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Addressing cognitive bias in gold mining could attract more investors - Osisko Gold Royalties

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(Kitco News) - Higher gold prices are drawing investors back into the resource sector. According to one mining executive, generalist investors should pay attention to the management team behind each project.

In an interview with Kitco News on May 1, 2023, Guy Desharnais, Vice President of Project Evaluation at Osisko Gold Royalties (NYSE:OR) said the reason why investors should prioritize good management teams with solid track records is that they will have done significant due diligence on a project before bringing it to market.

Following a good management team could help investors avoid projects that suffer from "cognitive biases,” according to Desharnais’ presentation at the 2023 CIM convention and expo in Montreal. In his conversation with Kitco News, Desharnais said that two-thirds of mining projects struggle or fail because of biases that overestimate the deposit's resources or underestimate operational costs or the capital required.

"The root cause of these failures is that humans are making these assumptions that build into the project… all those assumptions aggregate and compound and make things much, much worse than you would expect,” he said.

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Desharnais said that management teams with successful track records are more likely to find better projects and can avoid errors related to cognitive biases.

While the mining sector continues to struggle to attract investment capital, Desharnais said that having more success stories and fewer project failures will improve sentiment and capital flows.

"That comes with people being properly calibrated to have the good projects and the right studies to back those projects so that the expectations are met,” he said.

Coverage of CIM Convention & EXPO 2023 sponsored by Canadian Securities Exchange.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.