(Adds Lynas' response, share movement)
KUALA LUMPUR, Aug 16 (Reuters) - Malaysia on Thursday renewed the operating licence for a rare earths processing plant owned by miner Lynas Corp LYC.AX for six months with new conditions, an extension shorter than investors and industry analysts had expected.
The Australian-listed firm is the only major proven producer of rare earths outside China, and the decision to renew its licence comes as markets are concerned that the industry may get embroiled in the trade war between Beijing and Washington.
Beijing has in the past tightened supply of the materials, used in goods ranging from military equipment to high-tech consumer electronics.
Under the conditions imposed by Malaysia, Lynas will have to identify a site for a permanent facility to store its low-level radioactive waste within six months or obtain consent from another country to take the waste.
Lynas said on Friday it was confident it would be able to satisfy this requirement. Australia has said it will not accept Lynas' waste. are optimistic that this decision will bring an end to the politicisation of Lynas over the past year," said Chief Executive Officer and Managing Director, Amanda Lacaze.
Lynas shares fell as much as 4.9% in early trade in a flat overall market, before retracing to be down 1.1%.
The Atomic Energy Licensing Board, an agency under the environment ministry, said Lynas will also be required to present a plan to set up a cracking and leaching facility overseas within four years of the licence renewal.
The cracking and leaching process produces the low-level radioactive waste that has angered residents near its Malaysian plant and led to the dispute with the Malaysian govenrment.
In May, Lynas said it would relocate these processes to Western Australia as part of its 2025 growth plan.
"They'll have six months to show their progress regarding plans for cracking, which for Australia's case is quite advanced," said Matthew Ryland of Greencape Capital, Lynas's second largest investor.
The requirement for Lynas to have an alternative processing facility ready within four years suggested that a longer licence renewal would be forthcoming if Lynas met the current conditions, he said. He was optimistic Lynas would meet the four-year deadline.
The licence for Lynas' processing plant had been due to expire on Sept. 2. Licence renewals are usually for three years.
Lynas said earlier this month that it was conducting preliminary work on a waste-disposal facility, offering to move the waste to disused mines in the state of Pahang where the plant is located. Australian company has been running its $800-million Malaysian plant since 2012, processing rare earths mined from Mount Weld in Western Australia.