iShares Silver Trust (ETF) (SLV), Silver Wheaton Corp. (USA) (SLW): This Chart Shows “Physical” and “Paper” Silver Are the Same

Silver Wheaton’s business model has few significant risks outside of falling silver prices. Silver prices have fallen, but prices for other commodities are up. Oil prices have risen slightly for the year despite a stronger dollar. Light sweet crude futures sit at $96 a barrel. As a key input, higher energy prices plus lower silver prices mean compressed margins for miners.

Silver Wheaton Corp. (USA) (NYSE:SLW) largely avoids this risk in agreeing to purchase physical silver from miners for the life of the mine. New variable costs are not Silver Wheaton’s to bare – the company on the other side of the contract has to pay up to cover higher costs. With cash costs coming in at $4.08 per ounce in the first quarter, Silver Wheaton can certainly stay afloat should silver prices continue on a downward slide.

A continued slump in silver prices could help Silver Wheaton Corp. (USA) (NYSE:SLW) find more attractive streaming arrangements based on lower base case silver prices for its streaming contracts. While in the short term falling prices are a negative for the company, falling prices can lead to long-term value creation as new deals are signed at attractive implied discount rates.

Physical is out, but if you’re bullish on silver, a streamer is much more attractively positioned with leverage to the upside. Silver Wheaton Corp. (USA) (NYSE:SLW) is the perfect stock to play a new bull run.

The article This Chart Shows “Physical” and “Paper” Silver Are the Same originally appeared on Fool.com and is written by Jordan Wathen.

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