By Rishav Chatterjee

Shares of Lynas Rare Earths hit their highest in over a month on Wednesday, extending gains, after Malaysia allowed the miner to operate its flagship refinery locally with a variation to the operating licence.

Shares jumped as much as 5.6% to A$7.2 as of 0229 GMT, hitting highest since Sept. 19 and putting the company on track to sit among the top 10 gainers in the ASX 200 benchmark index.

The government of Malaysia said on Tuesday it will allow Lynas Malaysia, which has been operating in central Pahang state since 2012, to import raw materials containing natural radioactive material and process rare earths until March 2026 after a long-running regulatory battle.

The licence extension comes despite concerns raised in recent years by Malaysia regarding radiation levels from the cracking and leaching operations during raw material processing.

Science and technology minister Chang Lih Kang said Lynas will be allowed to import radioactive material and continue processing rare earths, provided the firm carries out thorium extraction to remove radioactive waste.

"Lynas has de-bottlenecked its cracking and leaching following the licence update", while eyeing multiple opportunities to further improve production, analysts at Macquarie said.

The brokerage also lifted its price target on the biggest rare earths miner outside of China by 3% to A$7.70 and upgraded the earnings outlook for a near-term period.

Lynas' Malaysia refinery, its first outside China, has been embroiled in a radiation dispute at the plant with Lynas challenging an earlier ruling that would have halted operations.

In a statement on Tuesday, Lynas said the change to its licence will allow its Malaysian facility to continue to import and process lanthanide concentrate from its mine in Western Australia.

(Reporting by Rishav Chatterjee in Bengaluru; Editing by Janane Venkatraman)