Silver Wheaton (SLW) is one of the more unusual silver companies in the world, because it is only a pure play middleman that does not own or operate its own silver mines. It has quickly become the largest metals streaming company in the world because of its ability to provide mining projects with upfront payments in return for future supplies of silver. It has secured the rights, at low fixed costs, to some or all of the silver production from 16 high-grade mines and three projects under development around the world. The company has long-term contracts with 11 major mining companies such as Barrick Gold (ABX), Goldcorp (GG) and Glencore. Some of these contracts are for fixed percentages of production or for a specific period of time or, indeed, as in the case of Penasquito owned by Goldcorp for the life of the mine.
Naturally, the single biggest determinant of the company’s success is the price of silver. Though Silver Wheaton’s contracts are indexed for inflation they are liable to pay the fixed amount regardless of the fluctuation in silver prices. This means that it can pocket to profit when silver prices are high, but asked to swallow the losses when prices are low. It has no say in how much silver its mining partners produce nor are they compensated if production expectations are not met. The company does not pay income taxes, because it is headquartered in the tax haven of the Cayman Islands.To continue reading, click here.