Bauxite: Malaysia's sudden mining boom turns into a headache

Bauxite: Malaysia's sudden mining boom turns into a headache
Malaysia's bauxite industry has left many residents complain of pollution.
Malaysia enjoyed a multimillion-dollar windfall after neighboring Indonesia banned exports of bauxite, quickly transforming an industry that hardly existed until 2013 into China's biggest supplier.

But now quarries and dusty rock piles have left swaths of farmland resembling moonscapes as some residents complain of pollution. This month the government halted mining for a three-month moratorium to gain control over an industry that's exposed gaps in Malaysia's mining laws.

"If everything followed standard procedure, this would not be happening," said Teh Teck Tee, managing director of Aras Kuasa Sdn., who began mining bauxite near the city of Kuantan in mid-2014 and exports solely to China. He's hoping the moratorium will allow authorities to root out operators without proper permits and exports to resume with better control. "This will wipe out the illegal. It's good."

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Mining of the ore, used to make aluminum, surged last year after Indonesia prohibited the raw material from being sold overseas. China instead bought more than 24 million tons from Malaysia, valued at $1.1 billion, in 2015.

Malaysia shipped more than 20 million tonnes of bauxite to China from January to November last year, up nearly 700 percent from the year before.

In September alone, China bought a record 3.7 million metric tons of Malaysian aluminum-rich bauxite - a $170.8 million windfall for the oil palm-covered hills in eastern Pahang state, where more than 70 percent of Malaysia's estimated 109.1 million tons of bauxite reserves are located. Dozens of companies rushed in, paying smallholder-farmers for their land to be dug up.
Within months the quiet roads winding through the hills behind Kuantan, about 250 kilometers (155 miles) east of the capital, Kuala Lumpur, became congested with trucks. When red ore dust seeped into rivers and the sea, and dead fish washed up on nearby banks, residents reacted, torching transport vehicles, said Andansura Rabu, the local representative in the state assembly.

After contamination was reported in the waters around Pantai Balok, where the Pahang royal family has a home, Crown Princess Azizah Aminah Maimunah Iskandariah posted on her Instagram account earlier this month that she could no longer gather "kerang," Malay for cockles or seashells. "Fight people, fight," she said.

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The Department of Environment has conducted "several tests" on water samples from rivers said to be affected by bauxite, Minister of Natural Resources and Environment Wan Junaidi Jaafar said Friday in an email. Wan Junaidi offered no specifics on when results would be ready.

Bauxite mining has ground to a halt in Prime Minister Najib Razak's home state of Pahang. About 400 police and other government agency officials have been deployed to enforce the temporary ban, and eight checkpoints have been established to check for any illegal operations, Wan Junaidi said.

Complications over bauxite are adding to the premier's problems, which include a slowing economy and a political-funding scandal. Najib spent the latter half of 2015 fending off calls to step down over revelations that 2.6 billion ringgit ($606 million) appeared in his private accounts before the 2013 general election.

Even though Najib has denied wrongdoing and retains widespread support within his party, some voters in Pahang said they were disappointed with the handling of bauxite mining. Those reliant on the industry, including about 250 farmers in the Felda Bukit Goh area where mines are located, are frustrated by the loss of income.


"I want to beg the government, don't let this drag on," said farmer Nik Abdul Majid Nik Sin, 72, who set aside half of his 4-hectare (10-acre) oil-palm grove for mining after bauxite was discovered there around 2013. "What can I eat? My trees have been chopped. I have to wait for bauxite."

But it's just such activity on small plots that led to uncontrolled mining, said Fuziah Salleh, an opposition parliamentarian for Kuantan: Because small growers own much of the bauxite-rich ground, companies could pay them to mine their land without having to do the environmental impact assessment that is required when the land area exceeds 250 hectares.

"Greed and corruption, coupled with poor regulations and enforcement, have led to an environmental disaster," Fuziah said Jan. 20. "Our local economies, such as the fishing and tourism industry, which we have been dependent on for generations are destroyed. This environmental catastrophe will take years to rehabilitate."

Wan Junaidi's ministry will hold a three-day workshop starting Wednesday "to review all the rules, procedures, guidelines related to the mining and export of bauxite, and propose improvements," he said. It will cover mine management, transportation, stockpiling ore and the procedure for applying for export permits. Proposed improvements will be presented to the federal government for approval and implemented after the moratorium expires, he said.

"All allegations alleging that the ministry has ignored the bauxite problem and hadn't done enough to solve the issue is obviously not accurate," Wan Junaidi said.

Health Minister Datuk Seri Dr S. Subramaniam today said that bauxite mining in Pahang should be stopped altogether if the activity continues to pollute rivers and poses health risks.

Government action is coming too late for some. Residents erected barricades to stop trucks entering housing areas and spilling their contents, said kindergarten proprietor Mardhiyah Mat Hussin. Outdoor play at her nursery school was curtailed because of air pollution caused by bauxite dust, she said.

"We kept thinking this bauxite thing will all stop soon, but it didn't," Mardhiyah said. "We collected signatures at the local mosque, but nothing seemed to work."

After investigating allegations of malfeasance, Malaysia's anti-graft agency concluded Jan. 6 that there were "elements of corruption" involved in bauxite extraction. The next day it detained state-government officials in Pahang suspected of taking bribes from unlicensed miners to protect them from enforcement action, it said.

The state receives royalty payments from bauxite only after the ore is shipped, Pahang Chief Minister Adnan Yaakob told the New Straits Times this month. He wants the system changed as part of the government review.

They'll need to move quickly. Malaysia's bauxite reserves may be depleted in less than five years, based on last year's sales to China alone. Chinese refineries may instead seek bauxite from suppliers in Australia and Guinea, said Jackie Wang, a Beijing-based consultant at researcher CRU Group.

Malaysia's bauxite prospects depend on cost, said David Wilson, a metals analyst with Citigroup Inc. in London. "If the mining is low-cost and it's easy to ship and the miners can improve their environmental management, then it could come back for a while," he said.

The mining hiatus may be good for prices, said Adnan, Pahang's chief minister. "When the supply is low, what will happen? Price will go up," he said. "This is a blessing in disguise for the players. If I were them, I would enjoy this moratorium period."