NEW YORK ( TheStreet) -- Silver Wheaton ( SLW), the world's leading silver streaming company, has recovered in the past few months. Investors seeking to add precious metals to their portfolio could consider Silver Wheaton because its type of business makes it less risky than precious metals producers such as Barrick Gold ( ABX) and Goldcorp ( GG). Let's see why.
Silver Wheaton's business consists of investing in silver and gold projects which are operated by precious metals producers. For its investment, the company receives a certain percent of the precious metal produced at a very low and relatively fixed (usually adjusted for inflation) cost.
This type of business reduces its risk related to rising production costs or any delays a mining company may face (for example: Barrick Gold's Pascua-Lama mine has been delayed since the end of last year and has yet to resume. These delays resulted in a sharp rise in the company's developing costs of this project).
In exchange, Silver Wheaton provides bullion producers: Additional capital to develop mines, reduces their debt burden and buys a portion of their future production. Moreover, the weakness of precious metals in the past couple of years led to a fall in the operating cash flow of gold and silver miners. Thus, they are forced to cut down their capital expenditure which slowed down the progress of some projects. Case in point, Barrick Gold slashed its capital expenditure by nearly half from $5 billion in 2013 to $2.55 billion in 2014.