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The establishment of rare earth-based industries in Malaysia

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Malaysia’s rare earths industry is expected to contribute RM9.5 billion (US$2.03 billion) to the country’s gross domestic product in 2025, said Prime Minister Anwar Ibrahim.

Mr Ai Chuan Din Chum is aware that his village, Kampung Pong in the northwestern state of Perak, is located in an area that contains many natural resources that he believes have always been eyed by outsiders.

The former chief of the small quaint Siamese village located in a valley about 20 kilometres from the Malaysia-Thai border claimed that the area contains resources such as barite, tin ore, precious metals, and even gold.

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“Over the years many people have come here. There is so much here, even under this earth,” the 70-year-old told CNA recently at his village.

Kampung Pong — 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 “non-radioactive rare earth element” (NR-REE) mining project in Malaysia that began operations in March 2022.

There are about 200 people living in the village, with most of them working as general labourers or in informal jobs.

While Mr Ai Chuan and the other villagers are not directly involved in the NR-REE mining project located about seven kilometres away from the village via a dirt road, he told CNA that he had previously been hired to recce the area several times over the past few years for foreign businessmen.

He added that he is not sure what the rare earth elements are about exactly but believes that the interested parties wanted to extract some “chemicals” from the ground.

“They were doing some sort of tests with these chemicals. I was told that they wanted to make batteries for handphones or electronics with these chemicals,” he said.


Rare earth elements are used in everyday consumer electronic devices such as laptops, cameras, televisions, and smartphones.

They are also considered critical for the development of so-called green infrastructure like renewable energy sources as well as electric vehicles (EV).

China controls the market for rare earth elements, producing about 70 per cent of the world’s supply while processing nearly 90 per cent of it.

And as the use of rare earth elements gains more importance, Malaysia is jumping on the bandwagon to begin the mining of these elements and establish a full-fledged industry in the country under one of its high-growth, high-value (HGHV) sector initiatives.

Prime Minister Anwar Ibrahim told Parliament on Sep 11 that the government plans to ban the export of rare earth raw materials to avoid the exploitation and loss of resources, as well as to guarantee maximum returns for the country.

He added that a new National Mineral Policy would be drafted to drive the comprehensive development of the mineral industry based on the “principles of sustainability and responsibility”.

The policy, Mr Anwar said, would be used as a guide in carrying out mining activities in permanent forest reserves, environmentally sensitive areas (ESA), and protected areas.

“Detailed mapping of rare earth element resources and a comprehensive business model that integrates upstream, midstream and downstream industries will be developed to maintain the rare earth value chain in the country,” he said then.

In this context, upstream refers to mining activities, while midstream is the process that retrieves the rare earth elements.

Downstream meanwhile refers to the industry that uses the rare earth elements to manufacture products such as super magnets.

Mr Anwar noted that the rare earth industry was expected to contribute RM9.5 billion (US$2.03 billion) to Malaysia’s gross domestic product in 2025, with the industry expected to create 7,000 new jobs.

Malaysia’s Minister of Natural Resources, Environment and Climate Change Nik Nazmi Nik Ahmad told CNA that the country currently has an estimated 16.2 million tonnes of NR-REE deposits in the country, with a potential estimated value of up to US$182 billion.

“The significance to push on (in) the rare earth minerals (industry) is due to the impact it can bring to the national economy,” he said in a written response to CNA’s queries.

He added that a set of standard operating procedures (SOP) for NR-REE mining has been presented and agreed in principle by the Cabinet, but that it would not be made public until a comprehensive policy on the rare earth industry is developed and finalised.


The final SOP for NR-REE mining in Malaysia will depend on the outcome of a pilot project that is located next to a federal road that connects the town of Baling in Kedah to Gerik in Perak.

When CNA recently visited the project site in Kenering, Hulu Perak, construction of several facilities there were ongoing.

A few workers could be seen painting a building while some were seen laying tiles on the roof. The building was located on part of a piece of land that had been cleared.

Several tractors and vehicles were also seen at the site, although the actual site of the mining and processing plant however was not visible.

After several minutes, staff members of MCRE Resources — the company in charge of the pilot project — told CNA that the news outlet did not have the right to take any pictures of their facility.

This is despite the photos being taken from the side of a public road where an animal crossing happens to be located.

The staff members also said they would invite CNA for a tour of the facility in the future. The company did not respond to CNA’s earlier request for an interview.

The project site covers an area of 5,339 acres on 11 parcels of land, with the in-situ leaching (ISL) method used to extract lanthanide — a type of rare earth element that is used in the production of optical devices and alloys among others.

ISL is a mining process that extracts minerals from the ground by dissolving them in a liquid and then pumping the liquid to the surface.

While ISL is said to be less damaging to the environment compared to the conventional open pit mining that requires total clearing of sites, there are concerns among observers on whether groundwater sources will be affected and seep into water sources.

Mr Nik Nazmi told CNA that the pilot project would determine the feasibility of rare earth mineral mining activities and the ability of the SOP developed to regulate these activities in a safe and orderly manner across the country.

“To date, data shows that 5,700 metric tonnes of rare earth carbonate (REC) have been produced. Based on the audit conducted, it can be concluded that this SOP is able to regulate rare earth mining activities well,” he said.

He said that the SOP — which was evaluated by a committee consisting of individuals with knowledge and expertise in the fields of mining, hydrology, and hydrogeology — emphasised important points to minimise the impact of mining activities on the environment and society.

