Spot gold prices touched historic highs, momentarily reaching $5,595 per ounce in January, driving unprecedented margins and cash flows for gold producers during the first quarter of 2026. According to a report by the World Gold Council (WGC), these record price levels successfully outpaced rising mining costs despite persistent inflationary pressures and regional geopolitical disruptions.
During the quarter, the global average gold producer All-In Sustaining Costs (AISC) rose by 5 per cent quarter-on-quarter and 16 per cent year-on-year to reach $1,785 per ounce. This marked the 28th consecutive year-on-year increase in AISC for the gold mining sector.
The report pointed to escalating royalty payments as the primary cost driver for the period. Fueled by the expansion in revenues, royalty payments surged by 24 per cent quarter-on-quarter and 85 per cent year-on-year. This doubled their share of the average operation's cost base from approximately 6 per cent in the first quarter of 2021 to 12 per cent in the first quarter of 2026.
Fiscal regime changes and growing resource nationalism in West Africa also accentuated cost burdens across several jurisdictions. In March, Ghana introduced a sliding scale royalty system reaching up to 12 per cent for prices above $4,500 per ounce. Similar sliding systems were introduced in Burkina Faso in 2025, reaching 10 per cent between $4,000 and $4,500 per ounce, while Mali implemented higher rates of 9.5 per cent at $4,100 per ounce in 2024. Consequently, royalty expenses surged by 220 per cent year-on-year at IAMGOLD's Essakane mine in Burkina Faso, accounting for 35 per cent of cash costs. Resolute Mining also identified royalties as a key factor pushing costs at its Syama mine above guidance.
Despite these escalating cost pressures, average gold prices rose by 17 per cent quarter-on-quarter and 70 per cent year-on-year. This price movement drove average AISC margins up by 25 per cent quarter-on-quarter and 134 per cent year-on-year to reach a record $3,076 per ounce.
Capitalizing on these gains, 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 (FCF) of $3.1 billion, and subsequently approved an additional $6.0 billion share buyback programme. Similarly, AngloGold Ashanti generated a record FCF of $1.2 billion, successfully moving from a net debt position into net cash.
Meanwhile, supply chain disruptions stemming from the Iran conflict, including the closure of the Strait of Hormuz, increased global energy, freight, and consumable expenses. While wholesale diesel prices rose 54 per cent in the US and 96 per cent in Perth, large and intermediate producers remained largely insulated through hedging, existing inventories, and long-term procurement contracts.
Looking ahead, the WGC noted that operating costs are expected to rise further as the Iran conflict and associated supply chain disruptions persist. Because much of the cost escalation occurred late in the first quarter of 2026, the full impact on fuel, freight, and consumable costs is anticipated to become more apparent during the second quarter, placing additional pressure on margins.
"The financial performance of gold producers in the first quarter of 2026 demonstrates how extraordinary commodity price surges can dramatically expand profit margins, even in an environment of escalating input costs and regulatory burdens. For businesses across sectors, maintaining capital discipline and utilizing hedging strategies during periods of high revenue generation remains vital to building long-term financial resilience against ongoing supply chain and geopolitical uncertainties." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
