Gold Prices Offset 16% Rise In Mining Costs, Lift Margins: WGC

Sat Aug 29 2026

Record gold prices helped mining companies deliver unprecedented margins and cash flows in the first quarter of 2026, despite continued increases in production costs and geopolitical disruptions, according to the World Gold Council (WGC). The strong rise in bullion prices more than offset higher operating expenses during the period.

Global average All-In Sustaining Costs (AISC) for gold producers rose 5 per cent quarter-on-quarter and 16 per cent year-on-year to USD 1,785 per ounce in Q1 2026. This marked the 28th consecutive quarter of year-on-year growth in AISC.

Gold prices, however, climbed much faster during the quarter. Average gold prices increased 17 per cent from the previous quarter and 70 per cent year-on-year, with spot prices briefly reaching a record USD 5,595 per ounce in January.

Royalties Drive Higher Costs

Rising royalty payments were the biggest contributor to the increase in mining costs during the quarter. Royalty expenses rose 24 per cent quarter-on-quarter and 85 per cent year-on-year, increasing their share of the average producer’s cost base to 12 per cent in Q1 2026 from around 6 per cent in Q1 2021.

The WGC attributed the increase partly to changes in fiscal regimes and growing resource nationalism in West Africa. Ghana introduced a sliding-scale royalty system in March, with rates reaching 12 per cent for gold prices above USD 4,500 per ounce.

Burkina Faso’s royalty system, introduced in 2025, reaches 10 per cent when gold prices are between USD 4,000 and USD 4,500 per ounce. Mali introduced higher rates in 2024, with royalties reaching 9.5 per cent at a gold price of USD 4,100 per ounce.

Margins Surge Despite Cost Inflation

The sharp rise in gold prices more than offset higher production costs. Average AISC margins increased 25 per cent quarter-on-quarter and 134 per cent year-on-year to a record USD 3,076 per ounce.

The strong cash generation also allowed major miners to maintain capital discipline and return substantial funds to shareholders. Newmont returned USD 2.7 billion to shareholders after generating record quarterly free cash flow (FCF) of USD 3.1 billion and approved a further USD 6 billion share buyback programme. AngloGold Ashanti also reported record FCF of USD 1.2 billion and moved from a net debt position to net cash during the quarter.

Supply Disruptions May Raise Costs

The Iran conflict and related supply chain disruptions, including the closure of the Strait of Hormuz, pushed up energy, freight and consumable costs. Wholesale diesel prices rose 54 per cent in the US and 96 per cent in Perth, although large and intermediate producers were partly protected by hedging, inventories and long-term procurement contracts.

The WGC expects cost pressures to intensify in the second quarter. Much of the increase in fuel, freight and consumable costs occurred towards the end of Q1, meaning its full impact is likely to become more visible in Q2 2026. The council said persistent geopolitical tensions and supply chain disruptions could put additional pressure on miners’ margins even as gold prices remain elevated.