In the face of US pressure on strategic minerals, rare earth processor Lynas and upcoming rare earth supplier Kelantan pursue plans in the shadow of military use and environmental impacts.
MARCH WAS a busy month for Lynas Rare Earths with a slew of announcements. But the one that caught the eye – and wrath – of Malaysian NGOs was the signing of a letter of intent with the US’ Department of War.
The deal was to supply rare earth products “to support US national security and supply chain resilience objectives”.
(Feature image: As Malaysia starts mining rare earths, pollution risks from in-situ leaching extraction are a concern in groundwater-dependent Kelantan. | Image by Mohd Naeem Mohd Nor)
The NGOs’ concern rests on the fact that the Australian rare earth giant mines raw materials in Australia but processes them in Malaysia. Lynas then sells these products to different clients globally.
But rare earths are integral building blocks not only in renewable infrastructure such as electric vehicles and wind turbines; they are critical in military hardware production.
As the Trump administration drags the US and the world away from climate crisis solutions towards militarisation and war, could the scales tip this way for rare earth use and demand?
Malaysian civil society says not in our backyard. A month after the Lynas-US signing of the USD96 mil (RM380 mil) deal, 57 Malaysian groups objected in an open letter to the Malaysia Prime Minister.
They pointed out that the agreement “directly links processing operations conducted on Malaysian soil to foreign military supply chains”, “implicates Malaysia in the military activities of a State that is, at the time of writing, engaged in armed conflicts and military operations..”, and risks Malaysia’s complicity in violation of international law.
Opposition to its operations is not new to Lynas. In fact, its Malaysian facility has drawn resistance from civil society since its 2012 inception. The key point of contention is the radioactive waste from its processing plant in Pahang.
These are solids that Lynas calls “water leach purification (WLP) residue”, the leftovers after rare earth compounds are extracted from rare earth ores. WLP residue is radioactive because it retains radioactive elements like thorium which occur naturally in the crude ores that Lynas imports from Australia.
But the deal with the US has drawn signatories beyond environmental groups, notably pro-Palestinian BDS Malaysia and Selangor Islamic school coalition Pertubuhan Gabungan Institusi Pendidikan Islam Selangor.
Nonetheless, that same March, the Malaysian government extended Lynas’ operating licence for 10 years, allowing the company to pursue its goal to almost double its output. In tandem with that is a planned expansion of its Pahang facility. NGOs are protesting both the licence extension and physical expansion.
The thing is, China controls the global supply chain of rare earths – 69% of its production and over 90% of its refining and magnet manufacturing.
Lynas is in an incredibly strong position in the rare earth supply chain in the so-called midstream, which involves separation and purification. While a distant second to China, it still processes most of the remaining 10% of the world’s rare earths.
This is further demonstrated in the shape of Lynas’ latest product – samarium oxide. By successfully producing samarium oxide in Malaysia just last March, Lynas has shown it is advancing separation capability — what the industry watchdog Rare Earth Exchanges calls “the true bottleneck” in samarium’s supply chain.
For that rare earth, it says, is “militarily indispensable”, adding that “the US defense planners view samarium not as optional—but as mission-critical”.
In an announcement, Lynas states that “samarium oxide is highly sought after by customers for use in high performance magnets for electronics and aerospace as well as optical, catalyst and medical applications.”
In addition to this, Lynas had already started producing the lucrative in-demand rare earths with heavier atomic weights called heavy rare earth elements (HREE). The prices of its 2 products, terbium and dysprosium, are already 4–20 times higher than its previous offerings, and have doubled in the last year.
Because of rare earths’ soaring demand and value, rare earth-rich Malaysia wants to develop this industry, but by building a full rare earth value chain — from mining to processing and manufacturing — to capture full economic benefits. However, lacking domestic technology, expertise and capital, its golden goose is really in mining its potential 16.1 million tonnes of rare earth resources.
It makes sense for both Lynas and Malaysia to source feedstock from Malaysia. Lynas told Macaranga that “Malaysia’s ionic clay deposits have excellent potential as future feedstocks” for its Malaysian operation; these deposits typically have a higher proportion of HREE “which are in demand for future facing technologies…”
The company’s upcoming extension in Pahang is to process HREEs.
Last year, Lynas signed an MOU to buy rare earths from the state with the second largest resources in the country: Kelantan.
Mining vs the Environment in Kelantan
“EKONOMI LAH, ekonomi lah,” said Rosli Harun, the Penghulu of Mukim Kundur, Kelantan. It’s the economy. “I support this for the good of all. And for government income.”
The village headman was talking about rare earth extraction in his district of Gua Musang. While he had not heard of any specific projects in his area, he was in favour of it. He is right about how important rare earths could be to the state.
