Higher oil prices can affect gold-company margins, which have been remarkably strong and rising the last few years. But while these stocks may slip a little more, if you are not invested, you should at least start a position now in stocks like Agnico Eagle Mines Ltd. (AEM), says Adrian Day, editor of Global Analyst.
Diesel is the largest cost input for operating mines. Though the impact on gold mines is generally less than on copper or iron ore mines, higher diesel prices will cause costs to increase. Higher oil prices also affect other cost inputs of course.
Agnico Eagle Mines Ltd. (AEM)
A study from BMO concluded that costs for gold miners would increase by about 2% for every $10 move in the oil price. So a move from $60 to $100, such as we have seen this month, would increase costs by around 8%.
But some companies have hedged their diesel. Agnico, for example, has hedged a little over half of its 2026 estimated exposure at an average of $0.69 per litre. The cost of diesel has jumped about 70% since late February to the current spot price of a little over $1 per litre.
Plus, the impact on their costs and margins is manageable. For Agnico, with all-in sustaining costs of $1,339 and the gold price at $5,100, there is room for costs to increase. The company can continue to generate margins well above its historical norm – and continue to be wildly profitable.
Recommended Action: Buy AEM.
