Politics, local communities and social media can make for a very 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.
The company has built a rare earths processing plant in Malaysia attracted by tax breaks 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 nineties 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 been calling for the Lynas plant to be closed and through its use of social media has steadily gained a worldwide following including 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 right 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 there or designing it in such a way as to reassure local people ie 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 such support for the movement has grown like wildfire and very much 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 very hard to shift even if they’re not backed by reality and to boot 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.
And for Lynas the real cost of that social media campaign is that is has become political – there are elections coming up in Malaysia soon. Due to politics the authorities have put on hold awarding the necessary licences for the plant to operate and are demanding more safeguards on the plant to demonstrate that they’re taking the issues seriously. And that’s costing Lynas money.
From a PR perspective, Lynas Corp has a very long and hard battle to win over an increasingly angry local population and sceptical media. Probably the best it can hope for now, is that it will get the necessary approvals, possibly after implementing even more safeguards and operate 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 a lot sooner.