SLW is an offshore (limited tax liability) Canadian company with almost no administrative costs and a shockingly transparent business model. They acquire silver streams from miners not in the silver mining business yet they have a decent silver stream as a by-product to the primary focus of their mine.
SLW pays an upfront fee and an ongoing per ounce fee that combined are less than $6 per ounce on average.
Some streams from early deals come in for under $4 per ounce. The contracts are iron clad with well written clauses for failure to deliver or failure to reach production guarantees.
The inflation adjustments are miniscule (4% of the $3.90 delivered price or lower) and SLW has no liability with the mines. They are not tied to labor, mine disaster, tax or political problems. Currently SLW has contracts that generate about 13 million ounces of silver per year for 2008 at a cash cost well under $7 per ounce. Silver is currently $17 as I write this.
That will increase every year until 2012 or so to 25 million ounces per year. That is without further acquisitions and based on P&P reserves at the mines they have contracts with. With increases in drill results recently at Penasquito that number will most likely grow.
SLW stands to earn profits in excess of $10 an ounce at current silver prices. With a conservative estimate of 12 million ounces that is $120M dollars for the year or about $0.50 per share.
That is a very conservative estimate.
