RE: RE: What Embry said of gold & AXM late 2008kre8, you raise many good points. The MO of AOG is a buyer of cheap assets in high risk countries. This is how they built Addax Petroleum into a multibillion dollar company. With their vast African experience and connections they could repeat with Axmin what they have done with Addax petroleum and build it up into a multibillion dollar intermediate gold producer. And if you take into account that AOG is very cash rich, it would be reasonable to conclude that this recent charade of attempting to sell Axmin is either a negotiating tactic with respect to the mining license for Passeandro or an attempt to squeeze out minority shareholders. Since minority shareholders in Addax Petroleum did very well in the sale to the chinese, there is reason to hope for the same eventual outcome with Axmin. The following is a blurb on Jean-Claude Gandur who is the chairman of Axmin and the power behind th scenes. Does this strike you as someone who would run from a difficult circumstance or who rather would seize some advantage from it ?
International
Trouble Is My Business
Christopher Helman 10.15.07, 12:00 AM ET
Billionaire Jean-Claude Gandur has braved war and corruption to build anoil empire on the cheap.
Recently a huge explosion shook northern Iraq. Not the usual kind. Thisblazing fire and billowing black smoke came from a test drill at Taq Taq, anoilfield 30 miles southwest of Irbilin the Kurdish region. With no pipeline or storage tanks in place, AddaxPetroleum had little choice but to burn off the oil rather than let it soakinto the rocky ground. Opening the well for a few minutes revealed a truegusher: a flow rate of 37,500 barrels per day. Considering the results fromthree other wells already completed, engineers figure that Taq Taq holds morethan 2.7 billion barrels of high-quality crude and could produce as much as200,000 bpd for ten years.
One small problem: Iraq'sparliament still hasn't signed off on a federal oil law, putting the entire$500 million gamble in jeopardy. Jean-Claude Gandur, Addax's chief executive,is pushing ahead anyway. "It is absolutely unbelievable the quality ofoilfields untapped in Iraq,"he says. Gandur would prefer to have a law and an export license in place. Butin a pinch he figures he can sell oil--up to 20,000 barrels a day--to arefinery he'll help build for the Kurds, or hawk it straight out of the ground."Peace has no value to our assets."
Gandur knows his way around trouble. Most of his business is in restiveNigeria, where Addax produces 100,000 bpd--overshadowed by only Shell, ExxonMobil(nyse: XOM- news -people), Chevron (nyse: CVX- news -people), Total and Agip. The company is also pursuing prospects in Cameroon and Gabon. Wherever it ventures, Addaxdoes very well. Over the last 12 months it netted $300 million on revenue of$2.5 billion. Run out of Geneva, Switzerland, Addax is listed on the Toronto and Londonexchanges; Gandur's 24% stake is worth $1.5 billion. His m.o. has long beenbuying assets on the cheap--and making nice with strongmen. "Jean-Claudeis able to open the doors and negotiate on his feet," says MartinMolyneaux, an analyst at FirstEnergy (nyse: FE- news -people) Capital, a Canadian investment bank in Calgary, Alta. and an Addax underwriter."He is very good at interacting with people." People close to SaniAbacha, the late dictator of Nigeria,for example. Gandur has also been dubbed Commander of the National Order in Benin, has a diplomatic passport from Senegal, and for ten years was the honoraryconsul in Geneva for the civil-war-riven Republic of Congo.
The son of a Swiss pediatrician, Gandur, now 58, grew up in Alexandria, Egypt,where he learned Arabic, fell in love with history and began a lifelongdevotion to Egyptian antiquities. He studied law and political science at the University of Lausanne. In 1976 he went to work at thePhilipp Brothers trading house in Zug,Switzerland:"the best school in the world," he says. There he became a successorto infamous trader Marc Rich, who had left the company in 1973. Early on Gandurgravitated to francophone Africa and becamemanager of Philbros' African oil trading operations. After stints at rivaltrading houses, in 1987 he and three partners set up their own west Africantrading operation, Addax & Oryx Group, named after two members of theAfrican antelope family.
