Malaysia on Thursday said Australian miner Lynas Corp must comply with safety recommendations made by an international atomic energy panel before it can operate its rare earth plant.

The Lynas Advanced Materials Plant (LAMP) in Malaysia was scheduled to start processing rare earths imported from Australia for use in high-tech products from iPods to missiles in the third quarter of 2011.

The plant is under construction near the town of Kuantan in eastern Pahang state.

But it has faced protests from activists and residents who fear that radioactive waste produced in processing the lucrative metals would not be disposed of properly, and say it could endanger lives.

Following the public outcry, Malaysia tasked a nine-member panel from the International Atomic Energy Agency (IAEA) with studying the plant's safety.

The IAEA's report, released Thursday, recommended that Lynas provide a long-term plan for waste management.

"The government (of Malaysia) will ensure that Lynas complies fully with this recommendation of the IAEA report," the trade ministry said in a statement.

"Until this is done, the status quo remains: there will be no importation of raw materials into the country, and no operational activities will be allowed on site," it added.

Lynas executive chairman Nicholas Curtis vowed to abide by the IAEA's requirements.

"Together with the Malaysian regulators, we will implement all aspects of the IAEA recommendations to further enhance the safety of the plant," he told reporters.

"We know the plant is safe," he said, adding that the plant was still scheduled to be completed by the end of the year and the 700 million ringgit factory ($232 million) will be fully operational by the second quarter of 2012.

Curtis rubbished a report in the New York Times that some of the engineering work had not been done properly and cheaper materials were used.

"There is no truth at all to the report," he said.

Lynas has insisted the plant, which would be one of the few sources of rare earths outside China, poses no safety threats.

It has said any waste would be placed in safe, reliable engineered storage cells to avoid leakage.

A similar facility built by a Japanese firm in another part of Malaysia was forced to shut down in 1992 due to protests.

earlier related report
Malaysia to be next rare earth processor?
Kuala Lumpur, Malaysia (UPI) Jun 30, 2011 - Australian mining giant Lynas Corp. Ltd. said it will comply with recommendations of the International Atomic Energy Agency for the approval of the company's Malaysian rare earth processing plant.

The IAEA report, released Thursday, recommends 11 improvements to be implemented before awarding Lynas further licenses for the $220 million facility in Kuantan, including a decommissioning plan and dedicated funding for cleanup work at the site.

"We will implement all aspects of the recommendations together with the regulatory authorities to further enhance the plant's safety," Lynas Executive Chairman Nicholas Curtis told reporters Thursday, Malaysian national news agency Bernama reports.

Curtis said the plant would be operational at full capacity by the second half of 2012 and ready to deliver some products by the first half of that year.

Lynas has said the refinery, the first processing plant to be built outside of China in nearly 30 years, would meet nearly one-third of the world's demand for rare earths, 17 minerals used to manufacture such products as wind turbines, batteries for hybrid and electric cars, flat-screen monitors, missile guidance systems and mobile phones.

While China supplies more than 90 percent of the global supply of rare earths, its reserves represent one-third of the global total. Beijing has further tightened its grip on the minerals with price hikes of up to 300 percent this month, following extensive export quotas over the last two years.

Lynas plans to ship the ore from the company's Mount Weld mine in Western Australia to Malaysia, where it would be mixed with powerful acids, producing a slightly radioactive watery mixture to be pumped through the facility's 70 containment tanks.

A rare earth refinery in Malaysia operated by Japan's Mitsubishi Chemical, closed in 1992, is now one of Asia's largest radioactive waste cleanup sites, The New York Times reports.

The IAEA report also recommended Lynas do more for the Kuantan community, who have fiercely protested the plant.

"We intend to increase our commitment to community engagements, including a long-term conversation with the residents in Kuantan that will continue for the life of our plant," Curtis said Thursday.

But engineers involved in the project told The New York Times the IAEA inspection earlier this month was hasty, in part because of security concerns stemming from protesters gathering outside the refinery gates.

In the Times report, published Thursday, the engineers raised safety concerns, including structural cracks, air pockets and leaks in many of the concrete shells for the containment tanks.

Responding to the Times report, Curtis told reporters: "We can confirm there are no engineering issues which we believe will be unsafe. We put the safety of the community and employees ahead of anything else and we will in no way compromise the engineering standards."

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