Australia Metals & Mining: Diesel Price Sensitivity and Gold Supply Disruption Risks
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Goldman Sachs assessed the vulnerability of its Australian gold coverage to severe diesel price volatility and potential supply disruptions. Since late February, crude oil prices have surged approximately 55% to $110 per barrel, while diesel prices have skyrocketed roughly 140% to around $220 per barrel. The analysis identifies PNR, RRL, and CMM as the most sensitive to a $10 per barrel diesel price shift, before considering mitigating factors. If spot diesel prices persist through the June quarter, FY26 all-in sustaining cost guidance across covered names faces upside risk of A$20 to A$100 per ounce.
Beyond pure pricing, the report qualitatively evaluated physical diesel rationing risks. Gold production may be deprioritized compared to other commodities during severe shortages. Operations relying heavily on diesel-powered processing, managing large low-grade open pits, or situated in remote locations face the highest exposure. Mines able to utilize high-grade mining and batch processing can partially mitigate production losses. Overall, EVN and RMS are deemed relatively resilient, whereas VAU and PNR carry higher risk profiles.
Despite heightened gold price and foreign exchange volatility, Goldman's precious metals team remains constructive. They view current downside risks as primarily liquidity-driven, noting the spot gold price near $4,200 per ounce. The Australian gold sector currently prices in a long-term gold value below $2,800 per ounce, creating an attractive setup. Goldman retains Buy ratings on NEM, NST, and CMM as preferred large-cap and mid-cap exposure names, respectively.