In this April 14, 2011 file picture the Glencore headquarters in Baar, Switzerland is photographed. Mining company Xstrata PLC confirmed Thursday Feb. 2, 2012 that it is in merger discussions with commodities trader.Urs Flueeler
Griffiths Energy Inc., shunned by investors when it tried to go public earlier this year, has found an international partner with exceptionally deep pockets.
Glencore International Plc, the Swiss commodity and mining giant, has signed an agreement to invest in Griffiths' energy projects in Chad – the Mangara and Badila oilfields.
Glencore, which is taking over Canadian agribusiness Viterra Inc., will put up $300-million (U.S.) to develop Griffiths' projects, the Calgary-based company said in a statement Tuesday. Glencore will front up to $100-million per year, and in exchange, it will earn a 25 per cent working interest in the Mangara and Badila efforts. Griffiths will hold on to 50 per cent, while Chad's national energy company, Société des Hydrocarbures du Tchad, will have dibs on the remaining 25 per cent.
"This transaction, once closed, allows Griffiths to accelerate the development of the Mangara and Badila oil fields," Gary Guidry, Griffiths chief executive said in a statement. The company wants the projects to spit out 50,000 barrels of oil per day by the end of 2014.
In Glencore's world, the investment is small. But it still comes with risk beyond slurping oil out of the ground: Griffiths is facing bribery allegations tied to $2-million worth of consulting contracts in the African state.
Neither company mentioned the lingering allegations.
"This is an exciting opportunity to work in a joint-venture with Griffiths and the government of Chad to help fast track the development of a region with long term growth potential," Alex Beard, director of Glencore's oil commodity department, said in the statement.
Nomura International Plc, RBC Capital Markets, and First Energy Capital LLP provided Griffiths with strategic advice on the Glencore deal.