4 African mining countries that ASX resources investors should avoid

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.

4 African mining countries that investors should avoid

1. Mali

We know this country all too well given what happened Leo Lithium (ASX:LLL). This stock managed to make some spectacular gains in 2023. The Goulmania lithium project, which Leo held 45% of and was poised to be the country’s first major lithium project, has a Mineral Resource of 108Mt at 1.45% lithium and an Ore Reserve at 52Mt at 1.51% lithium. The DFS found an NPV of US$2.94bn and a post-tax IRR of 83%!

But the military regime in charge of Mali proposed to introduce a new Mining Code which could have left Leo with as little as 10% in the project. After some months of denial that this would be a problem to the future of the project, Leo was left with no choice but to sell its stake to Gangfend for US$342.7m.

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 was been suspended for more than a year and was ultimately delisted due to being at loggerheads with the government of Congo.

The government 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 were suspended all the while and delisted back in May 2024, causing $2.8bn of paper wealth held by over 20,000 shareholders to be wiped out.

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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