Navigating geopolitical disruption
Mining & Resources
Mining and resources companies are facing a period of cost volatility that is reshaping operating and investment decisions across the sector. Elevated diesel, gas and explosives prices are putting sustained pressure on margins, cash flow and development economics, particularly for remote, off‑grid and haulage‑intensive operations.
At the same time, uncertainty around the reliability of supply chains, shipping capacity and export logistics is forcing businesses to look closely at how risk is allocated across fuel, power, mining services, logistics and offtake arrangements. These pressures don’t sit in isolation, and they flow through joint ventures, financing covenants, lifecycle assumptions and long‑term growth plans.
The critical response is early, coordinated action: stress‑testing commercial and operating models, triaging key contracts and engaging proactively with partners, contractors and financiers. Businesses that take a disciplined, whole‑of‑portfolio approach will be best placed to manage volatility and protect long‑term value.
What this may mean in practice
- Sustained volatility and elevated prices for diesel, gas and explosives impacting mining, processing and remote power generation costs; pressure on margins, cash flow and project economics, particularly for off‑grid and bulk‑haul operations.
- Potential disruption to critical inputs and export logistics may affect production profiles and delivery commitments.
Emerging issues / developments
- Exposure to diesel and fuel-intensive operations (haulage, power generation, processing)
- Reliability and cost of supply for critical consumables (fuel, reagents, explosives, spare parts)
- Constraints and delays in shipping, export terminals and insurance affecting offtake
- Increased scrutiny of pricing, allocation and export commitments by counterparties and government
- Implications for development timelines, expansion capex and life‑of‑mine assumptions
Key considerations
- Allocation of fuel price and availability risk under mining services, fuel supply and power arrangements
- Whether force majeure, hardship or change in law clauses may be enlivened (including sanctions, shipping restrictions or emergency fuel measures, eg rationing)
- Ability to pass through cost increases under offtake, tolling or processing contracts
- Impact of sustained cost increases on financing covenants, reserve reporting and impairment assessments
- Managing JV and contractor alignment where cost pressures or supply constraints diverge
What to think about now
- Triage key contracts (fuel supply, mining services, explosives, power, logistics, offtake) for force majeure, price adjustment, change in law and termination risk
- Stress‑test operating models, budgets and life‑of‑mine plans against prolonged fuel and freight volatility
- Review hedging and procurement strategies, including alternative supply arrangements and on‑site generation options
- Engage early with JV partners, financiers and key contractors on risk allocation, funding headroom and contingency planning
- Confirm insurance coverage and notification requirements for business interruption, supply chain and political risk