Australian rare earths miner Lynas said Wednesday it would consider "legal options" after Malaysia imposed tough new conditions on waste removal for the renewal of its licenses due next year.
Lynas shares lost more than 22 percent in Sydney after news of the new terms.
Lynas Corporation's $720-million dollar Malaysian plant, which processes rare earths mined in Australia, has been criticized by green groups and locals who have warned it produces dangerous radioactive waste.
The government's decision to demand Lynas take additional steps for the renewal of its licenses comes after the completion of a probe at the plant which was launched in September.
Malaysia's political opposition, which unexpectedly ousted the long-ruling coalition of Najib Razak in May elections, has been critical of the factory in Pahang state.
The miner said it was surprised by the decision to impose pre-conditions to renew the licenses.
"This appears to be policy based on politics, not policy based on science," said Lynas CEO Amanda Lacaze
She added it would consider "all options available" on how to respond, including "legal options".
Under the new license pre-conditions set by the energy and environment ministry, water that "contains radioactive materials must be removed from Malaysia" and the company must submit an action plan explaining how it will dispose of non-radioactive waste.
Lynas's three-year operating license for the factory is up for renewal in September 2019.
The company insists the plant is safe and that any radioactive waste will be low-level and safely disposed of.
Lynas opened its factory in 2012 and hopes it can reduce the Chinese dominance in the market for rare earth metals, used in everything from missiles to mobile phones.
But the Malaysian government said it is concerned about the increasing amount of accumulated residue at Lynas' temporary landfill site, which is at risk of flooding and poses a risk to communities nearby.
Widespread opposition to the plant led to the start of its operations being delayed by a year.
Meanwhile an ardent critic of the Australian plant, Fuziah Salleh, who quit as head of the audit committee in October, hailed the government decision.
"No decent country in the world will allow its citizens and its environment to endure the risk of contamination from radionuclides and toxic substances," he said.