Sustaining Strength in a Higher Gold Price Environment

Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits.

Key Takeaways:

• Strong free cash flow and industry costs below $2,000 per ounce support durable gold miner profitability, even if gold prices stabilize.
• Gold mining companies are prioritizing disciplined capital allocation, shareholder returns and organic growth.
• Gold mining equities remain well positioned to outperform in 2026 if prices stay elevated or rise further.

How Sustained High Gold Prices Are Shifting Valuations

Investors continue to ask whether gold prices can rise further from here. We believe that remains likely. We live in a world where a new gold catalyst seems to emerge every month. Market participants, many still watching from the sidelines, have observed gold’s relentless rally over the past couple of years and now appear increasingly convinced that these record prices are here to stay.

Even without upward revisions to gold price forecasts, this shift in perception has meaningful implications for gold miners. As confidence builds that gold can remain at elevated levels, the market progressively embeds higher long-term gold price assumptions into equity valuations.

This durability of record or near-record margins and cash flow generation, even if the gold price holds at current levels, is a central driver of our conviction in gold mining equities for 2026.

Gold Miner Margins, Costs and the Math Behind the Opportunity

In a flat gold price environment, margin erosion would need to come from rising production costs. Companies have provided 2026 all-in sustaining cost (AISC) guidance that, so far, aligns with our expectation of roughly a 10–12% increase versus 2025.

The gold price closed at $5,278.93 per ounce on February 27, up $384.69 per ounce or 7.86% for the month, and $959.60 per ounce or 22.22% year to date. The math remains compelling: margins have already expanded year over year, and with estimated average industry AISC below $2,000 per ounce, the sector demonstrates substantial resilience at current price levels.

These strong fundamentals support our view that gold mining equities are well positioned to outperform the metal again in 2026. The stocks demonstrated strong outperformance in February. The MarketVector Global Gold Miners Index¹ rose 21.01% for the month.

Key Takeaways from the 2026 BMO Global Metals and Mining Conference

We had the opportunity to meet with more than 40 gold mining companies at BMO’s 2026 Global Metals and Mining Conference in Hollywood, Florida this past month. Our discussions with producers, developers and royalty and streaming companies reinforced our view that the sector is in a cash-generative, disciplined phase, not a reckless expansion cycle.

Key themes from our meetings included:

• High margins are driving record free cash flow generation, allowing companies to comfortably fund capital needs.
• Returning capital to shareholders, in some cases 40%–50% of free cash flow, through dividends and share buybacks remains a priority.
• With leverage well within target ranges and cash balances building rapidly, companies are focused on avoiding “lazy” balance sheets by accelerating optimization initiatives, expanding exploration programs and advancing project pipelines.
• Abundant capital is likely to revitalize industry activity, which could eventually tighten labor, services, equipment and materials markets. For now, most companies are not experiencing sustained cost pressures, though conditions vary by geography and activity type (e.g., exploration versus construction).
• Scale may prove advantageous in tighter markets. One large producer emphasized that its procurement strength, supplier relationships and reputation position it well to mitigate potential cost pressures.
• Jurisdictional risk management remains front and center. Despite ample capital for M&A, companies are maintaining discipline. Growth for growth’s sake is no longer acceptable. Acquisitions must enhance portfolio quality and reduce risk, with geographic exposure a key consideration.
• Permitting remains slow and complex. While governments in the U.S. and Canada have signaled efforts to streamline processes, companies report limited tangible impact on timelines to date, aside from some improvements in jurisdictions such as New Zealand.
• Higher gold prices should ultimately support reserve growth as more ounces become economic, yet companies continue to use conservative gold price assumptions (around $2,000 per ounce) in reserve calculations.
• In the near term, larger exploration budgets should support reserve growth through resource conversion drilling.
• Over the longer term, increased exploration spending could drive new discoveries. Many companies are expanding drilling programs within existing land packages, favoring organic growth, which is typically more accretive than M&A and supportive of stronger returns on capital.

Why Gold Mining Equities Are Positioned for 2026

Overall, the tone across meetings was constructive and confident. Companies are generating record margins, balance sheets are strong and capital allocation is notably more disciplined than in past cycles. Management teams are prioritizing returns, investing selectively in high-quality growth and advancing projects with greater technical rigor and lower risk.

While permitting hurdles and geopolitical risks remain part of the landscape, the sector appears better positioned than ever, supported by resilient assets, improving operational execution and a clear commitment to long-term value creation.

With free cash flow robust even under conservative gold price assumptions, the sector appears fundamentally well positioned for 2026. If gold prices remain near current levels, or move higher, gold mining equities have both the financial strength and operational leverage to continue outperforming the metal.

¹ MarketVector Global Gold Miners Index (MVGDXTR) tracks the overall performance of companies involved in the gold mining industry.