Even hardened contrarians struggle to buy beaten-up mining stocks in Africa. The threat of civil war or goverments changing mining royalties and rules headline a long list of risks. But uncertainty creates opportunity for speculators. 
Tanzania, in East Africa, this month rocked the global mining sector with new legislation that effectively allows its Government to tear up and renegotiate mining contracts, introduce higher royalties, nationalise mining companies or enforce local-content rules.
As sovereign shocks go, the Tanzanian legislation was as bad as it gets. Should they come into force, the amendments would almost certainly encourage international resource companies in Tanzania to relocate – and sully the reputation of African mining. 
Once considered a star of African mining, Tanzania has lost its way. Australian mining stocks such Cradle Resources, OreCorp, Mangis Resources, Strandline Resources, Black Rock Mining, Graphex, Walkabout Resources, Volt Resources, Kibaran Resources and others were caught in the carnage. 
The Australian Securities Exchange suspended ASX-listed mining companies with Tanzanian operations because of the uncertainty.
Contrarians hoping to snap up bargains after heavy share-price falls in Tanzania-focussed mining stocks should look elsewhere. There’s too much risk, even though companies, such as Black Rock Mining, are making good progress with recent resource upgrades.
Speculators too often underestimate risks in African exploration. Mining exploration is hard enough without adding a layer of risk from unstable goverments that target resource companies when they need to balance the budget or appeal to populist pressures.
Focussing on established producers in Africa is a better bet. They too have extra risk, but are a different proposition to early-stage explorers that must develop a resource, then finance and construct mining plants and infrastructure in the middle of nowhere.
Perseus Mining is among the more established Australian mining companies in Africa. The West-Africa focussed gold producer owns the Edikan mine in Ghana and the Sissingué and Yaoure projects, both under development, in Côte d’Ivoire.
Perseus has a terrific gold resource and was a sharemarket darling in 2011 when African exploration boomed. The stock traded above $3.50 that year. But operational problems have hampered Perseus’ Edikan mine and the stock has been caught in the broader malaise in small mining stocks, especially those with African operations. 
Perseus trades at 28 cents, even though it is a far more established company than the one that caught the market’s eye at the turn of the decade.  The stock has bounced between 20-30 cents for the past few years, with a brief spike to 60 cents last year. 
Chartists might argue Perseus is in an accumulation phase where the price moves sideways as the smart money slowly absorbs excess stock supply and gets set for the next upturn.  There is no sign of Perseus breaking out of this consolidation and trending higher.
Operationally, Perseus is progressing. The recently announced fourth quarter FY17 result met market expectation and the flagship Edikan mine improved. 
Perseus produced 100,218 ounces of gold, in the middle of its production guidance range. Production rose 6 per cent on the quarter and is 32 per cent higher for the June 2017 half year compared to the December 2016 half. 
Production costs remain stubbornly high and slightly exceeded market expectation because of one-off issues around wage negotiation conclusions and back payments. 
Perseus has much work ahead to meet its FY18 production targets. But the company has delivered two good quarters of production growth, the benefits of mill upgrades are coming through and mining grades should improve. Production costs should eventually fall. 
Perseus has a strong growth pipeline through the Sissingué mine, which it says is on schedule and budget, and due to pour first gold in the March 2018 quarter.  A definitive feasibility study for the Yaoure project is due in the December 2017 quarter.
If all goes to plan, 2018 should be turning point for Perseus: a substantial increase in gold production at Edikan; Sissingué producing first gold; and Yaoure, which has plenty of potential, moving closer towards development. 
After years of pain, speculators might be buying Perseus near the bottom. Macquarie Group values the stock at 48 cents and has a 12-month price target of 34 cents. The investment bank upgraded its recommendation from neutral to outperform this month and believes that Perseus delivering on production guidance will be a re-rating catalyst.
A consensus of nine broking firms has an average share price target of 46 cents for Perseus, suggesting the stock is materially undervalued at the current price. 
However, several brokers have argued for years that Perseus is undervalued, only to watch it disappoint operationally and on the market. Waning sentiment towards African mining, evident again in Tanzania, are another reason to doubt Perseus’ turnaround prospects. 
Behind the gloom is a company that is stringing good production quarters together and on the cusp of meeting major milestones. Achieving full-year production guidance would boost market confidence – and inevitably spark a share price that may have fallen too far. 
Clearly, Perseus is for speculators and experienced investors only.
Chart one: Perseus MiningSource: The Bull 

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• Tony Featherstone is a former managing editor of BRW and Shares magazines. The information in this article should not be considered personal advice. The article has been prepared without considering your objectives, financial situation or needs. Before acting on the information in this article you should consider its appropriateness, regarding your objectives, financial situation and needs. Do further research of your own or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at July 19, 2017.