PAS-led Kelantan has the country’s third lowest GDP, 15 times less than Selangor which has the highest. But this could change if the state develops its lion’s share of the country’s inferred or estimated rare earth resources at 16% of the 16.1 mil tonnes with an estimated value in 2021 of RM129 bil.
In April last year in the Kelantan state assembly, the deputy Menteri Besar said the state had conducted a 1,000acre (405ha) rare earth mining feasibility study in Gua Musang. A month later, it signed an MOU with Lynas to supply the latter rare earth carbonates.
The project comes under Perbadanan Menteri Besar Kelantan, the strategic investment arm of the Kelantan government, and the state targets commercial extraction next year. The state has developed its own Standard Operation Procedure (SOP) protocol for rare earth mining based on the federal SOP, the latter of which is classified sulit (state secret).
Rich in heavy rare earth elements
The extraction site that the state government announced is Panggong Lalat in Gua Musang. Macaranga was not able to locate and visit the exact site, or obtain a copy of the latest rare earth map, which government officials told us “memang disekat” to prevent “orang mengambil kesempatan” (restricted to prevent misuse).
However, Macaranga was able to examine a rare earth map of Kelantan which is part of government-funded Universiti Malaysia Kelantan research presented at its 3rd International Conference on Tropical Resources and Sustainable Sciences 2021 (not peer-reviewed). The study investigated the distribution of REEs in different type of granitoid rocks in Kelantan. For this purpose, 15 samples were selected and analysed.
From our analysis, the Panggong Lalat area does not appear to have the state’s highest concentration of rare earth elements. It does however, have high concentrations of the lucrative HREE terbium and dysprosium, and the critical LREE samarium. All these minerals are currently brought in from Australia by Lynas and processed in their Pahang facility.
However, Kelantan’s rare earth extraction plans are concerning because of the state’s poor environmental governance record, namely on water pollution and biodiversity loss.
Groundwater pollution is a primary risk of the technology allowed by Malaysia for rare earth extraction: in-situ leaching (ISL).
And Kelantan’s population relies heavily on rivers and ground water for daily use. Over a quarter of Kelantanese do not have access to treated water, according to the National Water Services Commission (2024). And of the raw water for treatment, 43.8% comes from groundwater, and the rest from rivers.
Malaysia’s policy on rare earths allows extraction from ion-adsorption clay and in-situ leaching is the technology of choice to extract REE from this clay. First, pipes are inserted into hillsides. Then, a solution (usually ammonium sulfate) is injected into the clay deposits containing rare earths. The solution pulls the rare earth ions from the deposits and carries them downwards. Eventually the solution with the dissolved rare earths flows out of pipes and is collected at the foot of the hill. This carries the risk of the solution leaching into groundwater.
In addition, Kelantan has a record of mishandling mining-related water pollution. In 2019, a manganese mine with a state-issued licence was linked to river pollution that allegedly led to deaths in a Batek Orang Asli community. The mine was eventually sealed for operating without permission from the federal mining regulator, the Mineral and Geosciences Department (JMG).
Two years ago, 2 iron mines in Kelantan were reported to have polluted rivers, with heavy metal found in a Temiar youth’s body. One mine was reported to have been operating for 9 years without an approved environmental impact assessment (EIA).
Those mines were and are operating in Gua Musang, the very district from which Kelantan has its first rare earth mine. The Kelantan state government declined interview requests.
But JMG Kelantan is highly aware of the water pollution threat, it said in a written reply to Macaranga. It listed comprehensive protocols already in place to address this, from technical evaluations to working with the Department of Environment to monitor water quality.
Community concerns
BACK ON the ground in Gua Musang, other leaders whom Macaranga interviewed around Panggong Lalat were – like Penghulu Rosli Harun – unaware of the state’s plans to extract rare earths in their area. But they were supportive of it albeit with caveats.
“They must follow the SOP,” said Ab. Hadi bin Mat Zin, Penghulu of Mukim Kuala Betis, which neighbours Rosli’s mukim. “Don’t allow pollution, pollution of river water, if it involves our village, involves our daily water use, because the water comes from the river. It doesn’t matter whether it’s Orang Asli or Malays: we all rely on river water.”
Locals’ health was the concern of both Mohd Nawi Derashid, ex-Penghulu of Kuala Betis, and a Gua Musang resident who requested anonymity for fear of repercussions.
Said the latter, “We, the villagers want a win-win situation. Don’t omit environmental protection and people’s health because of development. Because people are the government’s assets. Be it for resource development or for any advancement, there have to be [protection] measures. We do not want our land to be polluted, [villagers] to get harmed, get sick or poisoned.”
