Two years of writing about rising gold prices and thickening margins, as a cynical old hack it is comforting to have something less positive to ponder, a bit of intrigue to get my teeth into once again
Spot gold’s descent to below $US4,500/oz at the time of print may not feel that dramatic when considering it only breached that mark for the first time ever in January.
However, the longer-term ramifications could be significant.
No matter what miners tell the market (and themselves), they do adjust plans to account for a rising gold price environment. And they do abandon some caution and begin assuming prices will remain high. It would be throwing money away to do otherwise.
When the gold price is sky high, management are obliged to get as many ounces out as possible. To achieve this, they must necessarily sacrifice some things in order to extract more tonnes and push them through the mill as quickly as possible.
The first option is usually to lower the head grade, ensuring now economic lower-grade material is captured. In addition, companies will push the envelope on other costs and may even ignore scheduled maintenance and other practices to ensure the mill is running at maximum.
What will now be keenly observed is how quickly companies can react to the altered circumstances, especially as they are enduring the double-whammy of lower spot price and higher input costs, largely due to the oscillating oil price.
There is no avoiding the fact the March and June quarterly results will be down on key metrics compared to the two previous periods but it will be a brave executive team which takes the decision to curtail higher cost production. No matter the reasons, it will not be palatable if a company declares its March quarterly production will be down and operating costs are up.
However, this is exactly the decision some brave teams will have to take otherwise we will begin to see the same story which has repeated so many times before – a buoyant sector gets a bit too full of avarice as the gold price appears on an inexorable climb, only to find it’s very difficult to cease dancing when the music stops.
Having previously been falling over themselves to enjoy the rewards of the gold price, suddenly investors are asking where the profits of the last 18 months have gone and why management didn’t do more to fortify the company against the “inevitable” downturn.
I suspect many of the established mid-tier and larger gold miners are in position to weather the storm but it could make for a few grim months for those companies who have pushed the hardest. Junior miners in particular may find it difficult as diesel costs go up and fixed costs remain.
Counter-intuitively, it could play it the hands of explorers. After a generation of poor discovery rates, we have been treated to a few success stories of late and there are several explorers with exciting discoveries of high quality. Some miners are going to be increasingly eager to improve the quality of the material they are mining and they may just come knocking at the door of these emerging juniors.
Saying all that, if the early months of 2026 have taught us anything it is that the entire macroeconomic and geopolitical landscape could have shifted again by the middle of next quarter (or indeed by the time this magazine reaches readers).
Throughout 2025, that uncertainty was the gold mining industry’s friend. Whether it will be quite so generous in 2026 is very debatable.