UPDATE 1-Malaysia court keeps Lynas operating licence on hold

* Court postpones decision on license until Oct 10

* Company says postponement leaves operating license on hold

* Shares fall 6 percent from level before decision

(Adds confirmation from Lynas, activist comments, share pricefall)

KUALA LUMPUR, Oct 4 (Reuters) - A Malaysian court kept onhold the licence granted to Lynas Corp Ltd'scontroversial rare earth plant by delaying until Oct. 10 adecision on whether it will consider judicial reviews topermanently block production.

The Australian company said that the Kuantan High Court'sdecision leaves the temporary operating licence suspended untilOct. 10, extending a one-week halt that expired on Thursday.

The rare earth plant - the biggest outside China - has beenready to fire up since early May, but the company has beenembroiled in environmental and safety disputes with localresidents since construction began two years ago.

The plant is considered important to breaking China's gripon the processing of rare earths, which are used in productsranging from smartphones to hybrid cars.

Activists linked to the environmental group Save MalaysiaStop Lynas, who had asked for the postponement, want the courtto suspend the temporary license until two judicial review caseschallenging the government's decision allowing the plant tooperate are heard.

Shares in the firm fell 1.2 percent to $0.845 at 0454 GMT,down 6 percent from where they stood before the court decision.

"We're staying optimistic," Tan Bun Teet, a spokesman forthe group, told Reuters after the court decision.

"The court has set an early hearing for Oct. 10 and it lookslike they want to resolve it quickly," he added.

The group's previous attempts to stop the plant had failed.

Lynas received a temporary operating license for thelong-delayed $800 million rare earth plant early in September,enabling it to start production as early as October.

Protests over possible radioactive residue have drawnthousands of people and the project has become a hot topic aheadof an election that must be held by early next year.

(Reporting By Siva Sithraputhran; Additional reporting byMaggie Lu in Sydney; Editing by Michael Urquhart)

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Keywords: LYNAS MALAYSIA/