Shares in commodity giant Glencore plunged 25 per cent after analysts raised fears about lower metal prices.
The company’s shares dropped to a new record low of 73p at 15:00, helping push the FTSE 100 down two per cent.
Analysts warned slumping metal prices could leave Glencore shares almost worthless because of its heavy debts.
Fears over Glencore’s £20billion debt pile have seen its shares drop more than 30 per cent in the past month.
More than £3billion was wiped off Glencore’s market value after a warning from analysts at Investec.
They wrote that low metals prices “could see almost all equity value eliminated” at the Switzerland-based company.
They also questioned how much Glencore could raise from selling its agriculture division, as “valuing such a volatile business is likely to be tough”.
Glencore hopes to generate up to $12billion (£7.9billion) from the sale of its grains business to reduce its debt burden.
The Investec analysts said that without major restructuring, Glencore and another debt-laden mining firm, Anglo American, could see their value “evaporate”.
Shares in London-listed Anglo American also fell nine per cent.
Hunter Hillcoat, an analyst at Investec, said: “Mining companies gorged themselves on cheap debt in a race to grow production following the Chinese stimulus that occurred in the wake of the great financial crisis.
“The consequences are only now coming home to roost, as mines take a long time to build.”
Fears of a slowdown in China’s economy has weighed on metal prices, with copper, aluminium and nickel all down more than 25% compared to a year ago.