Politics, local communities, and social media can make for a toxic mix when it all goes wrong—as Australian rare earths producer Lynas Corp is finding out to the tune of $10 million a month, according to its own estimates.
Attracted by tax breaks, the company built a rare earths refinery plant
in Malaysia to process material from its mine in Australia. Unfortunately, some of the waste is radioactive and Malaysia has already had one bad experience with rare earths processing when a Mitsubishi Chemical plant was shut in the early ‘90s after several health incidents
. It has since spent a $100 million cleaning up the mess, according to media reports.
A campaign calling itself “Save Malaysia Stop Lynas” has called for the Lynas plant to be closed. Through the campaign’s use of social media, it has steadily gained a worldwide following, which includes political support. It has used Twitter, Facebook, YouTube, blogs, and websites to great effect.
What seems to have gone so wrong for Lynas Corp is that it did not consult sufficiently with the local community, or at all, according to some sources. Yet, community relations is a regular part of setting up a mining project these days to bring the local community onside at the beginning. This is done through consultation and by giving something back in the form of new community facilities, farming equipment, training, jobs, and so on.
Indeed, a bit of research beforehand might have revealed the strength of feelings of the local community and led to either not building the plant or designing it in such a way as to reassure local people (that is, treating them more like stakeholders).
Also, Lynas Corp seems to have allowed the “Save Malaysia Stop Lynas” movement to dominate the debate rather than fully engage in it. As a result, support for the movement has grown like wildfire and left Lynas Corp looking like the caricature of some greedy western company cashing in on tax breaks and a more relaxed regulatory regime of a developing country. Once such views stick, they can be hard to shift even if they’re not backed by reality.
Inflaming matters even more, the company is suing the campaigners for spreading misinformation.
Basically, as the Lynas Corp CEO Nicholas Curtis admits, he underestimated the power of Facebook and Twitter when building the plant. The fact that much of Malaysia’s media might be state controlled matters less these days as campaigners simply bypassed it via social media.
For Lynas, the real cost of that social media campaign is that it has become political—there are elections coming up in Malaysia soon. Due to politics, the authorities have put on hold awarding the necessary licenses for the plant to operate and are demanding more safeguards to demonstrate that they’re taking the issues seriously. And that’s costing Lynas money.
From a PR perspective, Lynas Corp has a long and hard battle to win over an increasingly angry local population and skeptical media. The best it can hope for now is that it will get the necessary approvals—possibly after implementing even more safeguards and operating the plant without incident for several years—after which the protests may die down. In the meantime, some investors probably feel angry with management that these issues weren’t addressed sooner.
Justin Pugsley is principal at JJPAssociates. A version of this story first appeared on the company’s blog.