NEW YORK ( TheStreet) -- The rally in natural-resources stocks is far from over, says Malcolm Gissen, manager of the Encompass Fund (ENCPX), which favors commodity producers such as Extorre Gold (XG), Avion Gold (AVGCF.PK) and Uranium Energy Corp. (UEC).
The mutual fund, which garners four of five stars from Morningstar (MORN), has returned 52% over the past year, putting it in Morningstar's 1st percentile for world stock funds. Over the past three years, the Encompass Fund has risen an average of 17% annually, once again better than 99% of its rivals.
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With many gold and silver miners to choose from, why does Extorre Gold stand out?Gissen: The grade of their gold is very high. And that makes the company very valuable. In addition, it's going to be very easy for them to get into production. Normally you may have to wait five or six years to get all the permits to construct the mine, but this will be much faster than that. And, finally, their mine in Argentina is well-located so it's near a lot of infrastructure. That makes it very attractive to the gold-mining companies that might make an acquisition of this company. Avion is a Canadian gold-mining company in your portfolio, but its operations are in Mali. How secure are the operations because there is a lot of concern when it comes to mining in West African nations? Gissen: The country gets most of its resources and most of its money from the mining companies that are there. And there are a good number of Canadian miners operating in Mali. Mali is a stable government that is very supportive of mining activities. It has provided a better standard of living for many people who are working in the mining operations there. We think it is a solid operation that will only expand demand for the resource. And with the kind of development they have now, they are already producing over 100,000 ounces this year and they will only expand that. We think this is an undervalued company. Deep in the heart of Texas, you own a uranium-mining company, Uranium Energy Corp. What are your expectations for uranium prices? (Editor's note: Uranium prices have slid since the nuclear scare in Japan.) Gissen: Uranium prices have increased quite a bit over the past few months, which we projected. They are likely to continue to increase because of all the development of nuclear power plants all over the world except in the United States. And with the demand, uranium prices have started to rise and this will continue. This company is in development. They are producing uranium. They are expanding the resource. They likely will do some acquisitions. And we think the company, even at this price, which has been a triple for us since we bought it, is undervalued and has a bright future.