Mining for cash

  • Business
  • Saturday, 07 Dec 2019

IN July, a nondescript article from an online portal touched on a big issue – that the government was looking to exploit Malaysia’s treasure trove of mineral reserves.

The value ascribed to those reserves though was an eye-popping RM732bil.

That is apparently, what Malaysia has sitting inside its grounds and the man spearheading the ambitious plan is Water, Land and Natural Resources Minister Dr Xavier Jayakumar.

However, digging up the earth to look for minerals is certainly not in vogue, due to environmental concerns and more so with climate change being a hot topic globally these days.

Moreover, many countries are striving to move their nations to become destinations for high-tech industries.

Malaysia has also set itself some targets related to its high-tech ambitions. Malaysia is targeting to be an Industry Revolution 4.0 hub in South-East Asia to regain its status as an Asian Tiger.

So why go into mining?

For one, Xavier sees mining as a means to enable other industries to grow. His plan is for the country to produce high value-added products from the minerals.

“For example, the metallic minerals that we have can contribute to the development of metallurgical industries such as steel and iron beams. These products then become inputs for the construction industry, ” he explains.

For Xavier, the mining of minerals would not only bring transfer of technology, but the industry could also become a “new economic powerhouse” of the country, fuelling part of its economic growth.

The dentist-turned-politician tells StarBizWeek that “it would be part of the future growth of Malaysia, but not the main growth engine of the country”.

Last year, mining and quarrying only contributed around 0.7% of the country’s gross domestic product (GDP).

Notably, in the past, mining was a major activity in the country. By the 1970s, Malaysia had become the world’s largest tin mining nation, producing around 40% of global supply.

That status gradually came to an end after tin prices collapsed in the 1980s.

Today, there are pockets of mining activities in the country, most notably coal, gold and more recently, bauxite.

But if compared with the palm oil industry, mining is a minnow.

When asked about whether mining is meant to become as big as the palm oil industry, Xavier says: “The palm oil industry is a big earner now. This is why there is a lot of effort from the government to ensure that the palm oil industry is sustainable. At the same time, we are looking at other possibilities. We cannot rely on palm oil alone.”

Xavier points out that miners could potentially benefit from the high demand and attractive pricing of minerals.

However, Xavier cautions that the mining industry needs large investments, usage of high technology and also needs investors who can endure its long gestation periods.

“Mining is not going to be the new biggest industry in the country. It will be part and parcel of the new sources of income for the country, ” he says.

Notably, tax generation from this sector could potentially be significant, he points out.

In line with his positive views on the mining industry, Xavier did something in March that won him both supporters and detractors.

In March, the minister lifted the ban on bauxite mining. This came after a three-year ban. The ban was imposed after places like Kuantan suffered the ill effects of unregulated mining and run-offs from unsecured stockpiles. The well-documented episode of Kuantan being shrouded in a red dust due to bauxite mining is hard to forget.

But Xavier’s move was one which came with strict rules.

Only miners who fulfil the newly imposed standard operating procedures or SOPs are allowed to mine bauxite.

“Our SOP for mining bauxite is already done as we are very concerned about the environment. Anyone who wants to come into this business must strictly follow the SOP that is set by the ministry and the state, ” he says.

Additionally, Xavier and his team are putting a lot of focus on enforcement.

“Lifting the ban also requires stern enforcement action for miners if and when the new SOPs are not followed”, says Xavier.

“This is the instruction handed down to the enforcement officers, ” he adds.

According to Xavier, since the ban was lifted, only one licence for bauxite mining has been issued so far.

Says an industry player, “The new SOPs may be to move the industry towards the right direction. However, in reality, the requirements are very onerous and cost a lot. We for example are not able to fulfil it at this point”.

Says Xavier, ““I don’t think we have to worry about environmental pollution on a long-term basis if we have very strict SOPs and we enforce these regulations.”

However, the question is, will stricter SOPs alleviate the concerns for the environment?

In June, some Sabah conversationalists came out against the issuance of mining licences for the extraction of natural resources in the state.

It was reported that this group had urged the state government to stay off mining as its past Mamut copper mining experience had left irreparable damage to the state’s biodiversity.

Perhaps the biggest recent saga in the mining industry concerns Australia’s rare earth producer Lynas Corp. The operation of its plant in Malaysia since 2012, had caused a stir because it produced radioactive residue in the country.

However, the Australian miner’s operating licence was renewed a few months ago following extensive consultations with regulators.

The government imposed conditions on the miner to relocate its cracking and leaching processes, which was the first stage of its operations in Malaysia, back to Western Australia.

The cracking and leaching processes will leave behind the radioactive waste in Australia, while the separation techniques in mineral processing would be done in Malaysia.

The Aussie experience

In the case of Australia, its vast land in the country works in favour for large-scale mining operations as the outback is far away from populated areas.

Since the mid-19th century, mining has been a significant contributor to the Australian economy. In 2018, Australia’s resources exports – including minerals, metals and petroleum – generated A$248bil (RM706.3bil) in revenue. This accounted for 72% of Australia’s goods exports. In that year, over 132,000 people were employed in the Australian mining industry.

However, for Malaysia, inadequate land space could be one of the limitations for enhancing mining in the country.

On that, Xavier agrees that land space for mining closer to populated areas could pose a challenge, noting that striking a balance between “economic purposes, the environment and people” would be crucial in order to increase mining’s contribution to the economy.

“We have to strike a balance on whether we allow miners into certain areas. And even when we do not allow them, we need to be clear on what those grounds are.”

He adds: “I will be in talks with environmentalists and with my department. This is to figure out if it is worth allowing mining to take place in certain areas.”

This is precisely why Xavier has pushed for the setting up of the Malaysian Minerals Development Board.

The board, which will be a merger between the Department of Mineral and Geoscience and the Tin Development Board, would cover mining licences and leasing as well as all rules and regulations for miners.

Xavier expects the board to be set up by the second half of next year following its approval by Parliament.

“We are still formulating a proper set-up to form the board to allow suitable power and control in order to drive the industry forward, ” he says.

Given that mining requires hefty investments and return of investment is in the longer run, Xavier welcomes big players that have the mining experience and big pockets to spare for the investments.

Asked on his stint as a minister of water, land and natural resources, Xavier says the two-year tenure has been very exciting and challenging. “I have not had enough sleep though, ” Xavier quips.

Going forward, he plans to review and strengthen the acts under his ministry.

Having his hands full in land, water and natural resources, Xavier’s efforts to harness the mining industry will likely be the talk of the town given its need to strike a balance in policies concerning greenies, miners and the people.

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