HardAssetsInvestor

Mike Norman (Norman): Hi, folks, welcome back. It’s Mike Norman here on HardAssetsInvestor.com, with my guest, Malcolm Gissen, who is the co-manager of the Encompass Fund. Malcolm, now … your vehicle … you use equities, you invest in companies that mine or produce raw materials. What are some of your favorite stocks, your favorite companies?

Malcolm Gissen, co-manager, Encompass Fund (Gissen): Mike, I should clarify, the fund has a wide variety of companies and sectors represented, but clearly the major focus has been resource companies — metals companies and energy companies of all kinds.

Among the companies that we like, I would mention right now a company called Extorre, symbol XG. As of yesterday [March 9, 2011], it started trading on the New York Stock Exchange.

Norman: What do they do?

Gissen: They’re in the gold and silver business in South America. It was a spinoff from another company in which we were invested, called Exeter. Extorre’s in Argentina. They have very-high-grade ore. They’re likely to get into production very quickly by the end of next year. They’re very well located near a lot of infrastructure. They would be a very attractive acquisition target for any major. So we think Extorre, which is now a little over $5, I believe, has very substantial upside.

A company we’ve been invested in for a number of years, and we’ve more than tripled our investment, but we still continue to like, is Avalon Rare Metals.

Norman: Rare metals are a very hot area for investors right now. Rare metals, that’s a big story driving that, right?

Gissen: Yes. Because the Chinese produce 97 percent of the world’s exports, and in the last couple of years, have cut back on their exports. And rare earth elements are needed for any kind of green technology, whether it be windmills or hybrid cars. And the Department of Defense is very concerned because rare earth elements are also needed in a lot of our defense systems.

Norman: Right.

Gissen: Avalon is a Canadian company that has the second-largest resource in the world. They’re believed to be the next company to have a mill, a processing plant, which is a major concern for the West, because the only mill in the world is in China now. So if the Chinese stopped exporting, the world is going to be in real trouble.

Norman: And what about oil and gas, do you do anything? You talked a lot about metals, how about oil and gas?

Gissen: Yes, we have invested quite a bit in a number of oil and gas companies. A company we like now that’s a fascinating company is called GeoPetro, symbol GPR. Stock is now at about 65-70 cents. We invested, I think, at about 45 cents. They have five projects that they call “elephants.” One is in Texas, one is in California, one’s in Alaska, one’s in Alberta and one’s in Indonesia.

Norman: What are elephants?

Gissen: Enormous projects. Any one of them would be a company maker. They don’t do the drilling. They bring in a partner to drill. Their partner, Linc Energy, an Australian company with $500 million in cash, did some drilling in Alaska in the fall. And it was very promising. So as soon as the ice melts, they’ll continue to drill. We think that sometime in the next few months, geo-petro is going to get a real boost because they’ll have great results.