An Australian mining company said Thursday it plans to finish building a huge rare earths processing plant in Malaysia late this year, in a possible challenge to China's stranglehold on the metals.

The Lynas Advanced Materials Plant (LAMP) in Kuantan is scheduled to begin producing rare earths, which are indispensable in making many high-tech products, in the third quarter of 2011, a Lynas spokeswoman in Sydney told AFP.

"The Lynas Advanced Materials Plant is scheduled to come online in the third quarter of 2011," she said.

The facility -- which will refine raw material from Mount Weld in Western Australia -- is described by the giant firm as "the largest of its kind" and set to provide the first new source of supply of rare earths outside China.

The firm was two to four years ahead of any other producers outside China because rare earths projects take several years to develop, Matthew James, vice president of corporate and business development at Lynas, told AFP in October.

He said the project, which had been eight years in the making, had about 1.4 million tonnes of the elements at Mount Weld. The company plans to double output from the Malaysian plant to 22,000 tonnes a year by the end of 2012.

Rare earths such as super-magnet dysprosium and red-glowing europium are vital components in hard-drives and computer screens, while the metals are also pivotal in making laser missile systems, wind turbines and solar panels.

The project has however drawn criticism from Malaysian environmental groups, which said they were "appalled" the government had approved it, after a similar plant in another Malaysian state was forced to halt in 1992 due to protests.

"We do not want a repeat of what happened in Bukit Merah where the impacts are still felt until today," S.M. Mohamed Idris, president of Friends of the Earth Malaysia said in a statement.

The Bukit Merah rare earths plant, which was opened in the 1980s, ceased operations in 1992 after an uproar from local residents who blamed it for a number of birth defects.

Mohamed Idris warned that the new refinery will produce huge quantities of radioactive waste, and urged the government to engage with environmental groups before going ahead with the project.

Raja Abdul Aziz Raja Adnan, the head of Malaysia's Atomic Energy Licensing Board, said Malaysia has only approved the construction of the Kuantan plant and has not yet given the green light for it to begin operations.

He said the board, one of the government agencies tasked with looking into the safety aspects of the project, will need to be satisfied that it will not lead to a major impact on the public and environment.

"We are looking from the safety point of view. We are continuously measuring the (safety) parameters and collecting samples, we will make sure they control the residue," he told AFP.

Raja Abdul Aziz said the Australian firm has proposed turning waste from processing the ore -- which is slightly radioactive -- into concrete-like objects known as tetrapods to be used to build artificial reefs and sea walls.

He said the radioactive concentration in these objects must be "dilute enough to be very similar to the environment".

World attention has shifted to Australia's nascent rare earths industry after China, which dominates global production, began restricting exports, sending shudders through major consumers Japan, Europe and the United States.

In December, the United States called on China not to use rare earths as a "trade weapon" after Japanese industry said Beijing temporarily cut off exports in 2010 amid a territorial row.

China, which produces more than 95 percent of the world's rare earths, has denied any political motivations, insisting the restrictions on exports were due to environmental concerns and the need for a more sustainable approach.

This year the Asian giant has also tightened its grip over the industry by setting tough emission limits on miners producing the lucrative metals.

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