Protest ... activists campaign against the rare earth miner during a rally in Kuala Lumpur on Monday.

Protest ... activists campaign against the rare earth miner during a rally in Kuala Lumpur on Monday. Photo: Reuters

Lynas has started production at its controversial Malaysian plant, calling it a "significant milestone'' for the company and prompting shares in the rare earths miner to rise up to 7.4 per cent in early trade today.

The Lynas Advanced Materials Plant (LAMP) commenced its first feed to kiln and will reach continuous feed by next week, the miner said in a statement this morning.

The company said it expected a ramp-up period of three to four months until its first commercial sales and subsequent cash generation.

"This is a significant milestone for Lynas,'' executive chairman Nicholas Curtis said. "The operation of the LAMP is now a reality, and the LAMP will provide real data that will assure people that the LAMP is entirely safe for our local communities and the environment.''

Shares in Lynas were trading 2.6 per cent higher at 69 cents in late morning trade, after earlier rising as high as 72.5 cents.

The shares have been on the way up, from 63.5 cents, since the miner announced at its annual meeting in Sydney last week that it expected to start production at the Kuantan plant next month.

Production was extensively delayed after repeated legal action from local environmentalists worried about potential health risks.

During the annual meeting, the miner came under pressure from shareholders frustrated at the share price, which had hovered near two-year lows.

Some shareholders were also concerned the environmentalists would continue to pursue legal action against Lynas despite the Malaysian government granting the plant a temporary operating licence in September.

Andrew Harrington of Patersons Securities said the news was "a huge milestone for the company after a difficult year''.

"The company has just raised more money than it could possibly spend in order to make sure it has enough working capital and enough in reserve in case there are any delays,'' he said.

"They've had a plant for the last few months that's been functionally complete but unable to start. And they've been burning a lot of cash keeping the lights on without being able to run the plant. At last, they're able to do what they've been trying to do for the best part of two years - get going.

"Looking ahead to 2013, they will be in production and in cash flow and even at $40 a kilo, which is the current rare earth price, they are bound to make pretty good margins.''

Mr Harrington said Lynas would be sensitive about environmental concerns around the plant and would "monitor everything going in and out of the plant in order to prove to people that what they're doing is better than world's best practice''.

"I think their ambition is essentially to be the benchmark for others.''