By J. Royden Ward, Cabot Benjamin Graham Value Letter

Based in Vancouver, British Columbia, Silver Wheaton (SLW) purchases silver from mines in Greece, Mexico, Peru and Sweden.

The company does not own or operate any silver mines, but functions by purchasing silver produced as a byproduct of gold mining companies. Silver Wheaton pays less than $4.00 per ounce of silver from gold mining companies such as Barrick Gold (ABX) and Goldcorp (GG).

It owns purchase agreements on proved and prolific silver reserves. Its contracts are very profitable and will produce rapid revenue and earnings growth well into the future.

Silver Wheaton recently inked a new contract with Hudbay that will add immediate cash flow with future costs fixed at current levels.

Silver Wheaton is in an enviable position to win new contracts at favorable rates while silver prices are low. The company has over $550 million in cash with almost no debt.

Third quarter revenue decreased 13% and earnings per share dipped 11%, well below my forecast. The shortfall was due to a 13% decrease in the realized price received for silver, which was only slightly offset by a 1% increase in the amount of silver sold.

The relatively small increase in ounces sold relative to those produced in the quarter was related to the timing of shipments of stockpiled silver at some of the mines underlying the company's silver and precious metal purchase agreements. The timing issue will balance out during the next couple of quarters.

Silver Wheaton raised its quarterly dividend to $0.10, which now yields 1.1%. Sales and earnings will likely increase 22% and 26% respectively in 2013.

The lower price of silver and the decline in SLW's stock price offer an excellent buying opportunity. SLW shares are medium risk and will likely rise to my Minimum Sell Price of $53.81 within one to two years.

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