynas Association[10]

Perak Anti-Lynas Association vice-chairman Hon Eng Kee speaks at a press conference urging the government to close Lynas operations in Pahang. Source: Malay Mail

Environmental groups such as Sahabat Alam Malaysia (SAM) have long been critical of the REE mining industry, especially when much of these resources are in environmentally sensitive areas such as permanent forest reserves.

Although the Minerals and Geoscience Department attempted to alleviate these concerns by reporting that, of the 29 areas with strategic potential for NR-REE in Johor, Kedah, Kelantan, Melaka, Negeri Sembilan, Pahang, Perak, Sarawak, Selangor, and Terengganu, 80% of these sites are not in permanent forest reserves[11], many still harbour doubts.

There is certainly a need for the government to make fully transparent where the REE resources are located and to impose a ban on mining activities in ESAs. 

It is not enough to talk about mining sustainably or responsibly as ESAs by definition must be protected at all costs. – Meenakshi Raman, SAM president[6]

Paradoxically, one cannot be entirely opposed to rare earth mining while still relying on smartphones and computers, as pointed out by the Director of Malaco Mining, Sia Hok Kiang. Therefore, there must be compromises and regulations if we are to prevent another incident akin to Bukit Merah from happening.

We cannot live on idealism or worst of all, not in my backyard policy. I want to continue using rare earths, but please don’t do it in my backyard. I think that is irresponsible. Whenever there is a deposit, we must try to take it up for our use and for future use. – Sia Hok Kiang, Director of Malaco[6]

Malaysia is already blighted by persistent illegal and unregistered operations in the mining and mineral processing industries, as demonstrated by the extensive and aggressive illegal mining of bauxite in 2016, which caused environmental problems and local outrage[12]. Therefore, implementing plans for environmentally-friendly practices and regulations in the rare earth industry is crucial to helping Malaysia achieve sustainable rare earth resources.

At the federal level, the Ministry of Energy, Natural Resources, and Environment regulates mineral exploration and mining, addressing environmental, social, and governance (ESG) concerns. The federal government can use its regulatory authority to promote downstream activities by enforcing international ESG mining requirements[3].

Mohd Yusri agrees with this sentiment, emphasising that while mining and the separation process constitute only a small part of the industry, it is crucial to support the high-value downstream industry, which relies entirely on quality production from the upstream and intermediate sectors.

To encourage downstream industries such as the production of magnets, LCD screens, lasers and the consumer electronics industry, upstream and intermediate industries need to be enriched in addition to positive policies to encourage new investment.

The upstream industry, which is mining, needs to be strengthened with the application of sustainable and sustainable mining policies. Traditional mining needs to be improved to ensure that the desire to achieve green technology and energy is not contaminated by unsustainable and unsustainable branches of industry. – Mohd Yusri Mohd Yunus[1]

He added that the rehabilitation process needs to occur concurrently with mining activities to control the environmental impact at a minimal rate.

In fact, the application of the concept of ‘responsible mining’ needs to be applied and audited from time to time so that this rare earth industry remains sustainable in the long term. – Mohd Yusri Mohd Yunus

Likewise, Sia made it clear that mining must be done responsibly with optimisation of extraction and environmental controls.

It really is that simple but to do actual mining, there is a lot of control involved.

That is where systematic proper mining is done by proper mining companies and not by the unregulated and illegal miners who are usually the ones who cause the environmental problems. –  Sia Hok Kiang, Director of Malaco[6]

He added that Malaysia is “fortunate” to have found the REE deposits relatively late, as mining technologies have improved over the years, noting that there was nothing wrong with the Bukit Merah plant per se but that its only flaw was that it was established 50 years ago and had no proper mitigation measures, especially when it came to its waste management. 

What kind of technology and control did they have? Everything was very primitive. Therefore, the environmental control and waste management is not as high-tech as what Lynas is doing now. – Sia Hok Kiang, Director of Malaco[6]

The Future Of Rare Earth Mining In Malaysia

The establishment of a robust rare earth mining industry in Malaysia is inevitable in the near future, as pointed out by Nik Nazmi in an interview with Channel News Asia (CNA). He emphasised the need to acknowledge that any physical development initiative will inevitably have environmental and social impacts on people.

This can be seen in development in other sectors such as road construction, townships, housing, agriculture, manufacturing, and others. Therefore, what can be done is to maximise the benefits while simultaneously minimising the negative impact on the environment and society. – Nik Nazmi Nik Ahmad, Minister of Natural Resources, Environment and Climate Change[6]

If the government can properly regulate the mining and processing of rare earth elements in the country, Malaysia could attract investments of up to RM 100 billion in the rare earth sector over the next 10 years[13].

Regarding the humble village of Kampung Pong, former chief Mr. Ai Chuan Din Chum told CNA that he is not worried about the pilot project. It is located some distance away from his village, and he is even hopeful that the rare earth mine will provide new jobs for the locals.

We are not affected at the moment and the project is far away. I believe the government knows about it and they would not allow it if it was harmful.

But if the project was to expand and come nearer to us, then I would have more questions. – Mr Ai Chuan Din Chum, former chief of Kampung Pong[6]

Ultimately, we are too reliant on rare earth elements to give them up entirely. However, to prevent another incident like Bukit Merah, we need proper laws and regulations in place to ensure that the mining, processing, and disposal of rare earths are sustainable and responsible.

Explore our sources:

  1. J. Chan. (2023). Malaysia’s rare earths elements could be worth up to RM1t, Pahang varsity don says as Putrajaya mulls export ban. Malay Mail. Link.
  2. N. LePan. (2021). Rare Earth Elements: Where in the World Are They? Elements. Link.
  3. T.S. Yean. (2023). The Race for Critical Minerals in Malaysia: Upstream, Mid-Stream, or Downstream? Fulcrum. Link.
  4. S. Strangio. (2023). Malaysia Flags Ban on Export of Rare Earth Minerals. The Diplomat. Link.
  5. N. Goh. (2023). Malaysia plans to ban exports of rare earth minerals. Nikkei Asia. Link.
  6. R.S. Bedi. (2023). ‘High-growth, high-value’: Malaysia’s rare earths industry getting a push, but splitting public opinion too. Channel News Asia. Link.
  7. M. Kaur & I. Shazwani. (2023). Malaysia’s govt counters potential Chinese pressure with proposed ban on rare-earth exports. Benar News. Link.
  8. A. Ananthalakshmi & M. Nguyen. (2023). Malaysia to ban export of rare earths to boost domestic industry. Reuters. Link.
  9. M. Jegathesan. (2012). Toxic legacy in Malaysia rare-earths village. Link.
  10. J. Bunyan. (2023). Recalling Bukit Merah rare earths disaster, Perak group pushes Putrajaya to shut down Lynas plant in Pahang. Malay Mail. Link.
  11. D. Ragu. (2023). Most REE sites not in permanent forest reserves, says minister. FMT. Link.
  12. E.S. Aziman, A.F. Ismail, M.A. Rahmat. (2023). Balancing economic growth and environmental protection: A sustainable approach to Malaysia’s rare-earth industry. Resources Policy. Link.
  13. The Straits Times. (2019). Malaysia can draw up to $33b in rare earth investment over next 10 years: Minister. Link.

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