Gold boom drives rising costs for Aussie producers

As Australian gold producers set forecasts for their 2026 performance, a clear trend has emerged that sets them apart: costs are expected to rise even as non-gold miners predict lower expenses.   

Shares in sector leader Northern Star Resources (ASX: NST) were heavily sold off in July after the company said all-in sustaining costs (AISC) for the fiscal year to June 30 could jump between 6% and 25% to A$2,300 (US$1,477) to A$2,700 an oz. from A$2,163 per oz. in the previous year. 

“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. “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.”

Tight labour markets, higher contractor and service rates, and inflation in energy and consumables are pushing AISC for gold steadily higher. Unlike bulk commodities or battery metals, where project slowdowns and weaker prices have tempered cost pressures, steady gold production and high margins have kept demand for skilled labour and key inputs strong, leaving operators with little room to contain expenses.

Labour pains

Tonkin said the main sticking point was labour, where the company was seeing a 3-4% increase for fiscal 2026.

“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 per oz. for fiscal 2026, up from A$1,572 an oz. this past year. The guidance factored in 4% inflation, equating to A$105-125 per ounce. According to the company, around half of its cost base is labour.

While Western Australia producer Ramelius Resources (ASX: RMS) hasn’t report next year’s forecast, managing director Mark Zeptner said wages may increase 4% to 5% when 12 months ago it was more like 3%.

“It’s probably really a gold-based boom and iron ore is ticking up as well,” Zeptner said on the sidelines of this month’s Diggers & Dealers Mining Forum in Kalgoorlie. “Everyone in the gold space seems to be either expanding their projects or restarting projects and we’re the same, so there’s potentially a bit of stress coming into the labour market.”

Zeptner suspected it may add around A$100 an oz. to Ramelius’ AISC, which were A$1,551 an oz. for fiscal 2025, 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 per oz., higher than last year mostly due to increased hauling costs instead of labour, Managing Director Wayne Bramwell said. The company trucks its ore as far as 180 km from the Fortnum mine to the Meekatharra plant in Western Australia.

“Haulage is a big chunk of our business, and if you’re hauling more tonnes, you pay more dollars,” Bramwell 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.”

Regis Resources (ASX: RRL) has tipped AISC to rise to A$2,610-2,990 per oz. this year from A$2,531 per oz. previously. 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,” Beyer said. “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.”

Labour strategies

Northern Star’s Tonkin says he’s had to balance labour strategies as the company expands its largest operation, KCGM in Kalgoorlie, which is also one of Australia’s biggest gold mines.

The workforce is largely residential, but a A$1.5-billion plant expansion underway has forced the company to invest A$30 million to A$35 million in an accommodation camp and increase its reliance on a fly-in, fly-out (FIFO) workforce. Given the expansion construction jobs were temporary, it didn’t motivate people to move to Kalgoorlie, Tonkin said.

“FIFO is expensive for us as accommodation,” he said. “Those are the things that all fit back into this cost structure uplift.”

Turnover rates

Evolution Managing Director Lawrie Conway also balanced labour strategy, though a bit differently. When the Mungari operation experienced turnover rates of as high as 38% two years ago, the company reduced turnover to 15% via an incentive-based remuneration scheme. 

“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.”