According to reports from Bloomberg, Agnico Eagle Mines Ltd. has issued a stark warning about rising operational costs, with rising diesel prices potentially adding $80 per ounce to gold production costs in 2027. The world's second-largest gold producer expects elevated diesel prices to increase costs by $50-$60 per ounce in Q4 2026, up from approximately $30 per ounce in the prior period. Chief Financial Officer Jamie Porter disclosed these concerns during a Thursday analyst call, as reported by Bloomberg. Miners rely heavily on diesel to power trucks and other equipment, making the fuel a critical input cost for the mining industry.
As reported by Bloomberg, shares in the Canadian company fell as much as 4.5% in Toronto, reflecting broader concerns across the mining sector. The selloff occurred alongside a broader decline across the mining sector, indicating widespread investor anxiety about rising operational costs. Mining companies are currently grappling with rising costs for labor and other key inputs, with diesel, sulfur, and sulfuric acid prices climbing amid supply disruptions from Middle East conflicts and reduced fuel flows through the Strait of Hormuz. However, historically elevated metal prices, such as gold and copper, have helped cushion the impact for some miners, providing some relief against the cost pressures.
According to Bloomberg reports, diesel accounts for approximately 11% of Agnico's operating costs, making it a significant expense component. However, the company maintains some protection due to its geographic positioning, with much of its production coming from mines in northern Ontario and Quebec that are connected to electricity grids powered largely by hydroelectric and nuclear generation. CEO Ammar Al-Joundi noted during the call that the company had hedged some of its fuel needs to provide some protection against price volatility. "We don't have any more insight into long-term diesel prices in 2027 than anyone else," Chief Executive Officer Ammar Al-Joundi said on the call, adding that the company had hedged some of its fuel needs.
As reported by Bloomberg, Agnico Eagle is facing higher costs due to ongoing US-Canada trade tensions, incorporating an estimated impact of about $5 per ounce into its latest cost guidance. CEO Al-Joundi warned that the burden could grow in 2027 if trade tensions persist, with Porter stating that "if there isn't a trade deal, we'd actually expect that impact to increase in 2027." The company's all-in sustaining costs rose to $1,648 per ounce in Q3, and it now expects the measure to finish 2026 near the upper end of its $1,400-$1,550 per ounce guidance range. The Toronto-based company continues to face these challenges as the US and Canada continue to quarrel over tariffs.
