The decision by Newcrest Mining Ltd. (NCM), Australia's biggest producer, to write down the value of its mines by as much as A$6 billion ($5.5 billion), will lead to the biggest one-time charge in gold mining history. Rivals such as Barrick Gold Corp. (ABX), the biggest producer, and Newmont Mining Corp. may be next, according to Jefferies International Ltd.

“There's going to be significant rationalizing in the gold industry,” Holland said. “You can't keep mines producing if they're losing money.”

Gold Fields's South Deep mine in South Africa is one of the few mines that could survive at the current gold price of 1,230 an ounce, Holland said. The mine's size and the fact that it's largely mechanized, meaning it's less reliant on labor demanding pay rises, will help keep costs low, he said.

The Bloomberg Research Global Mining & Exploration Index has fallen 41 percent since April 9, while gold has dropped 22.3 percent amid its biggest three-month decline on record.

Eoin Treacy's view Gold miners let costs get out of control over the last decade and are now being brought to heel. A marginal cost of production at $1500 is high by any standard. This suggests that the companies who survive will be those best equipped to control costs. Writing down overvalued assets, renegotiating labour contracts, cancelling expansion projects, managing energy costs and lobbying governments are all likely to play a part in this process.

The NYSE Arca Gold BUGS Index decline reflects the sector's poor fundamentals but it has fallen to such an extent and is so short-term oversold that potential for at least a relief rally has increased. A break in the progression of lower rally highs, currently near 300, would be required to break the medium-term downtrend.

According to its 2012 annual report RandGold Resources has a total cost per ounce of between $700 and $750. The company increased its dividend this year by 25% and yields 0.77%. The share has halved since October, but found at least short-term support in the region of 4000p last week and an unwind of the oversold condition appears to be underway.

Franco Nevada as a royalty company is also noteworthy at this stage. The share currently yields 2% but has an admirable dividend growth rate averaging more than 30% over the last five years. The share halved between September and the end of June but found at least short-term support last week and an unwind of the short-term oversold condition appears to be underway.