Open-pit gold miners most exposed to inflation: Jefferies

Gold miners with large open-pit operations could face the biggest margin pressure from the conflict in the Middle East as higher oil prices threaten to lift fuel and consumable costs in the near term, Jefferies says.

Open-pit mines are particularly vulnerable to fuel inflation because diesel powers haul trucks, electricity generation and much of the processing chain, Jefferies mining analysts led by Fahad Tariq said in a research note published Thursday. Producers with a large share of open-pit production are therefore more sensitive to sustained increases in oil prices than their underground-focused peers, they add.

As the conflict in the Middle East drags on, “we view cost risk as more of a question of when rather than if,” Tariq and his colleagues wrote. “Whereas the market previously viewed energy costs as a tailwind for miners, they are now a headwind.”

Cost outlook

The warning comes as investors begin reassessing the cost outlook for gold miners amid the United States-led bombing of Iran, which has caused escalating tensions and spurred Tehran to restrict shipping through the Strait of Hormuz. Energy is a critical input for the industry, and prolonged disruptions in oil markets could drive up operating costs across the sector.

Canada’s G Mining Ventures (TSX: GMIN; US-OTC: GMINF) is the most exposed North American gold producer to open-pit mining, with all its output coming from its Tocantinzinho operation in Brazil, Jefferies says. Endeavour Mining (LSE, TSX: EDV) is next at about 85%, followed by B2Gold (TSX: BTO; NYSE-A: BTG) at between 78% and 83% and OceanaGold (TSX: OGC; US-OTC: OCANF) at about 71% of production, the report says.

Other gold miners with more than half of output sourced from open-pit operations include Barrick Mining (TSX: ABX; NYSE: B), with 52% to 66%, and Kinross Gold (TSX: K; NYSE: KGC), with more than 55%, Jefferies calculates.

To be sure, miners with diesel hedging programs or regulated pricing structures may be better insulated in the near term, Jefferies says.

Gold momentum

Gold equities entered 2026 with strong momentum, with many stocks reaching record highs amid a rally in bullion prices. The S&P/TSX Global Gold Index has climbed about 14% so far in 2026, reflecting miners’ leverage to rising prices for the yellow metal. Investors have begun to zero in on near-term input costs as geopolitical risks mount, Jefferies says.

Energy makes up about 12% of the average gold miner’s cost structure, Jefferies says. This compares with 46% for labour and contractors and 33% for consumables and materials.

A 10% increase in oil prices could raise all-in sustaining costs by about $10 (C$13.70) per oz. on average, though the impact varies widely depending on a company’s asset mix and hedging strategy, Jefferies says.

Beyond energy, the report highlights the risk of “second-order” inflation in mining consumables if supply disruptions persist. Gold producers depend on specialized inputs such as sodium cyanide, explosives, grinding media, steel, flotation agents and tires.

Replacement costs

Although many miners amassed large inventories following pandemic-era supply chain disruptions, those buffers will eventually be drawn down, exposing companies to higher replacement costs, Jefferies says.

For now, strong gold prices and existing supply contracts should help protect margins. But the longer geopolitical tensions continue, the more likely it is that higher fuel and consumable costs will begin to weigh on operating results.

As a result, Jefferies expects stock performance in the gold sector to diverge more sharply between companies — with outcomes increasingly determined by mine type, cost structure, energy exposure and hedging positions.

“Timing and outcomes will increasingly drive stock selection,” Tariq and his colleagues wrote. While higher gold prices can offset cost pressures for some producers, others may see margins flatten or decline, the analysts added.