* Plant delay seen depleting Lynas cash reserve
* Court decision due Nov. 8 on whether to review licence
* Company likely to need to sell new shares - broker
* Shares slump to six-week low
(Adds Lynas, lawyer comments)
By Sonali Paul MELBOURNE, Oct 11 (Reuters) - Shares in Lynas Corp Ltd
plunged up to 19 percent on Thursday as it facedanother delay in opening its rare earths plant in Malaysia,raising the prospect the company may need to shore up itsfunding with a share sale.
A Malaysian court extended a hold on the Australiancompany's operating license to Nov. 8 on Wednesday while itdecides whether to consider a review aimed at permanentlyblocking production at the $800 million plant in Kuantan, on thecountry's east coast.
Lynas received the temporary operating licence in Septemberfor the rare earths plant, the biggest outside China. It hadaimed to start production this month, processing material fromits Mt Weld mine in Western Australia, but said on Wednesdaythat would be delayed and gave no new timetable for the opening.
A lawyer working for the Save Malaysia Stop Lynas groupopposing the plant said if the court decides on Nov. 8 to goahead with a review of the license approval, the review couldtake one to two months.
That would add to what has already been a year-long delayfueled by community protests.
Lynas shares fell to a six-week low of A$0.69 in early tradeand closed down 15 percent at A$0.73, reflecting worries thecompany will need to raise equity to shore up its funds thelonger the delay runs.
"Given the current delays, we believe the core tenet for ourargument to sell Lynas is still applicable -- namely riskssurrounding funding, dilution, commission and waste disposalsolution," Foster Stockbroking said in a note to clients onThursday.
Lynas was not immediately available to comment on thechances it may need to raise equity.
However when Lynas received its temporary operating licencein September, Executive Chairman Nick Curtis ruled out an equityraising and said the company would tap banks for a new workingcapital facility.
Lynas had A$205 million in total cash at June 30, but A$81million of this can only be used for a future expansion of theplant.
It has said it is spending A$8 million a month just to standstill and needed to spend A$48 million to complete the plant andabout A$12 million on other items by Dec. 31.
That would leave it with just A$16 million in unrestrictedcash if production were delayed to December.
Brokers had raised concern that the A$1.25 price forconverting a $225 million bond issued to Mount Kellett CapitalManagement earlier this year may be slashed due to the licencebeing put on hold, adding to concerns that other shareholderwould be diluted.
However under the terms of the convertible bond, the pricewould need to be re-set only if the company did not receive itstemporary operating licence by Oct. 15. Given that Lynasreceived the licence in September and still has it, though it ison hold, a re-set has not been triggered.
Activists linked to the environmental group Save MalaysiaStop Lynas want the court to suspend the licence until twojudicial review cases challenging the government's decisionallowing the plant to operate are heard.
The company says its plant is safe and is not comparable toa rare-earths plant in Malaysia that was shut by a unit ofMitsubishi Chemicals in 1992, after residents there blamed theplant for birth defects and a high rate of leukemia cases.
($1 = 0.9759 Australian dollars)
(Additional reporting by Stuart Grudgings in KUALA LUMPUR;Editing by Richard Pullin)
Keywords: LYNAS SHARES/