Bullish on gold since it carried a $400-per-ounce price tag, Blue Phoenix Chief Investment Strategist John Licata points out why he is equally bullish on silver.

TGR: Any others that appeal to you?

JL: I've been high on NovaGold Resources Inc. (TSX:NG) (NYSE.A:NG) for a long time. They have partners, including Barrick Gold Corporation (NYSE:ABX) and Teck Cominco Ltd. (TSX:TCK.A) (TSX:TCK.B) (NYSE:TCK) and I do think that they could gain the external financing they need develop their properties and get them up and running. Their assets are very rich. I also love Golden Star Resources Ltd. (TSX:GSC). So those are names I'm looking at right now in the gold space that I think would be quite attractive for investors.

TGR: How about Fronteer Development Group (TSX:FRG) (NYSE.A:FRG)? Anything new with them?

JL: I'm still very much a fan of Fronteer, but at the moment more for their uranium assets than their gold assets. A third-party surveyor is supposed to announce uranium results for Fronteer before October. That should go a long way toward showing Wall Street some economics around the company's uranium business and that Fronteer has a robust profitable project in Michelin. Fronteer has about 100 million pounds of uranium in that project in Labrador.

TGR: Are you still bullish on platinum and palladium, too?

JL: I am still enthusiastic, but not as bullish on either of them just because we have seen a bit of a run since April. I'd rather be in silver. I think silver gets forgotten when we start talking about precious metals. As opposed to platinum or palladium, I would rather be in the silver space and possibly look at a company like Hecla Mining Company (NYSE:HL).

TGR: What's about Hecla captures your attention versus the hundreds of other silver equities?
JL: They're the largest U.S. silver producer. They've been doing a really good job of paying down their debt. The company has cut down its costs and is on track to meet their full-year production guidance between 10 million and 11 million ounces of silver. In addition, Hecla recently announced a 24% increase in quarterly silver production. The fact that they have record silver production—thanks to, I guess, more stringent management and better mill optimization—speaks volumes for this company. And they said on their last conference call that they could have a record-breaking Q4.

TGR: Given the rally we've seen in the last four months or so, hasn't the market already priced that in?

JL: I don't see it. I think there's more upside to come.

TGR: Is there anything in particular in silver that you're finding appealing?

JL: I just think if we're talking about an economic recovery in the back half of this year into 2010 and silver is mostly used for industrial purposes, I honestly think that silver prices are just forgotten. When people start talking about the inflation hedge, they jump into gold. If they start talking about the economy improving, they jump into copper. They tend to forget that silver is actually used for much manufacturing. So I think that is the forgotten metal and I do think that silver prices can move a lot higher, especially as gold prices march through $1,000.

TGR: As you say, people look to copper as the leading metal to point to in terms of a recovery. What's your feeling about copper?

JL: You hit the nail on the head. Everyone starts to talk about copper, but nothing has jumped out at me to say that copper prices have much more upside. Copper prices are up nearly 100% year-to-date, so I think a lot of the recovery that many people are talking about has been priced in already. In addition, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)—the world's largest publicly traded copper company—is up north of 150% year-to-date. It seems to me that a lot of the good news is baked in already. So I think the upside in both the futures and in the bellwether—Freeport—is definitely limited.

Beyond that, the Baltic Dry Index, an index that just had the biggest monthly drop since October (down 28% in August), has been down because people fear that China might cut back on buying iron ore and coal. If that happens, copper prices won't be immune. Copper supplies have been tight for the last couple of quarters. If anything, we're trading about 35 cents or 40 cents above the recent 50-day moving average. I think copper is over-extended right now.

TGR: Any last comments before we meet again?

JL: Only that while it's a difficult marketplace and I do expect tight markets around the world to continue, some of the plays we've talked about have the makings of a pretty successful portfolio.

Courtesy: The Gold Report

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