If you are an international fund manager and you want to hold an Australian goldminer, you have precious few investment options beyond Newcrest. So, when it comes time to take your money out and move on, Newcrest's share price is trashed.
For Newcrest shareholders, this was the week they took an unwelcome cold shower, with the value of their holdings here hitting multi-year lows.
Even though the gold price has gained ground over the past few days as investor sentiment on the efficacy of the US Fed's liquidity program has waned, which helped to push gold clear of $US1400 ($1471) an ounce, Newcrest has been punished. Its management is seen as having been too slow to cut costs following the downturn in the gold price, and has been punished as a result. And it is not alone, with Canada's Barrick Gold another large local player under pressure.
With an all-in production cost of circa $US1100 a tonne in Australia/Pacific - artificially held down by its Porgera mine in Papua New Guinea, which is a cheaper producer than its Kanowna Belle mine in Western Australia - Barrick began cutting jobs in the west over the past few days.
Barrick's Porgera mine, for example, produces about 120,000 ounces a quarter with a cash cost of $US934 an ounce, benefiting from the processing of lower cost stockpiles. This mine alone will account for about a quarter of Barrick's planned Australia-Pacific output of up to 1.85 million ounces of gold in 2013.
The big North American goldminers such as Barrick, Goldcorp and Newmont have seen a handy pick-up in their share prices from their April-May lows, rallying a quick 10-15 per cent.
And despite the gloom and doom among some local goldminers, some investors are willing to commit fresh funds for promising plays.
Consider Indochine, a minnow with ambitions of developing the Mount Kare gold deposit in PNG. It raised another $4 million this week in a quick placement at a premium to its share price, placing shares at 7¢ when they had been trading at 6.6¢. For any miner, let alone a gold explorer, getting a placement away at a premium takes some doing, let alone in the present market.
Part of the residual interest here is in a prospective corporate play if its reserves and mine plans firm up.
Similarly, there is investor interest in the likes of Gryphon Minerals, which wants to develop a project in West Africa. With more than $60 million cash on hand, it is well positioned to fund its proposed $200 million-plus project, but few are willing to look too closely until its plans progress a further few notches.
Gold bulls continue to call a short-covering rally to push gold to fresh highs in the months ahead. But their optimism is belied by the view that gold is a store of value in times of inflation. With the rampant deflationary forces unleashed on the global economy thanks to the internet and excess manufacturing capacity globally, this may continue to test the optimism of the gold bulls.