In August 2008, the high-flying Lynas Corporation offered to pay $500,000 to a South African geologist, Michael Saner, if Saner would drop his claim over a rare earths deposit in Malawi.

That’s according to Saner. Citing a confidentiality agreement, Lynas has declined to comment.

Lynas had already told the market that it had ”acquired” this rare earths resource a year earlier in September 2007.

Fast forward three years. Although Saner never relinquished his claim, and has a High Court order stating the rights to the deposit cannot go to anybody else, only last Thursday did Lynas finally disclose, and then rather cryptically, that the ownership of its Malawi asset might be in dispute.

Back in 2008, Lynas, a market darling of the resources sector, was taking off. The vision of its founder, Nick Curtis, to become a global player in rare earths had already enticed the likes of Goldman Sachs, JP Morgan and the Capital Group to the share register. Privately, Curtis’s backers were already ascribing billion-dollar values to the company and its rare earths deposit at Mount Weld in Western Australia.

And there was more blue sky still. Curtis and his corporate wingman, Matthew James, had put their foot on a rich rare earths deposit in the landlocked African republic of Malawi.

The rub was that, according to the highest legal authority in the nation of Malawi, this Kangankunde (KGK) prospect didn’t actually belong to them. Enter Michael Saner.

At the meeting in Lynas’s Sydney offices on August 21, 2008, the South African geologist explained to Dr James, Lynas’s counsel Andrew Arnold, geologist Matthew Edler and Curtis himself – who got to the meeting later – how the transfer of the KGK licence had not been legal.

Saner says he showed the Lynas executives an order from the High Court of Blantyre in 2006 that prohibited the issue of any mining rights over KGK to anyone except Saner himself. And he went on to explain to them how Lynas had acquired its ”rights” from a Malawian furniture entrepreneur called Tony Patel, who held them illegally.

Then, according to Saner, who spoke with BusinessDay over the weekend, Lynas offered to pay him $US350,000, and then $US500,000, if he relinquished his High Court claim over the KGK tenements.

Saner refused. The dispute is now subject to letters flying back and forth between London law firm Mishcon de Reya, which acts for Saner, and Clifford Chance for Lynas.

There is another party in the fray, the London geologist and chairman and chief executive officer of Anglo-African Minerals, Michael Smith. Smith and his colleagues are minority shareholders in Saner’s Rift Valley Resource Development.

It was Smith who, via investigative journalist Paul Barry, exposed unscrupulous dealings of Alan Bond in African resources. Smith brought Bond in as a funder in his Lesotho Diamonds venture in Africa but, unimpressed by Bond’s corporate manoeuvres, later tried to dump him.

For its part, Lynas has a more powerful ally, at least for the moment. That is the Malawi government. Before announcing the Malawi licence in September 2007, the Minister of Mines flew to Australia to visit Lynas.

Moreover, the man who sold them the ”rights” to KGK, Patel, is closely associated with the country’s previous president Bakili Muluzi.

The government has so far ignored the orders of its High Court and has not reinstated Saner’s EPL (Exclusive Prospecting Right) over the deposit. It remains in court.

The Malawi Ministry of Mines had issued a mining license to Patel in May 2003 although Patel never held an EPL. Three years later Patel sold the ”rights” to Lynas.

For Malawi itself – a country bisected from north to south by the Great Rift Valley, this deal is a national headache. Although it desperately needs foreign capital it also needs to project the rule of law to attract exploration and investment.

The contretemps between Saner and Lynas is a rift between the legislative and executive arms of government. Again in 2010 the High Court upheld Saner’s rights to KGK, granting an injunction against the Malawian Ministry of Natural Resources and Environmental Affairs.

That injunction prohibits the granting of a mineral rights licence of KGK to any party other than Michael Saner. It grants him costs too. Saner was first awarded the rights to KGK in 2000.

Saner says Lynas knew about the legal dispute over the tenements since July 2008. Lynas is not party to any action.

A spokesman for Lynas said it could not answer questions about what it knew when, or of any details of the August 2008 meeting, as it was bound by a confidentiality agreement.

”If any such conversations occurred, they were under a confidentiality agreement and Lynas cannot comment,” the spokesman said.