Gold price surge brings huge gains to producers in Q1’26, WGC says - BusinessLine

AI desk brief

WGC says record gold prices in Q1’26 more than offset rising mining costs, driving sector margins to a record $3,076/oz and lifting producer cash flows to unprecedented levels. Global average gold AISC rose 5% q/q and 16% y/y to $1,785/oz, but average realized gold prices still jumped 17% q/q and 70% y/y, leaving miners with exceptional profitability despite inflationary and geopolitical cost pressures.

Royalties were the biggest cost driver, with payments up 24% q/q and 85% y/y and doubling to 12% of the average operation’s cost base from about 6% in Q1’21. WGC highlighted sharper fiscal burdens in West Africa: Ghana’s new sliding royalty scale reaches 12% above $4,500/oz, Burkina Faso’s scale goes to 10% between $4,000 and $4,500/oz, and Mali’s higher rates reached 9.5% at $4,100/oz. The report cited major mine-level impacts, including IAMGOLD’s Essakane where royalties rose 220% y/y and took 35% of cash costs, while Resolute said royalties pressured Syama above guidance.

For the market, the near-term read-through is two-sided: elevated gold prices are still generating strong shareholder returns and supporting producer equity sentiment, but cost inflation and resource nationalism are beginning to erode operating leverage in higher-tax jurisdictions. WGC warned Q2’26 margins could come under further pressure as the Iran conflict feeds through higher fuel, freight, and consumables costs more fully. Key catalyst is the next quarterly mining-cost update, with particular focus on whether hedging and procurement can continue to cushion margins if spot gold stays elevated.