Cost discipline tempts investors back into gold mining shares

Fri Aug 8, 2014 7:46am EDT
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* Gold shares up 22%, heavily outperform basic gold price

* Canadian, Australian firms among fund managers' favourites

* Valuations significantly cheaper vs pre-gold crash levels

By Clara Denina and Silvia Antonioli

LONDON, Aug 8 (Reuters) - Gold mining shares are bouncing back from a disastrous 2013 and are expected to far outperform the price of the metal in coming months as company efficiency measures lure investors back to the sector.

Years of over-spending on expansion projects and disruptive merger activity fell heavily on miners last year, just as the gold price posted its biggest annual drop in 32 years.

Gold mining stocks plunged 53 percent on average versus a 28 percent drop in gold prices after a 12-year bull run.

Eight months into 2014, the gold mining sector is rapidly making up some of the lost ground with a 22 percent gain to date, outperforming global mining shares overall.

Goldcorp Inc, the world's biggest producer by market value, has gained 34 percent, and Africa's Randgold Resources is up 33 percent.   Continued...