ii view: Fresnillo bullish on gold production

Third-quarter production update to 30 September

• Silver production of 11.68 thousand ounces (kOz), down 7% from Q2

Guidance:

• Now expects full-year gold production towards the upper end of its previous 525-580 kOz estimate 

Chief Executive Octavio Alvidrez said:

"Production performance is in line with our expectations, and we are on track to meet our full year guidance. We remain focused on achieving our priorities in the last quarter of the year. 

“The safety of our people is key, while our continued focus on running our operations as efficiently as possible will enable us to further capitalise on the consistently strong precious metals prices."

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ii round-up:

Mexican miner Fresnillo (LSE:FRES) today detailed gold production that beat City estimates, with output for the full year now expected to be towards the upper end of management’s prior range. 

Third-quarter production of 151 thousand ounces (kOz) exceed analyst estimates of 138 kOz, pushed by higher-than-expected grades at its Ciénega and Saucito operations. As such, full-year production is now expected to be towards the upper end of its previous 525-580 kOz range. 

Shares in the FTSE 100 company rose 5% in early UK trading although later eased to a gain of 2%. Shares in the silver and gold miner came into this latest news up around 240% year-to-date. Prices for both gold and silver have soared 58% and 79% respectively in 2025, as investors have sought safe havens given potential trade wars and the possible impact on inflation from newly imposed US trade tariffs. 

Fresnillo operates a series of mines across Mexico. The company is the world's largest primary silver producer and Mexico's biggest gold producer.

Silver production for the quarter of 11.68 kOz missed City forecasts of 12.23 kOz, falling 7% from the prior quarter, hindered by lower recoveries at Ciénega and ventilation equipment constraints at Saucito. 

Management continues to expect full year silver production of between 47.5 kOz to 54.5 kOz, potentially down from 2024’s 56 kOz. 

A fourth-quarter production update is scheduled for 29 January, with full-year results due on 4 March.

ii view:

Headquartered in Mexico City, Fresnillo shares are listed both on the Mexico and London Stock Exchanges. Nine Mexican operations include underground mines at Fresnillo, Saucito and Ciénega and open pit mines at Herradura, Soledad-Dipolos and Noche Buena. Group exploration includes prospects at Guanajuato as well as ongoing drilling at Capricornio in Chile.

For investors, full-year production for both silver and gold is potentially likely to be lower than that of 2024. A share price-to-net asset value ratio above the three-year average may suggest the shares are not obviously cheap. A highly focused portfolio of mined commodities heightens risks compared to more diversified rivals like Glencore (LSE:GLEN) and Rio Tinto Ordinary Shares (LSE:RIO), while currency moves between Mexican operations, precious metals priced in dollars and shares traded in pounds also warrants consideration.  

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More favourably, full-year gold production is now expected to be towards the upper end of management’s full-year estimates. Trade tariffs pushing higher inflation concerns, ongoing geopolitical tensions and fears about elevated government debt from France to the USA have all aided an investor move towards precious metals. A management focus on improving operational efficiency persists, while group net cash held of $1.8 billion as of late June indicates a robust balance sheet. 

In all, expected annual silver production of up to 54.5 kOz, which is less than last year’s 56 kOz, is reason for some caution. That said, the payment of a surprise special dividend in 2024 and a forecast dividend yield of close to 3% are likely to leave fans of this precious metals miner in supportive mood.

Positives: 

• Pursing efficiency measures
• Income generation and exposure to precious metals

Negatives:

• Lacks the product and geographical diversity of other miners
• Currency movements can impact

The average rating of stock market analysts:

Hold