Morning Expresso – Australasia

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Morning Expresso – Australasia

Australian Gold - Overweight, but Risks Remain

We see further downgrades on both costs & gold prices for FY27 EPS Mining & Metals

We think rising cost pressures remain underappreciated by the market (link). While consensus assumes

costs have peaked, we expect sector-wide AISC to rise ~A$110/oz YoY in FY27 (UBSe A$2,760/oz vs.

A$2,650/oz FY26), driving 5% EPS downside on avg. in FY27 and further margin compression as we

incorporate higher cost assumptions. Gold is under near-term pressure from rising yields and rate hike

expectations, but we retain a constructive outlook supported by anticipated Fed easing and ongoing

diversification demand, albeit with more uncertain & potentially delayed price recovery. While we have

trimmed near-term prices (incl. MTM), margins remain elevated, supporting strong FCF and valuations.

This backdrop reinforces a rotation toward quality & defensiveness, with higher-margin names such as

NEM & CMM better positioned than growth peers facing rising capex, project/permitting delays; our

preferences are NEM, GMD, CMM and CYL.

Downside risks to gold prices have increased

Gold has come under significant pressure as rising yields and rate hike expectations weigh on sentiment

(LINK). While parallels to prior bear markets exist, we see prices, this time, ultimately being supported

by expected Fed easing and continued buying in both private and official sectors. UBS forecast remains

higher short term than consensus, with economic prints out of the US remaining a key catalyst in the

coming months.

Cost escalation in focus; quality/defensiveness preferred

We expect cost inflation to be a key theme in FY27 guidance, forecasting average AISC of A$2,760/oz

across our coverage (4% up YoY and above cons).