Oil Breaks $100! Which Miners Are Getting Hurt the Most?
Hey investors and mining followers! 🚨 Oil just blew past $100 a barrel — and it’s not just drivers feeling the pain. Mining companies are next in line, and some sectors are way more exposed than you think. Let’s break down which miners get hurt the most and why!
Middle East Conflict Drives Energy Costs Higher; Open-Pit Gold Miners Face Severe Tests, Iron Ore Producers Have the Largest Risk Exposure
As geopolitical tensions in the Middle East continue to escalate, international oil prices have broken above the $100 per barrel mark, hitting their highest level since July 2022. For the mining industry, energy is one of the most critical input costs — and the question is no longer whether costs will rise, but how much, and which miners will be hit first.
According to a new report from BMO Capital Markets, the answer largely depends on the commodity and the mining method. Using data from Wood Mackenzie to analyze historical cost trends, the bank found that iron ore mining is the most sensitive to rising oil prices: a 10% increase in crude lifts costs by roughly 4.2%. Copper mining follows at about 3.5%, while gold mine costs rise around 2%. $Copper - main 2605(HGmain)$
These averages, however, mask a starker reality. If crude oil averages near $100 per barrel — about 47% above 2025 levels — iron ore costs could jump ~20%, copper ~16%, and gold ~9%.
Open-Pit Gold Miners: The “Weak Spot” Under High Oil Prices
In gold mining, the mining method defines sensitivity to oil. Analysts at Jefferies point out that open-pit mines rely heavily on diesel-powered haul trucks, power generation, and bulk processing — making them especially vulnerable to fuel inflation.
Producers with a large share of open-pit output are far more exposed to sustained oil price increases than underground-focused peers.
“We believe cost risk is no longer a question of if it will pass through, but when,” wrote Jefferies mining analyst Fahad Tariq and his team in a research note. “What the market once viewed as a tailwind for miners has now turned into a headwind.”
The report specifically names G Mining Ventures as the most exposed North American gold producer, with its Tocantinzinho project in Brazil being 100% open-pit.
Other major miners’ exposure:
-
Endeavour Mining: ~85% of production from open-pit
-
B2Gold: 78%–83% open-pit
-
OceanaGold: ~71% open-pit
-
Barrick Gold: 52%–66% open-pit
-
Kinross Gold: ~55% open-pit
Jefferies added that while miners with diesel hedging or regulated pricing structures may be protected in the short term, higher fuel and consumable costs will eventually weigh on operating performance if geopolitical tensions persist.
Beyond Fuel: The “Secondary Shock” to Supply Chains
The threat from higher oil goes far beyond just diesel bills.
Analysts note that “bottom-up” cost breakdowns often underestimate the full impact, because they focus narrowly on direct fuel use. Diesel now makes up only about 5% of copper operating costs, down from roughly 8% two decades ago. But higher energy prices eventually filter through power, consumables, labor, and equipment, amplifying overall cost pressure.
Furthermore, a potential closure of the Strait of Hormuz creates major supply-chain uncertainty:
-
Sulfur: Higher prices can lift costs for copper SX-EW operations, which rely on sulfuric acid.
-
Ammonia: About one-fifth of global ammonia exports pass through the Strait; ammonia is a key input for ammonium nitrate used in mining explosives.
-
Marine shipping: Rising transport costs directly affect final prices for all commodities.
Jefferies also highlighted risks of “secondary” inflation in mining consumables if supply disruptions continue. Gold producers depend on specialty inputs like sodium cyanide, explosives, grinding media, steel, flotation reagents, and tires.
While many miners built up large inventories after pandemic-era supply snags, these buffers will eventually run out — leaving companies facing much higher replacement costs.
Regional Differences and Outlook
Impacts also vary by region. Historically, mines in Africa and the Americas have been less sensitive to global oil prices than those in Europe and Asia, likely reflecting access to cheaper local fuel and power sources.
Meanwhile, the industry’s overall vulnerability to oil has gradually declined as companies invest in fuel efficiency, electrification, and on-site power generation.
For now, strong gold prices and existing supply contracts are helping protect miner margins.
But Jefferies believes performance divergence will grow within the gold sector as energy costs bite. Mine type, cost structure, energy exposure, and hedging positions will become increasingly important in stock selection.
While higher gold prices can offset some cost pressure, margins for certain producers may face stagnation — or even decline.
For SG users only, Welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with unlimited trading on SG, HK, and US stocks, as well as ETFs.
🎉Cash Boost Account Now Supports 35,000+ Stocks & ETFs – Greater Flexibility Now
Find out more here.
Complete your first Cash Boost Account trade with a trade amount of ≥ SGD1000* to get SGD 688 stock vouchers*! The trade can be executed using any payment type available under the Cash Boost Account: Cash, CPF, SRS, or CDP.
Other helpful links:
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
