Goldcorp (GG) is in a similar boat to Barrick. CEO Chuck Jeannes said in 2011 there will be a "6% absolute dollar increase year on year" due to inflation, the most painful aspect being high oil prices.
Jeannes blames uncertainty in the Middle East leading to uncertainty in oil prices, which causes price uncertainty for the company. For its part, Goldcorp has hedges on oil and in its operations in Mexico, which use a lot of fuel, the government sets the price. Nevertheless, Goldcorp is still building a natural gas power plant in Mexico to help cost issues.
(GFI) CEO Nick Holland says "oil prices in particular can have a profound impact on the open pit operations because of the .... distances out of the pit
Holland is thinking about a conveyer system in areas where the company is vulnerable and, in the future, would consider new operations that don't require a large amount of oil. The CEO believes that oil prices could hit $150 a barrel in a few years and warns that the gold mining industry has "to start factoring that in."Agnico-Eagle (GFI) is trying to do just that, but much of the company's operations are in the Arctic and CEO Sean Boyd says there are no alternatives to diesel right now. "We look closely at hedging. We have hedged diesel." Agnico-Eagle has its fuel requirements for Meadowbank, in Nunavut Canada, at $80 a barrel until September 2011. Boyd says liquid natural gas might be an option in the far future, but that Agnico-Eagle is stuck with oil for now. Whether a big producer or small explorer, the theme is clear at BMO: high oil prices are becoming the Achilles' heel for gold miners.
|More on Gold Gold Price News|
|How to Invest in Gold|
>To contact the writer of this article, click here: Alix Steel. >To follow the writer on Twitter, go to http://twitter.com/adsteel. >To submit a news tip, send an email to: email@example.com.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV