Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Increasing royalties imposed by governments have been the primary driver of the rise in gold mining costs, according to a World Gold Council (WGC) report.
Global average gold producer All-In Sustaining Costs (AISC) rose 5% quarter-on-quarter and 16% year-on-year to $1,785 an ounce in the first quarter of 2026, marking the 28th consecutive year-on-year increase in the measure. AISC is an industry measure of the recurring cost of producing an ounce of gold, including operating expenses and expenditure required to sustain existing production.
The WGC said royalties were the most significant contributor to the increase. With gold prices reaching record levels, royalty payments jumped 24% quarter-on-quarter and 85% year-on-year. Royalties and production taxes accounted for about 12% of the average operation’s AISC in Q1 2026, double their roughly 6% share five years earlier.
The impact has been particularly pronounced in countries that have introduced royalty systems linked to gold prices.
Ghana introduced a sliding-scale royalty system in March, replacing a longstanding flat rate of 5%. Under the new system, the royalty can reach 12% when gold prices exceed $4,500 an ounce.
Burkina Faso introduced its own sliding royalty system in 2025, applying a 10% rate when gold trades between $4,000 and $4,500 an ounce. Mali introduced a sliding scale in 2024, with the royalty rate rising to 9.5% at a gold price of $4,100 an ounce.
The WGC said the higher rates were feeding directly into mining costs. At IAMGOLD’s Essakane mine in Burkina Faso, royalty costs surged 220% year-on-year and accounted for 35% of cash costs. Resolute Mining also identified higher royalties as one of the factors that pushed costs at its Syama operation above guidance.
The conflict in Iran and disruption across the Middle East added another layer of cost pressure. The WGC said the closure of the Strait of Hormuz and damage to energy and other infrastructure disrupted global supply chains, increasing fuel, power, freight, shipping and consumable costs.
Fuel and power emerged as particular concerns. The average US diesel price ended the quarter 54% higher quarter-on-quarter, while wholesale diesel prices in Perth, Australia, rose 96%. Smaller mining operations in Western Australia were reported to have suspended activity because of fuel constraints.
Higher energy prices also spread through supply chains. Bunker fuel costs doubled in early March and war-risk insurance premiums increased, raising the cost of importing consumables and spare parts. Gold Fields reported a 40% rise in freight and consumables costs since the start of the Iran war.
Despite the cost increase, record gold prices more than offset the pressure during the quarter. The average gold price rose 17% quarter-on-quarter and 70% year-on-year, while average AISC margins increased 25% quarter-on-quarter and 134% year-on-year to a record $3,076 an ounce.
The WGC said cost pressures could become more visible in the second quarter because much of the escalation in the Iran conflict occurred late in Q1. It expects the impact on fuel, freight and consumable costs to become more apparent, potentially putting additional pressure on miners’ margins.
Commenting on the report, Dhaval Jasani, a Dubai-based chartered accountant who publishes a regular bulletin on the gold market, said the Q1 2026 data point to resilience rather than distress.
“Producer costs have hit a record $1,785/oz, and the shift to price-linked, sliding-scale royalties across Ghana, Burkina Faso and Mali marks a structural change in how resource-rich nations are capturing the gold rally, not a one-off spike,” he said.
Despite the rise in royalties, near-term profitability remains firmly intact, Jasani said. “With AISC margins at a record $3,076/oz, miners are still earning roughly $1.72 for every dollar spent producing an ounce.”
“The real test comes in Q2 2026: the Iran conflict’s fuller impact on fuel, freight and insurance costs — much of which escalated only late in Q1 — has yet to fully filter through and could compress margins faster than royalty inflation alone,” Jasani added.
