By Adrian Day, Global Analyst

Silver Wheaton (SLW) is our favorite silver company, largely because of its business model. It more-or-less invented the "streaming" business. Like a royalty company, Silver Wheaton buys future silver production from other companies.

In return for an upfront payment and an on-going per-ounce payment, Silver Wheaton receives all or part of the future silver production. These streaming arrangements are usually made with base metals producers for whom the silver is simply a by-product, and also sometimes with silver companies that need the capital.

The contracts usually have minimum production requirements and sometimes provisions for the per-ounce payment to change on significant shifts in the silver price.

For this year, SLW will receive 27 million ounces of silver to its account, at a cost of $4.07 per ounce. Like a royalty, the beauty is a (reasonably) fixed payment once the purchase is made.

So the company is exposed to upside in the silver price without additional payments. It is relatively insulated from the cost pressures that plague mining companies.

It is not immune to some mining hazards, of course. A big driver of earnings growth this year, Goldcorp's new Penasquito mine in Mexico, will not produce as much as anticipated due to a water shortage.

A key component of planned future growth, Pan American's Navidad mine in Argentina, may not get built, as least not yet, due to new mining laws.

But again, Silver Wheaton is not responsible for trying to fix these problems and most of its contracts call for a minimum silver stream even if the company has to go out and buy the silver!

Other than a silver ETF, it's as close to a pure silver play as there is. And with almost one billion in cash, and strong cash flow, the company is in an excellent position not only to survive but to make additional acquisitions or boost its dividend. This low-risk resource stock is a buy.

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