Gold Boom Drives Rising Costs for Australian Producers
As Australian gold producers set annual guidance for the 2026 financial year, a clear trend has emerged across the sector.
While miners outside the gold sector are expecting to see flat to lower unit costs for the 12 months to June 30, 2026 (FY26), gold miners are almost universally forecasting a rise in costs.
Shares in sector leader Northern Star Resources (ASX: NST) were heavily sold off last month after the company said it expected all-in sustaining costs (AISC) for FY26 to rise to A$2,300-$2,700 an ounce ($1,477-$1,862/oz) from A$2,163/oz in FY25.
“Unfortunately, we’re not seeing costs plateau, and that pressure still remains and you’re seeing that across the sector,” Northern Star managing director Stuart Tonkin told reporters at the Diggers & Dealers Mining Forum in Kalgoorlie this month.
“We haven’t really seen the relief that was expected when nickel and lithium projects were paused or wound down. If anything, gold has picked up that and then some and so that’s just added to the pressure.”
Labor pains
Tonkin said the main sticking point was labor, where the company was seeing a 3-4% increase for FY26.
“With the service providers, we’re seeing more than that because they have stale contracts that might have been formed a few years ago, and there’s been that build-up,” he said.
Evolution Mining (ASX: EVN) guided AISC costs of A$1,720-1,880/oz for FY26, up from A$1,572/oz in FY25.
The guidance factored in 4% inflation, equating to A$105-125/oz. According to the company, around 50% of its cost base is labor.
Western Australia producer Ramelius Resources (ASX: RMS) reported AISC of A$1,551/oz for FY25.
While the company is yet to report FY26 guidance, managing director Mark Zeptner said costs were set to rise.
“I think there’s a little bit more cost coming into the business,” he said on the sidelines of the Diggers & Dealers Mining Forum.
“On wages, we’re looking at between 4% and 5% increases, where we were probably talking more 3% 12 months ago. I think it’s probably really a gold-based boom and iron ore is ticking up as well. Everyone in the gold space seems to be either expanding their projects or restarting projects and we’re the same, so I think there’s potentially a bit of stress coming into the labor market.”
Zeptner suspected it may add around A$100/oz to Ramelius’ AISC, allowing the company to retain its position as a low-cost producer.
“I don’t think it’s anywhere near as bad as it was when inflation was double digits, but it has ticked up a bit,” he said.
Higher-cost production
Westgold Resources (ASX, TSX: WGX) this month set cost guidance A$2,600-2,900/oz, higher than FY25.
The company hauls its ore as far as 180 kilometres from the Fortnum mine to the Meekatharra plant in Western Australia.
Managing director Wayne Bramwell said the company was seeing the largest cost increase in haulage, rather than labor.
“Haulage is a big chunk of our business, and if you’re hauling more tonnes, you pay more dollars,” he said.
“As the gold price is high, there’s always the risk – and we’ve done in the past – you lower your head grades to chase more gold, but you’re processing more tonnes, so your unit cost goes up, so that’s a fool’s errand in some sense.
“That’s why we’re trying to get away from a mentality of chasing volume and try to chase grade. It’s about margin, not about the headline of how many ounces you produce.”
CEO Jim Beyer said the company was experiencing the same cost pressures as its peers, but that Regis’ costs were also higher due to the company’s plan to take advantage of the higher gold price.
“I need to be clear: our strategy of bringing in higher-cost, lower-margin ounces is still making money at the moment, not at the expense of our long-term ‘good’ ounces,” he said.
“We are not delaying good ounces and bringing in ordinary ones. We’re doing both what we originally planned with what we call our core ounces, and we’re adding marginal ones while it makes sense.”
Retention strategies
Northern Star’s largest operation is KCGM in Kalgoorlie, which is also one of Australia’s largest gold mines.
The workforce is largely residential, but a A$1.5 billion plant expansion currently underway has forced the company to invest A$30-35 million in an accommodation camp and increase its reliance on a fly-in, fly-out (FIFO) workforce.
Tonkin said that given the expansion construction jobs were temporary, it didn’t motivate people to move to Kalgoorlie.
“FIFO is expensive for us as accommodation, so those are the things that all fit back into this cost structure uplift,” he said.
Meanwhile, Evolution’s Mungari operation, outside Kalgoorlie, experienced extremely high turnover rates of as high as 38% only two years ago.
Evolution managing director Lawrie Conway said the company had managed to reduce that turnover rate to 15% via its incentive-based remuneration scheme.
“There is that demand picking up again, particularly with gold, but I think we’ve got the right remuneration structure in place for our workforce to not see that as a bigger impact,” he said.
“Anyone in the organization, from an entry level, maintenance, through to myself, has an at-risk component, and what we did a couple of years ago, when we saw inflation really rising, we actually increased the percentage of our quarterly bonus for the operator level, and we increased that rather than lifting their salaries.
“And you know what we saw through the last 12 months with our performance? It was probably the equivalent of them getting a 4% pay rise in what they got in their bonus, but it’s not fixed in and that’s why we think the balance between the fixed and the variable structure works really well.”
