Monsters of Rock: Big miners count the cost of Iran War as diesel bites

• Quarterlies show rising diesel costs are bringing added pressure for Aussie miners
• Gold, lithium and iron ore companies among those weighing the impact of the Iran War
• Gold prices tumble overnight as Iran War delivers double whammy

Large and remote, Australian mining operations are heavily fuelled by diesel, something which helps make the country the world’s largest importer of seaborne sources of the fuel.

And with the Iran War playing havoc with oil markets, miners are starting to feel the impact on costs.

Brent surged to almost US$113/bbl yesterday, now at a five-month high after a 15% rise in September.

Westpac economists said in a note this week that Singapore Gasoil, a barometer for diesel prices, had risen 100% since the start of the war compared to 40% for crude oil futures, a result of shipping costs and physical oil exposure over the top of crude movements.

Chris Ellison’s Mineral Resources (ASX:MIN) said its average diesel price in the September quarter was largely in line with the $1.25/l guided to for FY27.

But lagged pricing means that will rise 35c to $1.60 this month, adding $1/wmt to costs at its Onslow Iron hub, $2/wmt at its Pilbara iron ore hub and $20/t on an SC6 basis to its lithium operations.

That’s before considering freight costs.

It was an otherwise stable quarter for MinRes, with Onslow shipping 5Mt based on the firm’s share of the project at $53/wmt, below its $54-58/wmt guidance range.

The Pilbara hub shipped 2.9Mt at $75/wmt, against forecast FY27 costs of $74-79/wmt. Prices for both averaged US$83/dmt, around 85% of the Platts 61% CFR Index and 5% down QoQ.

Lithium volumes from MinRes’ stakes in its operated mines came in at 90,000dmt SC6 at Wodgina, 58,000dmt SC6 at Mt Marion and 21,000t at the restarted Bald Hill. It maintained guidance for all, though costs at Mt Marion ($1029/dmt in the September quarter) are now projected to be at the upper end of its $960-1020/dmt range.

Bald Hill’s costs came in at $1498/dmt SC6, with guidance for FY27 of $1150-1250/dmt, while Wodgina’s sat in the lower half of its $640-710/dmt range at $674/dmt in the September term.

It came a day after Fortescue (ASX:FMG) revealed a 13% jump QoQ and 21% rise YoY in C1 costs for its core Pilbara iron ore business to US$21.98/wmt, with diesel costs adding US$1.40/wmt YoY. Ironically, in lockstep with founder Andrew Forrest’s green energy evangelism, FMG has been running a campaign for large miners to have their diesel tax rebate bill capped at $50m.

Operationally, FMG sold 42.9Mt of iron ore, some 3.9Mt lower than shipments thanks to a pricing standoff with China’s large steel industry buyer China Mineral Resources Group.

Twiggy’s company, which has made claims it will decarbonise its Pilbara mines by the end of the decade, saw hematite prices fall 10% YoY and QoQ to US$79.79/dmt, just 82% of the Platts 61% Index.

FMG CEO Dino Otranto later said the company would stockpile as much as 30% of its production next quarter in a game of chicken with CMRG.

Bloomberg reported overnight Thursday that rival Rio Tinto (ASX:RIO) had concluded its own negotiations with CMRG on a supply deal running from November this year to May 2028.

Singapore iron ore futures have fallen from US$101/t in early September to US$90.54/t as of Thursday.

Goldies rack it up

Regis Resources (ASX:RRL) revealed earlier this week it was paying $1.45/L for diesel, up from its FY27 forecast of $1.35/L.

It doesn’t seem like much but a 10c/L movement in the diesel price is worth $25/oz in all-in sustaining costs.

RRL produced 83,000oz at an AISC of $3617/oz in the September quarter, well off full-year guidance of 360,000-400,000oz at $2990-3390/oz at its Duketon and Tropicana mines, albeit having said the year is back-half weighted. (Common for gold miners who report on a financial year basis).

Rainfall was blamed for disrupting open pit mining and haulage in September, leading to lower-grade ore from stockpiles feeding the mills.

Pantoro (ASX:PNR) produced 21,864oz at $3860/oz at its Norseman gold operations in the September quarter, up from 18,028oz at $4107/oz in June. It plans to produce 90-105,000oz at $2800-3400/oz, with the second half expected to contribute up to 60% of production.

Fuel supply is fine. But fuel costs could put a spanner in the works on bringing those costs down. They were 8% above budget in the September quarter and are running 31% over budget in October.

Gold major Newmont Corporation (ASX:NEM) on the other hand surprised on costs, producing 1.3Moz of gold, 11Moz of silver and 23,000t copper at AISC of US$1454/oz, down 10%, lowering full-year cost-guidance to US$1520/oz and generating US$1.9bn in free cash.

But it expects higher diesel prices and inflation above its previously assumed 3% target incorporated for 2026 to push costs higher in 2027. The Denver-based gold giant, which says it’s on track to produce 5.3Moz this year, also expects to see lower co-product credits thanks to a projected drop in silver, lead and zinc output at the Peñasquito mine in Mexico.

Those were among a host of gold miners to release results this week as prices for the precious metal stuttered.

A 2.5% dive overnight amid fears the Iran War could re-escalate saw gold head for levels closer to US$4000/oz (~A$5700/oz), pulling the ASX gold sub-index around 4.5% lower.

Silver fell 5.84% to US$54.28/oz, close to the 2026 lows seen in July.

The GDX suffered a 5.8% shellacking in New York on Thursday.

History shows this has been a good level for consolidation ahead of a potential rebound, though investors will be wary of how energy costs – also a source of weaker gold sentiment due to their impact on rate hikes – will eat into margins.

The S&P/ASX 300 Metals and Mining index fell 5.07% over the past week.

Which ASX 300 resources stocks have impressed and depressed?

Making gains 

Vulcan Steel (ASX:VSL) (steel) +10.5%

Bluescope Steel (ASX:BSL) (steel) +4.1%

Benz Mining Corp (ASX:BNZ) (gold) +3.5%

St Barbara (ASX:SBM) (gold) +2.4%

Eating losses 

Turaco Gold (ASX:TCG) (gold) -22%

Brazilian Rare Earths (ASX:BRE) (rare earths) -17.1%

Ora Banda (ASX:OBM) (gold) -14.2%

Kingsgate Consolidated (ASX:KCN) (gold) -13.4%

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