2Q26 Preview: Volatility Makes for Attractive Entry Point; Upgrade AEM to Buy

Research evidence excerpt

2Q26 Preview: Volatility Makes for Attractive Entry Point; Upgrade AEM to Buy

term elections are in November, and the current

US national debt is ~$40 trillion, resulting in net interest payments that are ~15% of total federal 2Q26 FCF Margins Expected to Trough Before

Rebounding in 2H26

outlays. For the first time in US history, annual net interest payments exceed annual spending on $2,000

defense. Central bank buying continues to be a positive - in 1Q, central banks bought 244t (+17% $1,800

q/q), implying annualized demand of 976t (vs. 863t in 2025). $1,600

$1,400

Sector commentary - cost concerns give way to commodity concerns. After 1Q, the biggest ($/oz) $1,200

concern for investors looking at the gold sector was costs. Everyone we spoke to was quantifying margin $1,000$800the impact of $100/bbl oil on miner costs and conversations were even shifting to the second- and

FCF $600

third-order impacts of higher oil. Fast-forward to now, oil prices have sharply dropped to below $70/ $400

bbl, lower than we would have anticipated given low strategic reserves globally. As a result, we find $200

investors increasingly think higher input costs will be largely a 2Q-only phenomenon. There will be $0

some residual pressure from elevated diesel prices, which haven't come down to the same extent . 1Q26A 2Q26E 3Q26E 4Q26E

Source: Jefferies, Company reports

as oil, but this should be minimal at ~1-2% of AISC. Further, the stronger USD versus the CAD in 2Q FCF Margin is derived from our proprietary Real Cost

Framework. We apply gold price at our price deck in

provided an FX tailwind for Canadian producers such as AEM and AGI, as USD-denominated gold determining 3Q & 4Q FCF margins.

revenues are matched against a largely CAD cost base. Attention has turned from costs to gold