War-related Risks Drive Gold Higher as Unprecedented Margins and Major Transactions Transform Mining Approaches

Geopolitical Tensions and Mining Sector Profitability: Insights from Neil Adshead

Neil Adshead, Consultant Analyst at the Commodity Discovery Fund, highlights how rising global tensions are coinciding with unprecedented profits in the gold industry and a renewed wave of major mining deals.

During an interview with Kitco Mining’s Digging Deep at PDAC 2026 in Toronto, Adshead discussed the sharp increase in gold prices following news of U.S. military action against Iran on February 28. He noted that gold surged in 24-hour trading, with bullion exceeding $5,300 per ounce—about $100 above the previous Friday’s closing price.

This price jump reflects a geopolitical risk premium at a time when gold producers are entering 2026 from a position of exceptional financial strength. Adshead remarked, “We’ve never seen gold miners achieve margins like those recorded in the fourth quarter of 2025.” Higher realized gold prices, combined with relatively stable diesel costs, have widened profit margins, improved balance sheets, and boosted free cash flow throughout the industry.

Energy markets remain a significant variable. With roughly one-fifth of the world’s petroleum liquids passing through the Strait of Hormuz, ongoing instability could drive up fuel prices. Adshead suggested that oil prices are likely to rise in the short term, though he cautioned that conditions could normalize quickly.

He also pointed out that while the United States is largely energy independent, China’s reliance on Persian Gulf oil means that any supply disruptions could have uneven economic effects across regions.

Broader Impacts on Strategic Metals

Beyond gold, Adshead explained that military conflicts can increase demand for minerals critical to defense technologies, such as tungsten, heavy rare earth elements, copper, and silver. Sustained hostilities require ongoing replenishment of munitions, making secure access to these resources a strategic necessity. “You don’t want to enter a conflict and find yourself short on essential supplies within a few months,” he emphasized.

Capital Markets and Major Mining Deals

There has also been a noticeable uptick in capital market activity. On February 16, Wheaton Precious Metals revealed a $4.3 billion silver streaming agreement with BHP, linked to output from the Antamina mine in Peru. Adshead noted that the value of such deals is shaped by timing: “That stream is particularly attractive now, as it was secured when silver was priced at $15–$20 per ounce, compared to nearly $90 per ounce today.”

Significant copper projects are also progressing. Lundin Mining recently released an integrated technical study, including a preliminary economic assessment for the Vicuña project—a 50/50 partnership with BHP that merges the Filo del Sol and Josemaria deposits. Adshead highlighted the project’s impressive scale, noting a projected mine life of around 70 years, which makes such long-term assets appealing despite substantial initial investments.

In the U.S., BHP and Faraday Copper announced a non-binding agreement last month to explore a potential transaction involving BHP’s San Manuel property in Arizona. Adshead described this move as a strategic consolidation, stating, “This feels like a case where combining forces creates greater value, especially as size and stable jurisdictions become more important for securing future supply.”

Outlook for the Mining Industry

Collectively, these trends illustrate how the mining sector is balancing immediate geopolitical risks with longer-term investment decisions. Strong gold margins have given producers greater financial flexibility, while the importance of strategic metals and supply security is increasingly shaping corporate strategies.