The Lynas Corporation Ltd (ASX: LYC) share price surged in morning trade after the Malaysian government renewed its operating licence for three years.
Shares in Lynas jumped 4.5% to $1.98 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index fell 0.9% at the time of writing.
The stock is also bucking the downtrend in the materials sector with industry heavyweights like BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) copping a beating.
Lynas' Malaysian solution
The uncertainty created by the coronavirus crisis is to blame for the sell-off and not even Rio Tinto's big profit increase and record dividend announcement could save the iron ore major.
The dark cloud of uncertainty was already hanging over Lynas before the outbreak of the contagious disease as investors fretted over the miner's tense relationship with the Malaysian government.
Lynas owns and operates a processing plant in that country and protestors worried about radioactive contamination from the facility have been pressuring the government to cancel Lynas' operating license.
Political turmoil
Management only managed to secure a six-month extension the last time and shareholders are relieved that the political turmoil in the country didn't affect the company's ability to win a three-year renewal till early March 2023.
Malaysia's Prime Minister Mahathir bin Mohamad resigned in a move that's speculated to be a power play between him and his heir apparent Anwar Ibrahim.
Lynas' operating license is subject to four conditions and management said it's confident it can satisfy all of four.
Conditions for the renewal
The first requires Lynas to begin the process of developing the Permanent Disposal Facility (PDF) within the first year from the date of approval of the licence.
The company must submit a work development plan for the construction of the PDF and report on its development status as determined by the Malaysian Atomic Energy Licensing Board (AELB).
Further, Lynas must ensure that the cracking and leaching plant outside of Malaysia is in operation before July 2023. Lynas will no longer be allowed to import raw materials containing Naturally Occurring Radioactive Material (NORM) into the Asian country after that date.
Finally, Lynas is required to pay a financial deposit to ensure it complies with the relevant licence conditions.
Clear path forward
"Over the past eight years we have demonstrated that our operations are safe and that we are an excellent Foreign Direct Investor," said Lynas chief executive Amanda Lacaze.
"We have created over 1,000 direct jobs, 90% of which are skilled or semi-skilled, and we spend over RM600m in the local economy each year."
Lynas is planning to build a cracking and leaching plant in Kalgoorlie, Western Australia. This will remove radioactive material in the miner's ore before it is shipped to its Malaysian processing plant.
