Gold Prices Outpace Rising Mining Costs as Producers Reap Record Margins
The World Gold Council (WGC) has released a report indicating that gold producers achieved record margins and cash flows in Q1'26, despite mining costs rising by 16% year-over-year to $1,785 per ounce. The surge in royalty payments was the primary cost driver for the quarter, increasing by 24% quarter-on-quarter and 85% year-over-year.
Escalating royalty payments have become a significant burden for gold miners, with rates doubling from approximately 6% of AISC in Q1'21 to 12% in Q1'26. Fiscal regime changes and growing resource nationalism in West Africa also contributed to cost increases.
Despite these rising costs, average gold prices surged by 17% quarter-on-quarter and 70% year-over-year to a historic high of $5,595 per ounce. This revenue expansion drove average AISC margins up by 25% quarter-on-quarter and 134% year-over-year to a record $3,076 per ounce.
Miners maintained strict capital discipline throughout the period, directing substantial cash flows toward dividends and share buybacks. Newmont returned $2.7 billion to shareholders after generating its highest ever quarterly free cash flow of $3.1 billion, while AngloGold Ashanti generated a record FCF of $1.2 billion.