Mining activity in Malaysia is governed by both Federal and State enactments. Federal government oversees the mining operation, refinery, storage, transportation and export. State government monitors mining land usage and mining permits.

Malaysia’s REE mining is governed by a combination of federal and state laws:(mida.gov.my)

National Land Code 1965 – Regulates land matters, including mining rights.
Mineral Development Act 1994 (Act 525) – Oversees mineral exploration and mining activities.
State Mineral Enactments, Policies and SOPs – Each state has its own laws regulating mining activities within its jurisdiction.
Environmental Quality Act 1974 – Ensures environmental protection during mining operations.
National Forestry Act 1984 – Protects forest reserves, which may impact mining activities.

 Malaysia has significant deposits of non-radioactive rare earth elements (“REE”), such as Neodymium (Nd), Dysprosium (Dy), and Praseodymium (Pr).  Terengganu, Kelantan, Pahang, Perak, and Kedah are the primary states that hold valuable deposits of these rare-earth.

Terengganu
Estimated reserve: 7.2 million Metric Tonnes
Source: BERNAMA

Kelantan
Estimated reserve: 2.5 million Metric Tonnes
Source: NEW STRAITS TIMES

Pahang
Estimated reserve: 1.4 million Metric Tonnes
Source: NEW STRAITS TIMES

Perak
Estimated reserve: 1.7 million Metric Tonnes
Source: NEW STRAITS TIMES

Kedah
Estimated reserve: 1.2 million Metric Tonnes
Source: jmg.gov.my

Pahang
Pahang State Mineral and Geoscience Department; Pahang Mining Corporation (state mining entity)
Established own SOP and actively manages REE mining through state-linked entit

Kedah
Kedah State Mineral and Geoscience Department; Menteri Besar Incorporated (MBI Kedah)
Draft SOP awaiting state approval; MBI Kedah oversees state mining initiatives. The Chief Minister announced mining royalty of 15% will be imposed.

Perak
Perak Department of Mineral and Geoscience (Jabatan Mineral dan Geosains Perak – JMG Perak)
Comprehensive SOP for Non-Radioactive REE mining implemented, detailing exploration, mining, environmental management, and export procedures
Link to the SOP: https://jmg.gov.my/en/component/rsfiles/files?folder=akta-peraturan-pekeliling-garis-panduan%2Fgaris-panduan%2Fmineral-dan-geosains&Itemid=437
  
Terengganu and Kelantan have yet to specify the guidelines of REE mining as of the date of this article.

Perak has established a comprehensive Standard Operating Procedure (SOP) specifically designed for Non-Radioactive Rare Earth Elements (NR-REE), particularly focusing on Ion-Adsorption Clay (IAC) deposits. The SOP is meticulously structured to ensure sustainable mining practices throughout the lifecycle of the mining activities.

Key components of the Perak SOP include

A. Application Procedures
Prospecting/Exploration Licences (PL/EL):
– Applicants must follow guidelines clearly defined in the Mineral (Perak) Enactment 2003 and Mineral (Perak) Regulations 2008.
– Procedures include submission of detailed exploration plans, environmental management considerations, and obligations for reporting quarterly and annual exploration results.
– Bulk sampling and trial processing must be specifically approved by the Jabatan Mineral dan Geosains (JMG) Perak and the State Director of Land and Mines (Pengarah Tanah dan Galian – PTG).

Mining Lease (ML) and Proprietary Mining Licence (PML):
– Detailed pre-feasibility and feasibility reports are required, including comprehensive geological and economic assessments.
– Application includes submission of an Operational Mining Scheme (OMS) detailing extraction methods, environmental management, and progressive rehabilitation.

B. Technical Studies and Compliance Requirements

Pre-Feasibility and Feasibility Studies:
– Required under the Mineral (Perak) Enactment 2003 and associated regulations, focusing on geological data, mining economics, environmental considerations, and technical feasibility.
– Includes detailed evaluations of mineral reserves, economic viability, and environmental impacts.

Operational Mining Scheme (OMS):
– OMS must comply with the Mineral Development Act 1994 and JMG regulations.
– It includes detailed mining plans, site hydrology, hydrogeology, geotechnical analysis, and a clearly defined mine development schedule.
– Emphasis is placed on sustainable mining through best management practices (BMPs) and erosion and sediment control measures (ESCP).

Environmental Impact Assessment (EIA):
– Prepared in line with the Environmental Quality Act 1974 and the EIA Order 2015.
– Requires assessment of baseline environmental conditions, identification of potential impacts, mitigation strategies, and public engagement processes.

Environmental Management Plan (EMP):
– The EMP ensures systematic environmental protection through ongoing monitoring and compliance checks, including regular audits.
– Specific plans for water quality, air quality, biodiversity management, and waste management must be clearly documented and implemented.

