Global miners face succession crisis as old guard nears retirement

The price of gold plunged by as much as 4% to five-year lows on Monday after a sudden bout of selling across Shanghai and New York markets in the early hours of trading triggered a mini flash crash.

In the aftermath of the financial crisis, some investors saw gold-and by extension gold mining companies-as a smart place to be amid global markets that seemed unstable and characterized by government intervention and mountains of debt.

The 113,821 ounces of gold produced in the June quarter was more than 10 per cent higher than the March quarter, and at a record low C1, or unit, cost of $690 an ounce.

Northern Star Resources, which like Evolution is aiming to boost its ranking to the top of the Australian mining sector by producing more ounces, fell 9 percent to A$2.08. “In the face of a continued fall in the gold price the market will get to a point where smaller gold miners have no choice but to more aggressively look for merger opportunities or strategic investors in order to survive”, Tivey said.

The biggest declines came in the leveraged ETF sector.

Freeport-McMoRan, a producer of gold and copper, fell 4%. Gold this week took its sharpest dive since September 2013, landing at $1,088 per ounce, a five-year low.

A total of $539 million was pulled from gold tracking ETFs last week as investors sought better returns elsewhere. “We don’t think gold deserves to trade close to or below $1100 for a prolonged period, albeit any recovery from here is likely to be capped – price action is likely to stay choppy…”

“It’s a combination of factors: softer Chinese gold demand, the rising USA dollar and what we’ve seen this morning being compounded by the triggering of a number of stop losses”, said Tim Schroeders, a portfolio manager who helps oversee about $1 billion in equities at Pengana Capital Ltd.in Melbourne.