Peak Gold Seen This Year as Mining’s ‘Weaklings’ Bite the Dust

Polymetal CEO Vitaly Nesis
Vitaly Nesis, chief executive officer of Polymetal International Plc. Photographer: Chris Ratcliffe/Bloomberg

The world looks headed for peak gold this year.

Record output, spurred by a 12-year bull run that fizzled in 2012, is ready to slide as mine operators that piled in during the good times finally give up hope of a recovery, according to the head of Russia’s second-largest miner of precious metals.

“We are waiting for the weaklings to drop off,” Polymetal International Plc Chief Executive Officer Vitaly Nesis said in an interview. “A lot of CEOs still hope against hope that happiness is just around the corner. This year will see some modest growth. Next year, we will definitely see a decline.”

Investors and some executives lambasted mining companies for producing too much high-cost gold. The industry lacked discipline, hurting prices, Randgold Resources Ltd. chief Mark Bristow said last year. Output rose to a record 3,114 metric tons in 2013 as demand fell 15 percent to a five-year low.

Production rose about 2 percent in the first quarter from a year before, while the market needs at least a 2 percent decline to support higher prices, Nesis said. Difficulty in closing mines, low energy prices and too much hope only delayed things.

“Sooner or later the mines will close down,” Nesis said in London. “We will see more forced closures.”

Weaker output will start in the fourth quarter of 2015 or the first three months of next year, he said. Still, it will take about four straight quarters of declines to improve the market’s mood toward gold prices and mining stocks, Nesis said.

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