Over one-third of the 700 producers tracked by Bloomberg have less than three months’ cash available.

“Looking at the data, things aren’t just bad, they’re exceptionally bad,” Hoffman said.

Gold miners have been particularly hard-hit, with precious metal prices down 14% last year compared to a 61-76% average drop in share price.

“Historic relationships between stock prices and metal prices have broken down,” Hoffman said.

“We’re seeing extraordinary drops.”

Soaring costs among gold producers, combined with the rise of Exchange Traded Funds (ETFs), have hit miners hard.

“Today’s hedge funds couldn’t care less about mining companies,” Hoffman said.

“If they like gold they’re buying ETFs, which give them liquidity and allow them to ignore all potential risk besides price risk.”

Hoffman said other financial instruments were emerging as an alternative to equities, such as iron ore swap contracts.

“We’re at a ‘Big Bang’ moment for metals markets,” he said.

“These new outlets are giving investors something they have found wanting from the mining companies: pure exposure.”

The tough market last year also slowed merger and acquisition activity with deal volume dropping to $US302 million from $1.3 billion in 2012, Bloomberg said.

But Bloomberg said a rise in M&A could be on the horizon, with a record 13 new mining focused private equity funds established last year.

Of the $15 billion raised since 2011, just $1.6 billion had been spent in the past two years.

“They have different viewpoint from traditional buyers because they want to hedge,” Hoffman said.

“If you pay low enough and have a really good understanding of your cost structure, you can forget about the upside and focus on cash flows.”

Bloomberg predicts cash-strapped miners will be forced to sell and funds will be there waiting.

“If the funds don’t use the capital they’re basically out of business,” Hoffman said.

“If mining CEOs don’t reduce the debt load their board will soon find someone who can.”

Hoffman said the pricing for the pending sale of the Las Bambas copper project in Peru may set the scene for further valuations.

“On one hand we have a lot of capital needing to be spent and on the other a lot of companies, with a lot of debt, that have assets to sell,” he said.

“It’s a perfect storm for an M&A boom.”