Soon AOG began acquiring physical assets to backstop trading positions,picking up oil storage tanks, petroleum depots, liquefied petroleum gas andoilfields. The company even branched out into gold mines (Gandur is chairman ofToronto-listed Axmin). In 1996 Gandur made the salmon leap from the downstreamactivities of oil trading and marketing, which provide thin margins by movinghuge volumes of other people's oil, into the upstream, which entails more riskand upfront investment but offers fatter returns. AOG inked its firstproduction-sharing contract with the oil minister of Ivory Coast to overhaul theabandoned offshore Espoir oilfield. That was followed up in 1997 withconcessions in offshore Benin.
Gandur came into the money a year later, in Nigeria,where U.S. oil company Ashland (nyse: ASH- news -people) and the French major Total were in a 50/50 venture developing fouroffshore oil blocks. Ashland,in the process of refocusing its business on mining, made a deal to sell itsinterest to a small French operator. But the Nigerians, insisting change inownership required government approval, threatened to repossess the assets. Ashland should have known better, jokes Gandur: "Ithink it was sabotage by some of the executives of Ashland because they wanted to keep it.Otherwise I don't understand why they messed up so much."
Their screwup; his payday. Addax explained to Dan Etete, then Nigeria's oil minister, that killing a contractwith a U.S. company would belousy p.r. and persuaded him to let Gandur negotiate with Ashland for the assets. Events played intohis hands. OPEC had boosted output just months before the Asian financialcrisis eroded demand for fuel; oil prices plunged from $20 to $12 a barrel.Gandur convinced Ashlandand Total to sell the four blocks, with 8,000 bpd of production and 30 millionbarrels of reserves, for less than $50 million. After investing $1 billion,Addax now produces 100,000 bpd there.
Did charm alone win the day? In 2000 two former Addax & Oryx Groupemployees were convicted in Switzerlandand fined for money laundering of embezzled funds tied to President Abacha.(Abacha, who died in office in 1998, is suspected of stealing more than $3billion from Nigeria.) Etete is on trial in Franceon charges of money laundering and receiving kickbacks from Elf Aquitaine (now part ofTotal). A French trader and former Addax executive, Richard Granier-Deferre, isbeing tried as an accessory. Etete reportedly bought $19.5 million of luxuryproperties in France.
Nigeriacontinues to be a contentious but profitable play for Gandur. In March 2006Addax signed production-sharing contracts on three blocks in an offshore areashared by Nigeria and tiny São Tome. Its partner is ERHC Energy, a publicly tradedcompany headquartered in Houston but controlled by Nigerian businessman EmekaOffor, a close associate of former Nigerian president Olusegun Obasanjo (Offorsays otherwise). Offor and ERHC reportedly got a sweetheart deal on its blocks,despite limited operating experience and insufficient access to the necessarycapital. "We are good friends," Gandur says of Offor. "We havechecked him out through several channels." The pals cut another deal lastNovember, Addax partnering with Offor's little-known company called Starcrestto develop Nigerian offshore block 291, a very promising prospect in the samegeologic trend as Chevron's giant Agbami field and Shell's Bonga. Addax paidStarcrest $35 million for a 72.5% stake, forking over $55 million to Nigeria as asignature bonus and pledging another $75 million in development costs.
When the deal was announced, the Nigerian media exploded with allegations ofcorruption. The block had been previously awarded to Transcorp, which,according to Addax Chief Financial Officer Michael Ebsary, hadn't come up witheither the money or the required international partner within 90 days, asstipulated by Nigerian authorities. Critics claimed Starcrest got the blockonly through cronyism. The Nigerian feds have been investigating, and in Augustthe press reported that new President Umar Musa Yar'Adua was considering therevocation of some recently granted licenses. Gandur says his request to meetthe president in person was recently turned down.
Shareholders of ERHC, meanwhile, are wondering why Offor didn't steer theblock 291 deal their way. In August Offor resigned his ERHC chairmanship."Nigeriahas not in the past been particularly good at enforcing rules on oil companieswith political ties," says Ebsary. "Now they are really trying toapply the rules." Still, he adds, "In these parts of the world youare invariably going to be dealing with people connected to someone powerful inthe ruling elite. That's just the way it is."
