A controversial rare-earths plant being built in Malaysia by an Australian miner is safe, a parliamentary panel ruled on Tuesday, but opponents vowed to continue their fight.

The seven-member body, which is dominated by ruling-coalition lawmakers, recommended granting Lynas an operating licence to start processing rare earths imported from Australia at the plant in eastern Malaysia.

The facility was awarded a licence in February but the government froze that following protests by thousands of people, saying the panel would review the decision. It was not immediately clear when the licence would be issued.

"The committee found that up to now all the safety, health and environmental aspects in connection with the project... have been met," the panel said in a 74-page report. The panel was widely expected to rule in favour of the plant.

Opposition lawmakers refused to join the panel after work at the plant was allowed to proceed pending the review, which is the last procedural hurdle, although opponents are expected to step up their court action.

The plant in Pahang state has been billed by supporters as welcome foreign investment on Malaysia's relatively undeveloped east coast, and a way to break China's stranglehold on rare earths.

Rare earths are mineral elements used in the manufacture of high-tech gadgets ranging from iPods to missiles, and China's control of about 95 percent of world supply has raised concerns.

The plant has been dogged by protests by environmentalists and residents who fear harm from radioactive waste, posing a political headache for Prime Minister Najib Razak as he chases support for elections due by next year.

The panel said radiation levels were "low and safe" but would need to be monitored, along with air and water quality and public health.

Wong Tack, chairman of an NGO coalition opposing the facility, dismissed the findings and vowed more protests. Previous demonstrations have drawn thousands.

"It's expected. We never recognised this panel... The people will decide. We will never allow putting our children's future in their hands," he told AFP.

A Malaysian court in April dismissed a legal application by Pahang residents to halt work at the plant, which was originally schedule to start operations late last year.

Lynas has insisted the facility is safe and any waste will be stored and disposed of securely.