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UPDATE 1-Malaysia extends license for Lynas' rare earths processing plant for 6 months

6 months@ (Updates with more details, background)

KUALA LUMPUR, Aug 15 (Reuters) - Malaysia on Thursday renewed the operating license for a rare earths processing plant owned by Australian miner Lynas Corp for six months with new conditions, ending a long-running dispute over radioactive waste disposal at the site.

The Atomic Energy Licensing Board, an agency under the environment ministry, said in a statement that Lynas' processing plant in Kuantan, on the east coast of Peninsular Malaysia, will be given a six-month extension of its operating license. The original license was due to expire on Sept. 2.

Lynas will have to identify a specific location with approval from local authorities for a permanent disposal facility to store its low-level radioactive waste, or it must secure official written approval from a recipient country that will take the waste, the regulator said.

Australia has said it will not accept Lynas' waste.

Lynas said earlier this month that it was conducting preliminary work on a waste-disposal facility, after Prime Minister Mahathir Mohamad said the license renewal hinged on Lynas providing a coherent plan to manage radioactive waste from its processing plant.

Lynas offered to move the waste to disused mines in the state of Pahang where the plant is located.

Among the other conditions, Lynas is also required to present a plan to set up its cracking and leaching facility overseas within four years of the license renewal.

The Australian company has been running its $800-million Malaysian plant since 2012, processing rare earths mined from Mount Weld in Western Australia. The cracking and leaching process produces the disputed low-level radioactive waste.

Lynas announced in May plans to build an initial ore processing plant in Western Australia that would help it overcome the licensing issues in Malaysia.

The regulator also told the miner to end all of its research and development efforts for processing its radioactive waste into agricultural soil conditioner.

(Reporting by Liz Lee; editing by Christian Schmollinger and David Evans)