![The only issue Mohd Nawi faces is monitor lizard-raiding of his fish pond. (pics: Lee Kwai Han [left] and Mohd Naeem Mohd Nor)](https://www.macaranga.org/wp-content/uploads/2026/05/4-Nawi-with-eaten-fishE_LKH-Naeem.jpg)
At last year’s briefing to the state assembly, the deputy Menteri Besar said that the state government expects Lynas to provide “technical guidance to ensure rare earths exploration and harvesting meets international standards”.
The Australian company concurred in a written reply to Macaranga. “Lynas’ technical experts work with potential feedstock partners to ensure they meet the high environmental and technical standards required by Lynas and our customers in the global manufacturing supply chain.”
It also said it “produces materials that are traceable from mine to finished product. Lynas also offers mine to motor traceability with selected downstream manufacturing partners.”
In addition to water pollution, though, Kelantan’s rare earth extraction risks impacting its biodiversity and ecosystems. Two areas of concern stem from the state’s removal of a conservation category from its State Structure Plan; and specifically for Gua Musang, the proposed amendment of the Local Plan to allow mining in protected areas.
No more ‘Environmentally Sensitive Areas’
Six years ago, the Kelantan government removed from their State Structure Plan 2040, the federally-defined classification of environmentally sensitive area (ESA). The proposed removal was made available for public consultation in 2023.
Development and management guidelines on ESAs do not have the strength of laws or even policies, says PLANMalaysia. They serve as conservation guidance to ensure areas of critical importance be preserved to maintain their life support value and reduce the risk of natural disasters caused by land use conversion.
Kelantan’s proposal removes all ESA designations from 82% of the state’s Permanent Forest Reserves (PRFs). The legally-designated PRFs and water catchment areas remain but can be removed from protection at the state’s will, as land matters fall under state laws.
Removing ESAs means that detailed EIAs for projects do not have to be conducted, an EIA consultant told Macaranga. Called Second Schedule EIAs, these must be conducted for development in areas deemed to incur more significant environmental impact, such as ESAs. They also require public display and are open to public consultation.
While the proposal was open for public consultation in 2023, Macaranga has not been able to determine the status of the removal. The state government declined an interview. But PLAN Malaysia told Macaranga the ESAs are still part of the 2040 State Structure Plan.
Then last December, the Kelantan government proposed amending the Gua Musang Local Plan, to move “quarry or mining” from the list of prohibited activities to the list of “allowable activities with conditions” in agriculture, forest and PRF lands in Gua Musang.
Gua Musang-based Temiar Orang Asli activist Nur Mohd Syafiq Dendi Abdullah said he was not aware of the proposed changes to either the Gua Musang Local Plan or the proposed ESA changes. “Right now, what I just see here are the impacts of the government wanting to change this and that,” he said.
Syafiq is part of the Jaringan Kampung Orang Asli Kelantan (JKOAK), who have been battling a slew of problems related to their ancestral lands and lives.
No Orang Asli involvement
Besides the mining-related river pollution, issues include forest clearing without free prior informed consent (FPIC), floods and landslides, conflicts with wild elephants, and the impending construction of the Nenggiri dam.
“Every government agency should seek FPIC,” said Syafiq. “That’s important because [changes to development plans] need to involve Orang Asli…Do they guarantee the future of Orang Asli or do they only benefit certain parties?”
Gua Musang is home to 16,738 Orang Asli, roughly 14% of the district’s population (Department of Orang Asli Development, 2023; Department of Statistics Malaysia, 2025).
As with the village leaders interviewed by Macaranga, Syafiq also had not heard about the rare earth mining feasibility study.
Greenpeace Malaysia campaign lead Heng Kiah Chun acknowledges that rare earths are here to stay. “We need rare earths for energy transition … but we need rare earth mining to be done responsibly.” Last year, Greenpeace International launched international guiding principles on minerals for energy transition, which includes rare earths.
Heng urged the government to adopt the guiding principles in these early days of establishing the rare earth industry. Likewise, businesses. “It’s an opportunity for more industry players to prove that the earlier you comply with such guidelines, to clean up your supply chain, it’s actually good for your own industry’s reputation.”
As Gua Musang local Penghulu Mohd Nawi said, “We need to be a developed country…Even compared to China, we are behind. By a lot… If the industry doesn’t endanger villagers, doesn’t impact us, then it’s all right. Ah, but if it impacts us, becomes a danger to our health, we don’t agree to it.”
Data visualisation: Irma Garnesia and Louis Lugas.
With thanks to Kelantan field guide, Mohd Naeem Mohd Nor, as well as to Paritta Wangkiat for her keen editor’s eye.
This story was produced with the support of Internews Internews Earth Journalism Network.
Also read: Macaranga’s coverage of the pilot rare earth project in Perak in 2023, and our coverage on conditions for Lynas’ licensing (2019) and its permanent disposal facility (2020).
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