Gold Production Costs Rise 16% as Mining Margins Hit Record High

Mon Aug 24 2026

The global average All-In Sustaining Cost (AISC) of gold production rose to $1,785 per ounce in the first quarter of 2026, increasing by 5% quarter-on-quarter and 16% year-on-year, according to the World Gold Council.

The report, written by Oliver Blagden, Mine Supply Analyst at Metals Focus, said the quarter marked the 28th consecutive year-on-year increase in AISC, reflecting persistent inflationary pressures across the mining industry over the past seven years.

Despite the sharp increase in costs, gold miners achieved record profitability, as the rise in gold prices significantly outpaced the growth in production expenses. Average AISC margins climbed to an all-time high of $3,076 per ounce, rising by 25% quarter-on-quarter and 134% year-on-year.

The average gold price increased by approximately 17% from the previous quarter and 70% from a year earlier. Gold briefly reached a record high of $5,595 per ounce in January, generating unprecedented cash flows for mining companies despite mounting operational costs.

Royalties Drive Production Costs Higher

The report identified royalties and production-related taxes as the largest contributors to rising costs. Royalty payments increased by 24% quarter-on-quarter and 85% year-on-year, alongside higher gold prices and stronger revenues for producers.

Royalties accounted for approximately 12% of the average mine’s cost base in the first quarter of 2026, compared with only 6% in the same period of 2021, highlighting the growing share of mining revenues captured by producing countries.  The increase was not solely driven by higher gold prices. Several gold-producing countries have revised their fiscal regimes and introduced sliding-scale royalty systems linked to international gold prices.

Ghana introduced a system that allows royalty rates to rise as high as 12% when gold exceeds $4,500 per ounce, while Burkina Faso imposed rates of up to 10%. Mali increased its royalty rate to 9.5% at specific gold-price levels.

The impact was particularly evident at IAMGOLD’s Essakane mine in Burkina Faso, where royalty costs surged by 220% year-on-year and accounted for approximately 35% of the mine’s cash costs.

Conflict Raises Energy, Freight and Supply Costs

The World Gold Council said the war in Iran and broader disruption across the Middle East, including the closure of the Strait of Hormuz and damage to energy and resource infrastructure, placed additional pressure on global supply chains.

These developments contributed to higher fuel, electricity, shipping and insurance costs, as well as increases in the prices of explosives, sodium cyanide, spare parts and maintenance materials used in gold extraction and processing.

Average diesel prices in the United States ended the quarter 54% higher, while wholesale diesel prices in Perth, Australia, jumped by approximately 96%. This placed significant pressure on mining companies in Western Australia and reportedly forced some smaller operations to suspend activities temporarily because of fuel shortages.

Bunker fuel costs also doubled in early March, while war-risk insurance premiums increased. Gold Fields reported a 40% rise in freight and consumables costs since the outbreak of the Iran war.

Major Producers Better Positioned to Absorb Costs

The report showed that major mining companies were better positioned to absorb the energy-price shock than smaller producers, supported by fuel inventories, long-term procurement contracts, power purchase agreements and hedging programmes.

Evolution Mining and Newmont reported no material disruption to their operations from fuel shortages. OceanaGold had hedged approximately 80% of its annual diesel consumption, limiting the immediate impact of higher oil prices on its costs.

However, several producers warned that a prolonged period of elevated fuel prices could have a greater impact in the coming quarters, particularly because much of the supply disruption occurred toward the end of the first quarter.

Record Cash Returned to Shareholders

The surge in mining profits enabled companies to return more cash to shareholders through dividends and share-buyback programmes. At the same time, gold miners maintained greater discipline over capital expenditure and new investments than during previous gold-price booms.

Newmont generated record quarterly free cash flow of $3.1 billion and returned approximately $2.7 billion to shareholders. The company also approved an additional $6 billion share-buyback programme.

AngloGold Ashanti generated record free cash flow of $1.2 billion and moved from a net-debt position into net cash. It raised its interim dividend to $1.14 per share, compared with $0.125 per share in the first quarter of 2025.

Margins Could Come Under Pressure

The World Gold Council expects gold-production costs to rise further during the second quarter, as the full impact of higher fuel, freight and consumable costs becomes more visible amid continued supply-chain disruption.

The average gold price fell by approximately 7.2% quarter-on-quarter in the second quarter but remained above $4,000 per ounce. This means the mining industry continues to enjoy strong profit margins, although they could retreat from record levels if costs continue to increase.

The figures show that higher gold prices benefit not only investors and holders of the metal but also reshape the economics of the mining industry. Producers generate wider margins and governments receive higher royalties, while companies face mounting pressure from energy, transport and raw-material costs.

Source: https://see.news/