That’s not sovereign risk… this is sovereign risk!

Zimplats Holdings Limited (ASX: ZIM) has today announced that the Zimbabwean government has agreed to its proposal – in principle – as to how it would hand 51% of its operating subsidiary back to Zimbabweans under that country’s ‘indigenisation’ policy.

And you thought Australia’s mining tax stoush was bad?

In 2008, Zimbabwe’s government passed a law requiring mining companies to effectively cede just over half of their operations in Zimbabwe to ‘government approved entities’. The agreement which has been announced today sees 31% of the operating subsidiary pass to the National Indigenisation and Economic Empowerment Fund, 10% to the community and 10% to employees, while Zimplats retains the other 49%. This was after Zimplats had ceded land to the government in 2006.

This move wasn’t unexpected, with the Zimbabwean government previously rejecting an initial Zimplats proposal.

Regardless, it’s a reminder of the risks involved with investing in companies which have operations in foreign countries, with governments able to call the tune. Specific attention should be paid to mining companies with operations in parts of Africa and Asia, where governments have taken similar actions.

I’ll leave the politics to someone else, but it makes claims of ‘sovereign risk’ in Australia pale into insignificance.

If you are looking for ASX investing ideas, look no further than “The Motley Fool’s Top Stock for 2012.” In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

More Reading:

Scott Phillips  is a Motley Fool investment analyst . You can follow him on Twitter @TMFGilla.  The Motley Fool’s purpose is to educate, amuse and enrich investors.  This article contains general investment advice only (under AFSL 400691).

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!