Gold miners’ Q2 margins fell, but cash generation stayed strong

AISC rose 8% quarter over quarter and 22% year over year, marking the 29th consecutive annual increase. Higher sustaining capital spending, operating expenses and disruptions at some mines outweighed lower royalty costs, Blagden said. Sustaining capital expenditure rose 34% from Q1 and 25% from a year earlier to a record US$441 per ounce. That increase accounted for about 80% of the US$139-per-ounce quarterly rise in AISC, lifting sustaining capital’s share of miners’ cost base to 23% from 18% in Q1 2026. Spending increases, however, were concentrated among a minority of operations.

Production at operations covered by Metals Focus’ Gold Mine Cost Service recovered 1.6% quarter over quarter, while average grades improved 1.4%. Year over year, output was down 4.4% and grades fell 3.1%. Cash operating costs increased 6% quarter over quarter and 18% year over year to US$1,215 per ounce; total cash costs rose 4% and 22%, respectively, to US$1,406. Labour and fuel remained pressures, while supply-chain delays affected access to consumables and equipment. Average royalty and production-tax costs fell 11% from Q1 to US$185 per ounce, but were still 53% higher year over year.

The average gold price declined 7.2% quarter over quarter to US$4,512 per ounce. AISC margins narrowed 16% to US$2,582 per ounce, but were 52% higher than a year earlier as gold prices remained 37% higher. Blagden described Q2 as “a retreat from exceptional margins rather than a collapse in cash generation,” noting that miners’ balance sheets remained robust.

He said the average gold price was US$4,266 per ounce in Q3 2026, down 5.5% quarter over quarter, and stood at about US$4,040 at the time of writing. With AISC approaching US$2,000 per ounce, fuel, supply-chain and inflationary pressures could drive further cost increases and margin contraction through the rest of 2026. For 2027, Blagden said, a forecast recovery in gold prices could raise royalties, but higher revenue should more than offset that increase and support wider margins.