This includes only allowing mining that does not involve the production of radioactive materials, the use of ISL methods, setting regular and periodic monitoring methods including the construction of monitoring wells to detect any solvent leaks, and for an environmental impact assessment (EIA) to be carried out before any approval is given to for mining activities to be greenlighted.

Perak chief minister Saarani Mohamad was reported by Bernama as saying on Sep 26 that the pilot project proved that the rare earth element extracted was not radioactive and that the ISL method did not cause any pollution.

He also said that until July, the state authorities had received almost RM16 million in royalty payments from the exports of 10 batches of REC to China.

It is unsure when the ban on exports of rare earth elements as announced by Mr Anwar earlier in September will take place and if it will apply to the pilot project in Perak.


Environmental groups such as Sahabat Alam Malaysia (SAM), however, are not in support of mining even for national economic purposes, especially when much of these resources are in environmentally sensitive areas such as permanent forest reserves.

“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,” SAM president Meenakshi Raman said in a statement on Sep 12.

She pointed out Malaysia’s troubled history with the extraction of rare earth elements, particularly the Asian Rare Earth (ARE) plant in Bukit Merah, Ipoh that was allegedly responsible for high incidences of cancers and deaths in the community.

The ARE plant extracted yttrium — a type of rare earth element — from a mineral called monazite, leaving behind thorium waste, a radioactive chemical.

The plant was eventually closed in 1994, with the radioactive waste now being permanently stored at a closed-off dumpsite located in the Kledang Range, about 15 kilometres from Ipoh.

Subsequently, the building of Lynas’ rare earth processing plant in Kuantan, Pahang back in the 2010s also courted controversy.

Lynas, an Australian mining company, is the world’s biggest producer of rare earths outside China.

The rare earth oxides are mined and initially processed at their Mt Weld Concentration Plant in Australia before being shipped to Kuantan, where the concentrate is separated and processed into rare earth materials.

The main issue of opposition against the Lynas plant is the disposal of the waste, which is classified as radioactive.

In May, the government said that Lynas would no longer be allowed to import raw materials containing natural radioactive materials into Malaysia starting Jan 1 next year as part of conditions of its operating license.

In August, however, the High Court allowed Lynas to initiate a judicial review against the government over this directive.

“Haven’t they learnt from the tragic lessons of the Bukit Merah ARE plant in the past? Rare earth mining is far too risky and dangerous for the environment and human health, and outweighs any of its short-term economic benefits,” Mdm Meenakshi told CNA.


Director of Malaco Mining Sia Hok Kiang, however, believed that one cannot be against rare earths but continued to use products such as iPhones or laptops.

“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,” said Mr Sia.

Mr Sia, who is also a geologist and who has spent most of his career mining in Australia, however, made it clear that mining must be done responsibly with optimisation of extraction and environmental controls.

He said that the ISL method is simple to carry out and believed that this was one reason why there was a temptation to mine illegally.

“It really is that simple but to do actual mining, there is a lot of control involved,” said Mr Sia, who heads a midstream working group at Malaysia’s Academy of Science in developing an NR-REE industry business model for the country

“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.”

He said that in controlled mining for example, the moisture content of a slope had to be measured while the sampling of the groundwater had to be taken.

“You cannot afford to have a major landslide and cause the whole industry to be shut down,” he said, adding that while additional measures will cost more, they are necessary to ensure safety.

He added that Malaysia is “fortunate” to have found the REE deposits relatively late, as mining technologies have improved over the years.

He said 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,” he said.

Mr Nik Nazmi told CNA there was a need to accept the fact that any physical development initiative would 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,” he said.


Mr Sia said that the deposits discovered in Malaysia are the “heavier” rare earths that are unique but critical to the new technologies.

“Because these rare earths are very special, we want to make sure we capture as far down as possible rather than just sell the raw material,” he said, adding that these elements are different from the rare earth elements processed in the Bukit Merah and Lynas plants as they did not contain radioactive materials.

Dr Badrulhisham Abdul Aziz of the Center for Sustainability of Mineral and Resources Recovery Technology of Universiti Malaysia Pahang (UMP) said that outside China, the Lynas plant is the biggest and most modern rare-earths processing plant in the world.

He said that Japanese companies are buying the rare earths processed by Lynas and sending them to factories in Vietnam to make super magnets, which are essential in the manufacturing of EVs and turbines.

“We lost that downstream opportunity because of the politicisation of the Lynas issue. An ambassador of a European country also told me that one of the big companies pulled operations out of Malaysia to build wind turbines because of this reason,” he told CNA.

He was referring to how the then-opposition coalition Pakatan Rakyat — made up of Parti Keadilan Rakyat (PKR), the Democratic Action Party (DAP) and the Islamist Party of Malaysia (PAS) — had previously pledged to shut down the Lynas if they ever came to power.

Dr Badrulhisham, who is working with miners in the country, said that even if five percent of Malaysia’s rare earths deposits were mined, this would be enough to sustain an industry for 20 years.

“We must have a downstream (industry) that contributes to the economy. We must develop the whole supply chain because we have the material,” he said, adding that the advent of EVs for one will hasten the need for more REE.

Mr Ai Chuan of Kampung Pong, meanwhile, is not worried about the pilot project as it is located some distance away from his village.

“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,” he said, adding that he hoped that the company would offer jobs to the locals.

“But if the project was to expand and come nearer to us, then I would have more questions.”


Source: CNA

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