Have you ever wanted to invest in a company that owned the supply of a product at a nice fixed rate of cost, but was able to leverage the upside, but not have to take any risk in actually making the product? How about if it's something inherently dangerous and expensive with bad margins like mining?
In the case of Silver Wheaton Corp. (NYSE: SLW) we have a very interesting investment vehicle, because the company does not have to take additional risks to grow its production numbers. Silver Wheaton owns the rights to silver production from mines that produce it as a bi-product. This allows the company to enjoy a growing supply curve, while protecting its balance sheet.
It has already purchased these rights upfront for cash, helping some miners with their capital costs to open a new mine. As these mines ramp up production in whatever primary product they are producing, Silver Wheaton gets access to the silver produced as a bi-product.