by Kip Keen, Mineweb

Among major North American gold miners, Newmont Kinross and Yamana stand to benefit most from cheap oil, Cowen and Company analysts says.

In a recent note to clients analysts Adam Graf and Misha Levental dig into how falling oil prices will affect the earnings of Barrick, Goldcorp, Newmont, Kinross, Agnico Eagle and Yamana Gold.

Broadly speaking they conclude those more relient on open pit operations will benefit most.

And more specifically, they highlight Newmont Mining, Kinross and Yamana.

“By our estimates, for NEM, KGC, and AUY, every $10/bbl decrease in oil price should lower operating costs by $28/oz, $38/oz, and over $23/oz, respectively,” Graf and Levental write. “Earnings in 2015 would be positively impacted by $0.16/sh, $0.06/sh, and $0.03/sh, respectively.”

Less affected are Goldcorp, Barrick and Agnico Eagle.

Why?

The analysts note Barrick has hedged about half its oil usage at $85/oz for the next three years. This mutes the impact of cheaper oil on its earnings.

For Goldcorp it is more a matter of underground mining operations, which tend to be less dependent on oil, and then also its exposure to federally regulated diesel prices in Mexico.

The analysts say “by our estimates, every $10/bbl move in the price of oil will result in an opposite ~$12/oz change in operating expenses, one of the lowest versus peers.”

The case is much the same for Agnico Eagle. Less diesel intensive underground mining and federally regulated prices in Mexico and Finland could mute the boost to Agnico earnings.

To arrive at their conclusions the analysts looked at the relative cost structures in open pit and underground mining.

It’s quite the gap. Diesel and oil based products make up about 35%-40% of opent pit mining costs, according to their research.

That compares to 13% to 17% of costs in underground mining. The exception here would be remote mines.

“For remote underground operations that are not connected to the power grid, and instead rely on diesel power generators, we estimate diesel generated power could comprise another 10%-16% of mining costs,” say Graf and Levental.

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