Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hi everybody, and welcome back to HardAssetsInvestor.com. I'm Mike Norman, your host. We're here for the second part of my interview with Jay Taylor, CEO and founder of MiningStocks.com. That's what we're going to be talking about.

So, is it better to just own the metal or the mining stocks? I mean, some people would say, “Look, when you get into stocks, you're not just only dealing with the commodity, you're dealing with management, you're dealing with accounting issues, you're dealing with maybe whatever it is the SEC decides to do. What do you say?

Jay Taylor, CEO, MiningStocks.com (Taylor): I agree with you, I think that's exactly right. That owning the stocks is a completely different game than owning the metal. I advocate owning some metal in every portfolio, I think maybe 5 or 10 percent, depending.

Norman: That's not a lot for a guy like you who’s really saying that …

Taylor: You know, the world is …

Norman: … they're printing money like crazy. Why not go to 100 percent?

Taylor: Well, OK, so I would have 5 or 10 percent maybe in the metal. But right now in a bull market, I would have a bigger percentage than that in the mining shares, perhaps.

Norman: In the shares?

Taylor: In the shares. And however, for more risk-averse people, they want to own more of the metal and less of the shares because, I agree with you, mining companies are very, very risky. It's a terrible business in some ways. Mining is a very, very tough …

Norman: Not now, though, is it?

Taylor: Well, it’s better now, but it's not all that great. It’s a very difficult business under any circumstance because it’s capital intensive, it takes forever to develop a mine. You have environmental issues that can pop up, you have political issues. The metal price can fall, there can be all kinds of risk factors. And again, it’s the time. Many times, these mining projects go into production, or they're projected to go into production three, four, five years later; they go into production by that time, but then the metal price falls. And then you're looking at another cycle, so …

Norman: But are they still hedging? I mean, we've had this phenomenal period in the last, what, it’s going on eight years that gold has been going up. And I've heard that some of these companies, they're not hedging anymore.

Taylor: OK, so a lot of the companies – Barrick, for example – made huge amounts of money on its short position. It would hedge its future sales, and it made something like $2 billion by hedging gold during the bad times, during the bear market. But they lost $4 billion, or something like that, during the bull market. So that really hurt Barrick a lot.

And, of course, it's very unpopular from shareholders right now. Shareholders don’t want their managements hedging the gold price because they want the upside on the gold price. But yeah, most of the times when they have to project finance, the banks are requiring the gold companies to have at least a portion of their production hedged forward. So if we do have a decline in the gold price, they can still make ends meet.

Norman: So now how does one go about selecting the mining company? I mean, they could go to your site, MiningStocks.com, obviously; that would probably be a good place to start. But are there some basic rules of thumb? You want to stick with the big guys, you want to stick … maybe what regions?

Taylor: Well, certainly I think more risk-averse investors want to stick with the big guys, the household names, the Newmonts, the Goldcorps, the Agnico-Eagles; those are some of my favorites among the big guys. Those are sort of the no-brainers. So, I would start with the metal and then move out a little bit to the big names.

The more speculative investors – and where the really big money can be made, though – are with the junior mining companies that find the metal in the ground. If you take a small-cap company that finds a million ounces, it's a big deal. If you take Newmont, finds a million ounces, they produce seven or eight million ounces a year, they have to find seven or eight million ounces a year.