Shares in Lynas plunged 19 per cent today as it faced another delay in opening its rare earths plant in Malaysia, raising the prospect the company may need to shore up its funding with a share sale.

A Malaysian court extended a hold on the Australian company's operating license to Nov. 8 on Wednesday while it decides whether to consider a review aimed at permanently blocking production at the $800 million plant in Kuantan, on the country's east coast.

Lynas received the temporary operating licence in September for the rare earths plant, the biggest outside China. It had aimed to start production this month, processing material from its Mt Weld mine in Western Australia, but said on Wednesday that would be delayed and gave no new timetable for the opening.

Its shares fell to a six-week low of 69 cents in early trade and last traded down 16 percent at 72 cents, reflecting worries that the company will need to raise equity to shore up its funds the longer the delay runs.

"Given the current delays, we believe the core tenet for our argument to sell Lynas is still applicable -- namely risks surrounding funding, dilution, commission and waste disposal solution," Foster Stockbroking said in a note to clients on Thursday.

Foster estimated the company, which had $124 million in unrestricted cash as of June 30, would have only $20 million in working capital available if the plant starts operating in November, and said it would probably need to raise funds through a sale of new shares.

Lynas had $205 million in total cash at June 30, but $81 million of this can only be used for a future expansion of the plant.

Activists linked to the environmental group Save Malaysia Stop Lynas want the court to suspend the licence until two judicial review cases challenging the government's decision allowing the plant to operate are heard.
Lynas had hoped to open the plant a year ago, but has been delayed by community protests.

The company says that its plant is safe and is not comparable to a rare-earths plant in Malaysia that was shut by a unit of Mitsubishi Chemicals in 1992, after residents there blamed the plant for birth defects and a high rate of leukemia cases.

Reuters