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Silver Wheaton Corp (NYSE:SLW) is the world's only pure play silver middle man.[1] SLW does not own or operate its own mines, but instead the company buys silver at below market prices via long-term contracts with eleven mining companies the largest of which are Barrick Gold, Goldcorp, Lundin Mining, Hellas Gold, and Glencore. Although many of the contracts are for a certain percentage of the silver mined (25% of the largest mine it has a deal with Barrick Gold for) and for a specific length of time some last the length of the mine's life (Penasquito) and/or the total amount of silver supplied by the mine. SLW then sells the silver to major industrial customers at a markup (in 2009 the price it agreed to pay producers averaged around $4 an ounce).[2]

Silver prices are the single largest determinant of the company's profitability. SLW's contracts, while indexed for inflation, allow the company to pay a fixed rate for the silver it purchases, regardless of silver price fluctuations. When silver prices rise significantly, the company is able to pocket the difference. When silver prices fall, the company still has to pay the same fixed price. Moreover, the company has no control over how much silver its mining partners produce. SLW is not compensated in any way if the mines miss production expectations.

Trends and Forces

Silver Wheaton has No Control Over the Silver Mines

Silver Wheaton does not own, operate, or control the mines with which it is partnered. If the mines miss production expectations, temporarily halt production, or shut down then SLW is not compensated in any way. Silver Wheaton buys its silver from 6 different mines which combine to record 344.6M oz of proven and probable reserves. [3] Glencore’s Yauliyacu mine is located in Peru and is vulnerable to the political instability in that region. SLW’s largest reserve source is the Penasquito mine owned by Goldcorp.

Silver Wheaton Pays No Income Taxes

Silver Wheaton operates through its wholly owned subsidiary Silver Wheaton Caymans. Silver Wheaton Caymans is based in the Cayman Islands where the company is exempt from income tax laws. A change in this law could significantly decrease earnings if Silver Wheaton has to pay income taxes.


Due to increasing business with Barrick Gold (specifically the Pacua Lama mine that when operational in 2013 will be the largest contributor of silver among the 4 Barrick Gold mines) Silver Wheaton's exposure to gold has risen (in terms of the primary metal mined at the mines from which it receives silver, has gone up from 41% in 2009 to 67% by 2013).[4]

Silver by mine '000 oz 1hfy08[5] 2hfy08[5] 1hfy09[6] 2hfy09[6] 1hfy10[6] 9M10[6]
San Dimas 2764 2497 2587 2507 2316 3571
Zinkgruvan 950 745 941 920 865 1373
Yauliyacu 1685 1499 1609 1533 1429 2062
Peñasquito 28 311 322 606 1320 2337
Minto 0 0 37 135 111 157
Cozamin 0 0 262 754 687 1068
Barrick 0 0 0 979 1477 2159
Other 540 896 1309 1762 2076 3099
Total 5967 5948 7,067 9,196 10,281 15,826


Silver Wheaton is the largest public mining company with all of its revenue from silver. Silver Wheaton competes most closely with non-producing mining companies like Silver Standard Resources (SSRI). Other close competitors include Pan American Silver (PAAS), Bear Creek Mining Corporation (BCM) and Endeavour Silver (EXK).


  1. Silver Wheaton Homepage
  2. Silver Wheaton (SLW) (2009-12-16).
  3. SLW 2007 Annual Report, pg.23
  4. November Corporate Presentation (2009-11-12).
  5. 5.0 5.1 2009 annual report (March 2010).
  6. 6.0 6.1 6.2 6.3 third quarter 2010 (2010).
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