Silver Wheaton is the largest precious metal streaming company in
the world, and derives approximately 60% of its revenue from the sale of silver
and approximately 40% of its revenue from the sale of gold. The company has entered
into twenty precious metal purchase agreements with fifteen operating partners, including
Vale, Barrick Gold Corporation and Goldcorp Inc.
It is estimated that 70 percent of silver production comes as a by-product from base metal and
gold mines. This characteristic, along with Silver Wheaton management’s bullish sentiment
for long-term silver prices, was the basis for creating Vancouver-based Silver Wheaton in 2004.
Silver stream agreements allow Silver Wheaton to purchase, in exchange for an up-front payment,
the by-product silver production from a base or precious metal mine that it does not own or operate.
The price that Silver Wheaton pays for production averages approximately US$4 per ounce of silver
and US$400 per ounce of gold, with a small inflationary adjustment, ensuring that Silver Wheaton's
costs are fixed. This allows the company to stabilize operating costs and reduce downside risk,
while providing the upside of significant leverage to the price of silver and gold. Other than
the initial up-front payment, no additional capital expenditures or exploration costs are generally
required. Yet, Silver Wheaton benefits from the production and exploration growth of its operating partners.
Silver Wheaton’s low-risk business model, which was designed specifically to create long-term shareholder
value, has a number of unique aspects. At its core are multi-year agreements to purchase, at a low fixed
cost, all or a portion of the silver production, and some gold, from high-quality mines in Mexico, Chile,
Argentina, Brazil, Peru, Sweden, Greece, Portugal, Guyana, Canada and the United States. The company has
fixed operating costs, no ongoing capital expenditures or exploration costs, and no exchange rate risk.
In addition, a large percentage of the company’s revenue is derived from low-cost and long-life mining
operations and it does not sell forward its silver sales. All of this provides significant leverage
to increases in the price of silver while mitigating the downside risks associated with traditional
mining companies. Furthermore, Silver Wheaton has an industry-leading production growth profile, and
it is very well positioned for further, sustained growth.