MELBOURNE, Feb 28 (Reuters) - Auditors to rare earths producer...

MELBOURNE, Feb 28 (Reuters) - Auditors to rare earths producer Lynas Corp (LYC) flagged a material risk to its business on Thursday, after Lynas said it could not meet a timeline from Malaysian regulators to export a waste product before its operating licence comes up in September.

In December, Malaysia's Atomic Energy Licensing Board (AELB) told Lynas - the world's biggest producer of rare earths outside China - that it must export stockpiles of a type of residue from its processing plant by Sept. 2, when its full operating stage licence is due for renewal.

In its first half results on Thursday, Lynas said that exporting the residue, known as WLP, within the mandated timeline was "unachievable".

The requirement follows an environmental review into Lynas's Malaysian operations last year.

"Lynas Malaysia continues to engage in discussions with the Malaysian government seeking to agree a basis upon which Lynas will achieve a renewal of its operating licence," Lynas said in a note to its half year results.

"The Directors have reasonable confidence that an appropriate resolution will be achieved."

Lynas added that it has appealed the condition on management of WLP.

Auditors Ernst & Young drew attention to the note in a review report, saying: "These conditions indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity's ability to continue as a going concern."

Shares in Lynas fell as much as 10 percent to a two-week low.

The Lynas Advanced Materials Plant, owned and operated by Lynas Malaysia, produces two types of solid residue, Water Leach Purification Residue (WLP) and Neutralisation Underflow Residue (NUR.)

WLP is currently stored in temporary storage facilities on site.