(EU)reka!? Our take on the new Gold Rush

21 October 2025

• Gold prices have risen to the extent that even the highest-cost mines are making record cash margins of ~USD 2,500/oz. This is around 10x more than the 30-year average*.


• Miners will scramble to produce more ounces. We expect to see significant upgrades to gold price assumptions that underpin the reserve statements and business plans of gold miners. This will unlock capital for brownfield expansions, new greenfield mines and M&A.


• Swedish-listed machinery producer, Sandvik, will benefit from a strong upcycle in new equipment sales and aftermarket services.


• Sandvik’s just-released Q3 results provided strong evidence, with 24% growth in Mining division orders, driven by a 75%* increase in orders for new equipment.

We have a large position in Swedish-listed machinery company Sandvik. Over 50%* of the business is exposed to the mining sector. Of that mining exposure, around 60%* is to gold (the biggest at close to 40%*) and copper, both metals which have seen strong increases over 2025. Gold in particular has made the headlines as its "safe haven" attributes (from geopolitical tensions, inflation, government deficits and doubts over the US dollar) have been once again lauded.

The gold mining industry is looking like a magic money printing machine, but with more convincing fundamentals than that other contemporary instant money hack: AI-partnership announcements...

Below we outline some of our thinking and put Sandvik’s just-released Q3 results into context.

Gold mining profits are off the chart (but we extended the Y-axis)

Thanks to the market's appetite for this "debasement trade", the economic fortunes of gold miners have been transformed. This is most pronounced for the highest-cost gold miners. Based on estimates from the excellent mining team at Jefferies, mines sitting at the highest point of the cost curve are printing a cash margin of around $2,500 per ounce based on the current gold price. This compares to a 30-year average of a couple of hundred dollars per ounce (and with intermittent periods of losses). Unfortunately, we are unable to display this in chart form as we do not have permission to share some of the underlying data that Jefferies used. Therefore, we deployed our excel prowess into drawing a rough trendline of cash profits for high-cost gold miners over time. Enjoy:

Cash margins for highest-cost gold miners

Expect a mad rush for more ounces

Market forces should naturally push existing miners to extract more ounces wherever possible, through brownfield expansion, new greenfield projects and likely through M&A. We should also expect to see external capital come into the industry too; if previous mining cycles are anything to go by, this will see a wave of marginal deposits, mothballed mines and dormant projects rehabilitated in far-flung corners of the globe. This can all sound a bit speculative (and some of it surely will be), but the established gold miners have processes in place to encourage (if not ensure) disciplined capital allocation over time. The reported ‘reserves’ and ‘resources’ of the listed mining companies are a good place to look. These statements communicate to the market the company's assessment of the amount of gold that is in the ground and economically viable to extract at a given gold price assumption. They form the basis of a company's production and financial budgets. The gold price assumption is therefore critical to any gold miner's capital allocation plan.

The average reported 2024 reserve price assumption was just under USD 1,600/oz* for a selection of listed gold miners:

2024 Reserve Price Assumption vs Gold Price ($/Oz)

Simplistically, these reserve price assumptions tend to track a three-year moving average of the gold price, with a buffer built in to protect the economic viability of the business plan if gold prices fall. Through 2023 and 2024 the reserve price assumptions of these companies were around 30%* lower than the average spot gold price for that year. Even if management teams and their advisers decide to factor in a bigger buffer given the eye-watering ascent in gold prices this year, there is a mechanistic underpinning that will lead to higher reserve price assumptions, an increase in reported reserves and re-optimised mine plans that target higher production and profits through brownfield expansion. Higher cash flows will also provide the financing to accelerate Greenfield Projects and make acquisitions. It is worth noting that gold miners are also somewhat fortunate in comparison to their peers in other commodities (iron ore, coal, base metals etc) in that they don't have to worry about the impact that their higher output could have on market prices. The gold price isn't set on annual supply/demand dynamics. Indeed, annual gold mined is estimated to add only around 1.5-1.7%¹ to the entire gold stock in existence above ground. Therefore, in the absence of discernible second order consequences, higher gold prices directly incentivise higher gold output.

Newmont's 2024 annual report provides a useful sensitivity analysis, which estimates an increase of 6% (or 7.4 million ounces)² in reported reserves for just a USD 100/oz change in the gold price assumption:

The conclusion is clear: barring a collapse in the gold price, gold production is set to grow significantly in the coming years.

More ounces will mean more digging with more tools: we can access that derivative theme in Europe

We do not own any gold mining companies in our strategy: Our choices are somewhat limited in Europe (many of the biggest players are listed in the US/Canada). The smaller miners can be volatile and exposed to concentrated jurisdictional risks through their asset base (with governments historically even more keen to take a bigger slice of the pie during strong pricing environments).

"Picks and shovels" is now one of the most hackneyed terms in the market, having been hijacked to describe any company that is, or claims to be exposed to AI and datacentres. But in the case of Sandvik, the phraseology - derived from the 19th century Californian gold rush - is entirely appropriate.

Sandvik sells heavy duty mining machinery, from drill rigs to haulage trucks and crushing and screening equipment. It then derives most of its Mining division revenues (around 70%³) from aftermarket services for that installed fleet of equipment (through maintenance and sales consumables like drill bits).

Sandvik has just reported Q3 results: we see confirmation of an emerging mining capex upcycle driven by gold

We do our best to not get caught up in the ticker-porn^TM of quarterly results; the way short term money and sell side coverage has effectively gamified releases into headline-driven binary bets (a small "beat" versus consensus can mean shares up double digit, and vice versa). But they can sometimes offer an insight into meaningful positive or negative surprise.

Sandvik has just reported Q3 results and we were pleased to see a clearly positive organic order intake result for the Mining division of +24% year-on-year (YoY) - well ahead of "consensus" on +16%. Importantly, much of the strength was driven by new equipment sales growing 75%³ YoY. Strength in new equipment sales signals the changing mindset of mining companies - from one of “capital discipline” during the last 5-10 years to one of optimising operations and growing output. This is great news for Sandvik. As mentioned, the business makes most of its Mining revenues from aftermarket services, and new equipment sales effectively ensure future aftermarket revenues that are worth 3x the revenue from the initial equipment sale.

It's notable that Q3 organic revenue growth for the Mining division lagged order intake (+6% versus +24%), as the lead time for conversion from an order into a booked sale is around nine months on average. We have now seen three consecutive quarters of double-digit YoY organic order growth for the Mining business, which bodes well for revenue growth into the end of FY 2025 and into FY 2026. What is also worth bearing in mind is that the division had already started to see improved order intake levels earlier in the year when gold prices (and copper prices) were much lower than they are now. The appetite of the mining companies has surely grown since then.

We expect to see Sandvik continue to report stronger order numbers, followed by revenue and profit growth, as the effects of higher commodity prices (in particular gold) work through the system: from higher mining cash flows, reserve statement updates and adjusted capital investment plans, into new equipment and aftermarket business for Sandvik.

Tom O’Hara, Jamie Ross and David Barker manage European Equities strategies at GAM Investments. You can find out more information on the team and the strategies they are responsible for here.