Can Newmont Protect Margins Amid Higher Unit Costs in 2026?

Newmont (NEM) Q1 2026 costs rose, with gold costs applicable to sales (CAS) up ~7% YoY to $1,307/oz and AISC up ~4% YoY to $1,709/oz on a co-product basis. Management warns lower production will push 2026 by-product costs higher to $1,680/oz (vs. $1,358 in 2025) and expects sequential unit-cost inflation in Q2. Peer commentary is mixed: Barrick’s AISC increased sequentially to $1,708/oz and is forecast at $1,760–$1,950/oz for 2026, while Agnico Eagle’s AISC jumped ~26% YoY in Q1 to $1,483/oz. Overall, rising unit costs and weakening profitability targets offset prior stock outperformance, with NEM valued at a forward P/E of 9.44x and a Hold (Zacks Rank #3) stance.

Analysis

The investable message is not “costs are up,” it is that 2026 margin assumptions are likely still too high for the big-cap gold complex. When lower volumes, deferred sustaining capex, and higher royalties all hit the same year, the operating leverage works in reverse: even if spot gold stays flat, free cash flow can disappoint by much more than the AISC increase suggests. That makes the second-order winner the royalty/streaming model, where FNV/WPM are insulated from operating inflation and can take share of investor capital rotating out of high-cost producers.

Among the large caps, NEM and B look like the most vulnerable to estimate cuts over the next 1-3 months because the market usually underestimates how quickly guidance revisions flow through consensus EPS. AEM is comparatively better positioned on a relative basis because its cost structure is still lower than the others, but it is not immune if sustaining capex and energy input inflation persist. The key time horizon is the next quarterly update: if Q2 sequential cost inflation lands as flagged, the market will likely re-rate the group on cash conversion, not headline earnings multiples.

Contrarian view: the move may be somewhat over-discounted at the index level, because gold miners still trade at single-digit forward earnings and the stock tape has already rewarded NEM over the last year. But that is exactly why relative-value is cleaner than outright directionality. The thesis breaks if gold rallies hard enough to offset unit-cost inflation or if management proves the sequencing impact is temporary and 2026 costs are re-anchored lower; otherwise the pressure is likely to show up first in consensus revisions, then in dividend/FCF expectations, and only later in price-to-earnings compression.

Key Decisions for Investors

• Short NEM into the next earnings/guidance window or use rallies to build; thesis is 1-3 month EPS revision risk from higher AISC and lower volumes. Falsify if gold price rallies enough to keep FCF flat despite higher costs.
• Pair trade: long FNV or WPM vs short NEM over 1-3 months. Rationale: royalty/streaming margins are far less exposed to diesel, royalties, and sustaining-capex inflation, so this isolates operating-cost pressure without taking a pure gold-price bet.
• Relative-value long AEM / short B if the market starts discriminating on cost quality. AEM is still inflationary, but its cost base looks less stretched than Barrick’s; use as a hedge if wanting sector exposure with less downside beta.
• Consider buying 3-6 month puts on GDX only on a strength spike, not immediately. The cleaner trigger is a confirmed Q2 cost beat/guide cut from NEM or B, which would turn this from idiosyncratic noise into a broader multiple-reset.
• Set an alert for NEM 2026 AISC guidance and consensus EPS revisions. If forward estimates keep drifting lower while the stock holds up, that is a sell-the-rip signal rather than a buy-the-dip.