In that respect Addax shareholders have little to worry about. Gandur isbuddies with powerful Nigerian Oil Minister Edmund Dakouru, having negotiateddeals with him for 20 years. Also helping to smooth things out is Addax boardmember Afolabi Oladele, who handled relations with oil majors for the NigerianNational Petroleum Co. in the 1990s and receives $9,000 a month from Addax forconsulting work. Gandur has also recruited Brian Anderson, formerly Shell'sleading guy in Nigeria,and James Pearce, who ran Chevron's deepwater operations there.
Gandur is making friends lower down the social scale, as well. Addax hirescommunity representatives from regional tribes and has spent $10 million in thepast decade building roads, schools and water projects. The rule in Nigeria, Iraq or anywhere Addax goes is to"make sure the chief of the village knows what you do next," Gandurexplains. "Don't move the rig without him knowing." The strategy hasworked pretty well, so far. In contrast with Shell--Nigerian civil unrest has disruptedone-quarter of its output for the past 18 months--Addax has had no outages, butseveral contractors have been taken hostage, and last February one was killedtrying to escape.
Security is increasingly in the fore of Gandur's mind, especially as hisempire and fortune have grown large enough to make him a target. In Iraq the Taq Taq field is protected by U.S. securityoutfit Vance, which hires peshmerga, armed Kurdish fighters. The KurdishRegional Government has a huge incentive to protect both Gandur and hisinvestments. After Saddam's fall the KRG began to assert its rights to the oilin the territory under its control; in 2004 it signed a deal with Genel Enerji,a division of Turkey'sCukorova Group, to explore Taq Taq.
Addax began talks with Genel, but months passed, and any hope of a dealseemed bogged down as other suitors tried to woo the Turks. "They wereaware they had a nice asset," says Ebsary. Gandur, sensing it was time toclose the deal, stepped in. He went to Ankara,met with Mehmet Sepil, chairman of Genel, and poked fun at his larger oilcompetitors, saying they would try to sideline the Turkish energy giant andtake total control of the field. In July 2005 Genel dealt Addax 30%; last yearAddax paid $85 million to up it to 45%.
Addax and Genel are also underwriters of Kurdish independence--a scaldingpotato, politically. They are footing $90 million for drilling this year andexpect to invest $1 billion to develop Taq Taq and the adjacent Kewa Chirmilaprospect. Yet when Taq Taq starts producing, 90% of the oil will go to the KRGas a royalty. If Taq Taq flows 200,000 bpd and Kewa Chirmila 50,000 bpd, that'smore than $15 million into KRG coffers each day.
That also assumes that the fractious parliament in Baghdad will pass a federal oil law. Itdoesn't help that the U.S. State Department opposes Kurdish oil deals as toomuch too soon, while the Iraqi oil ministry, led by Shiite Husaynal-Shahristani, condemns any deals as illegal. Until there's a law, Addaxcannot build the pipeline that would probably move oil to the Turkish port of Ceyhan. Meantime, Gandur and Genel willlikely start construction of a refinery near Taq Taq that would take 20,000barrels a day and provide a vital supply of indigenous gasoline to the Kurds.
In a visit to Irbilearlier this year Gandur gave his two Serbian bodyguards the slip to visit theancient citadel there. Built on a hill said to be inhabited continuously for7,000 years, it houses a small museum where Gandur, an avid collector ofantiquities, studied a collection of ancient Sumerian tablets. He reflected onthe myriad powers that have come and gone in the FertileCrescent. Assyrians, Babylonians, Romans, Europeans, Saddam'sBaathists. Gandur intends to stay.
By the Numbers
Simply Gushing
West Africa is a black gold mine forGandur's company. Up next: Iraq.
$1.2 billion Addax Petroleum's capital expenditure this year.
480 million Addax's total reserves in barrels.
$9 Addax's net income on every barrel of oil produced.
Source: Addax Petroleum.