Ord Minnett research reveals the ASX-listed gold miners under threat of margin erosion from rising fuel prices

Some ASX-listed gold miners will bear the brunt of higher fuel prices far worse than others, according to fresh analysis. Gold equities are broadly down about 30 per cent since the onset of the Middle East war on the final day of February. The sharp fall has been attributed to investor profit-taking as they divert their funds into rising oil and gas stocks, plus a reduced probability of rate cuts impacting the gold price. Additionally, there are growing concerns that diesel-intensive gold mining operations will suffer major margin erosion from soaring fuel prices. Ord Minnett senior research analyst Paul Kaner told clients he expects the pain will not be spread evenly. The nation’s larger gold miners with operations weighted towards underground instead of open pit have a greater ability to absorb margin pressures, the analysis indicates. “Given diesel costs pre-conflict accounts for approximately 2 to 15 per cent of our coverage cost base pre-conflict, we’re not anticipating material changes to outlooks but flag it as a key inflationary risk or productivity risk should the Strait of Hormuz remain shut for an extended period,” Mr Kaner said. “Some are more protected, (e.g. Evolution Mining), than others (e.g. St Barbara Mining),” he said. Evolution, Northern Star Resources and Ramelius Resources are all expected to face free cash flow margin erosion of 3 per cent or less at the current gold spot price of $US4720 an ounce ($6660/oz) combined with “higher fuel prices”. At the other end of the spectrum, the Canada and Papua New Guinea-focused St Barbara is facing a 17 per cent margin hit, while Genesis Minerals and Pantoro Gold could each suffer a 5 per cent whack. But based on current valuations, balance sheets and broader growth prospects Ord Minnett believes Alkane Resources, Vault Minerals, Westgold Resources and Ramelius Resources are the best stock picks heading into the 2027 financial year. Gold miners are facing a turbulent time after more than two years of near-constant share price gains. The safe-haven precious metal they mine has dropped in value every week since the US and Israel attacked Iran last month. “Do not buy-the-dip — there’s way too much volatility,” Robert Gottlieb, a former precious-metals trader at JPMorgan Chase & Co Robert Gottlieb, told Bloomberg. “Until the volatility starts to decrease and prices start to consolidate.” Gold’s performance since the Iran war broke out has parallels with Russia’s invasion of Ukraine in 2022, which also caused an energy shock that cascaded through global markets. Despite the recent pullback, gold remains nearly 10 per cent higher in US dollar terms this year. Prices climbed to a record of almost $US5600/oz in late January, driven by a wave of strong central-bank buying as the US dollar weakened — in part due to the threat US President Donald Trump poses to the US Federal Reserve’s independence.