C. Mining Operations

Mine Safety and Rehabilitation Plans:
– Detailed safety protocols in line with Department of Occupational Safety and Health (DOSH) guidelines, including emergency response and risk assessments.
– Comprehensive Mine Rehabilitation Plan required before commencement, emphasizing progressive rehabilitation throughout the mining lifecycle to restore ecological balance.

Regular Environmental Monitoring and Community Engagement:
– Continuous environmental monitoring programs (air, water, soil, noise) are mandatory, supported by periodic reporting.
– Active community engagement strategies are mandated to maintain transparency, gather feedback, and ensure the community benefits from mining operations.

D. Export and Royalty Management

Technical Assessment and Export Permits:
– A Technical Evaluation Letter must be obtained from JMG Perak before any export activity.
– An Approved Permit (AP) for export, administered through the electronic Bahagian Mineral dan -Geosains Permit (eBMGPermit) system, is also mandatory.

Royalty Management:
– Clearly defined royalty rates established under the Mineral (Perak) Enactment 2003
– Royalties are regularly monitored and managed by JMG Perak, ensuring the state adequately benefits from resource extraction.

There is currently only one REE processing plant in Malaysia, which is Lynas Advanced Material Plant (LAMP), located at Gebeng, Pahang. Annual capacity is 22,000 tonnes per annum (Source: MIDA).
 

Yes. In September 2023, Prime Minister Anwar Ibrahim announced a policy to ban the export of rare earth raw materials to prevent exploitation and loss of resources. This move aims to encourage domestic processing and add value to the country’s rare earth industry.

The permitted export REE product is Rare Earth Carbonate, and it must be stored and transported in jumbo bags, which are heavy-duty, reusable polypropylene bags.

Malaysia emphasizes sustainable and environmentally friendly mining practices. The Ministry of Natural Resources, Environment and Climate Change (NRECC) is developing a national framework to promote responsible REE extraction. Additionally, the Green Practices Guideline for the Mining Sector outlines best practices to minimize environmental impact.

Recent Legal Developments in Malaysia’s Rare Earth Industry
The Malaysian government is working on important changes to the law governing rare earth elements (REE). These changes aim to support responsible growth in the industry, from mining through processing and manufacturing.

Key Developments:

1. Updating the Mineral Development Act 1994
The government, through the Ministry of Natural Resources and Environmental Sustainability (NRES), is reviewing the Mineral Development Act 1994. These updates will address new industry challenges, such as illegal mining, and support the growing REE sector.

2. Involvement of MITI
The Ministry of Investment, Trade and Industry (MITI) will participate in amending the act. MITI’s role ensures that developments in the REE sector align with national priorities and international trade rules.

3. Sustainability and Responsible Mining
The proposed amendments emphasize sustainability, environmental protection, and good resource management. These changes will highlight Malaysia’s commitment to responsible REE practices.

4. Clearer Policies and Investor Confidence
Updating the law will provide clearer rules and greater certainty. This clarity helps attract more investments into Malaysia’s REE industry.

5. No New Regulatory Agency
The government confirmed it will not create a new regulator. Existing agencies will continue managing the industry.

6. Prioritizing National Interests
The government aims to prioritize developing the downstream industry, which focuses on processing and making REE-based products. This strategy ensures the industry benefits Malaysia economically.

7. Downstream Industry Focus
Emphasis will be placed on expanding the downstream sector, promoting domestic value-added processes, and creating local jobs. These legal updates are designed to help Malaysia build a robust and responsible REE industry that benefits both the environment and the economy.

As of May 2025, Malaysia’s rare earth element (REE) sector remains an emerging and highly sensitive industry, with ongoing policy developments, evolving regulatory structures, and state-specific implementation gaps.

Engaging a qualified Malaysian law firm offers several strategic advantages:

A. Navigate Complex and Evolving Regulations
Each state (e.g. Pahang, Kedah, Perak) operates under distinct mineral enactments and SOPs.
A Malaysian law firm with regional experience can guide investors through licensing, land access, royalty obligations, and federal-state compliance.

B. Conduct Market and Legal Feasibility Studies
Since Malaysia’s REE sector is still in the early phases of formalization, market data, geological viability, and regulatory interpretation are not always readily available.
Local law firms are best positioned to coordinate multi-disciplinary due diligence with geologists, state officials, and technical consultants.

C. Access Local Networks and Facilitate Engagements
Entry into this industry often hinges on building relationships with:
State land offices (PTG)
Mineral and Geoscience Departments (JMG)
Menteri Besar Incorporated (MBI) and GLCs
A local legal advisor can connect investors with relevant authorities, vet opportunities, and verify legitimacy of local partners or intermediaries.

D. Secure Investment and Operational Safeguards
Law firms help draft and vet:
JV and shareholder agreements
Mining rights agreements
Land leases and contractor appointments
Export documentation and tax compliance terms

In short, retaining a Malaysian law firm is not just a legal safeguard but a strategic investment to ensure lawful entry, stakeholder alignment, and long-term compliance in Malaysia’s REE sector.