Lynas is the only significant rare earth producer outside China. Rare earth is the name for a group of 17 metals used in batteries, computers, televisions and smartphones.
The product is currently at the centre of the growing trade war between the US and China. China controls most of the rare earth production and has threatened to use it a weapon in the trade war against the US.
To reporters Dr Mahathir says the 600 Malaysian employees at the plant in the state of Pahang were not afraid to keep working there.
“We invite them and then we kick them out. Others will say the country made a promise but, when there is a problem, we kick them out … we cannot do that,” he was quoted as saying by Bernama.
Lynas shares were up 3% at A$2.89 on Friday.
It is also possible that Malaysia will extend Lynas’ licence to operate the plant by a Sept 2 deadline.
Blocking Lynas may impact the rare earths market as Beijing tightens its grip on the supply of the rare material.