KUALA LUMPUR (AFP) - The International Atomic Energy Agency (IAEA) on Friday gave a passing safety grade to a controversial Malaysia rare earths plant, but raised concerns that there was no long-term plan for properly disposing of the plant's potentially radioactive waste.

The rare earths processing plant in the Malaysian state of Pahang has generated opposition from green groups who fear radioactive contamination and have accused authorities and Lynas of overriding public concern.

In a report, the IAEA said it saw little risk of contamination due to the low-level radiation involved, and that its investigators were "not able to identify any instances of non-compliance" with international standards.

However, it also appeared to underscore environmentalists' concerns that Australian miner Lynas Corp has no long-term plan for the disposal of waste from the plant. "Lynas needs to demonstrate that the disposal of solid waste can be carried out in a safe manner over the long-term," the report said.

It also recommended that the Malaysian authorities require Lynas to come up with a plan.

"There is a lack of a plan for managing the waste from the decommissioning and dismantling of the plant at the end of its life," it said.

The IAEA said its report was based on a 2011 visit to the plant, when it was still under construction.

Lynas began processing rare earths there in late 2012, after a delay of more than a year due to strong opposition.

Lynas hopes the US$800 million plant (S$1 billion) can help break the Chinese stranglehold on the market for rare earths, which are used in everything from missile technology to mobile phones.

Malaysian protesters staged several large rallies before the plant opened, saying they feared radioactive contamination.

Efforts to block the plant through the courts have so far failed.

The Australian miner has insisted the plant is safe, saying any radioactive waste would be low-level and safely disposed of.

Neither Lynas officials nor key opponents were immediately available for comment.

The Malaysia government has strongly thrown its support behind the project, as part of plans to develop rural areas via big-ticket foreign-invested projects.

The IAEA also said Malaysian regulatory authorities and Lynas "are encouraged to maintain a proactive approach to relations with the media, public and other stakeholders" to address what it called "continuing widespread misconceptions about the plant".