4 African mining countries that ASX resources investors should avoid

Nick Sundich Nick Sundich, September 27, 2023

African mining countries offer a lot of potential for ASX resources companies and their investors, but also a lot of risk. Now, it is said that risk can lead to higher returns and in some instances this can be right. But in others, there is little or no upside because there is too much risk. Investors won’t pay attention to the company because of its jurisdiction, because of real-time issues or a bad reputation for events that have happened in the past.

Without further ado, here are four such countries where it is not worth investors’ time to even think about ASX resources stocks with projects there.

 

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4 African mining countries that investors should avoid

 

1. Mali

We know this country all too well given what happened Leo Lithium (ASX:LLL). Yes, our Concierge service managed a 56% return in 3 weeks back in May, getting out before all hell broke loose.

When we bought in, we acknowledged the risk, but noted that these risks (namely terrorism and political instability) had not stopped Mali from being a major mining destination. But the military regime currently in charge of Mali wants to introduce a new Mining Code which may leave Leo with as little as 10% in the project. And this change was proposed without any notice whatsoever – so who knows what could be next?

 

2. Tanzania

Yes, it is a while ago now. But the scars remain amongst companies there with good projects such as Black Rock Mining (ASX:BKT) and Evolution Energy Minerals (ASX:EV1).

In mid-2017, the Tanzanian government suddenly introduced major changes to the mining code, introduced without any notice and with substantial changes including:

  • A free 16% carried stake in all resources projects
  • the right of the government to tear up an mining agreement at any time because it thought it was unconscionable and;
  • the restrictions of repatriation of funds.

Yes, there is a new administration in charge but investors remain scarred about this country ever since this episode. Because seemingly, the companies are too judging by how long things have taken for these companies to show progress. It’ll remain on our ‘no-go’ list until any of these companies with projects there begin any kind of production.

 

3. DR Congo

Another country where you need to point to the example of just one company – AVZ Minerals (ASX:AVZ). It has been suspended for over a year due to being at loggerheads with the government of Congo.

The government has refused to issue it a mining license and has torn up its joint venture partnership. AVZ is fighting its case in international courts but shares have been suspended all the while.

 

4. Namibia

Granted, this is not the riskiest country. But it makes the list because there is some risk and because so many uranium stocks are based there. Paladin (ASX:PDN), Deep Yellow (ASX:DYL) and Elevate Uranium (ASX:EL8) are three of them.

We and other investors got queasy earlier this year from some public comments by Namibia’s mining minister. He was quoted by Bloomberg stating that ‘local ownership must start with the state’ and calling for a minimum equity percentage that would be free-carried. This followed on from comments he made in early March that high levels of foreign ownership was ‘untenable’.

Now if a free-carried stake comes to fruition, it wouldn’t be the end of the world. This is common in this part of the world. But a country where rules are by ministerial decree and based on how they’re feeling at a point in time is not one where you want to be operating a resources project.

 

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