ii view: gold outshines silver at miner Fresnillo
A play on precious metals and with the added benefit of dividend income. Buy, sell or hold?
23rd July 2025 11:10
by Keith Bowman from interactive investor
Second-quarter production update to 30 June
- Continues to expect full-year silver production of between 49 kilo ounces (kOz) and 56 kOz versus 56 kOz in 2024
- Continues to expect full-year gold production of 525-580 kOz versus 632 kOz in 2024
Chief Executive Octavio Alvidrez said:
"I am pleased to report another quarter of robust silver and gold production, reflecting the resilience and dedication of our teams and consistent performance of our operating mines.
“Our rigorous focus on operational optimisation and cost reduction initiatives continues to yield positive results, combined with favourable precious metals prices."
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ii round-up:
Fresnillo (LSE:FRES) today detailed mixed production data, although the precious metals miner retained forecasts for annual output.
Second-quarter silver production missed City hopes by 4%, with overall first-half production falling 12% to 25 kOz. Meanwhile, quarterly gold output beat analysts' forecasts by 11%, with first-half production rising 16% to 314 kOz.
Shares in the FTSE 100 company retreated 1% in UK trading having more than double year-to-date coming into these results. The FTSE 100 index is up 10% in 2025. Diversified miner Rio Tinto Ordinary Shares (LSE:RIO), whose commodities include iron ore and copper, is little changed year-to-date.
Fresnillo operates a series of mines across Mexico. The company is the world's largest primary silver producer and Mexico's largest gold producer.
Lower silver ore grades at the miner’s Fresnillo and Ciénega operations more than countered increased volumes and ore grades at Saucito and San Julián Veins during the quarter.
A strong performance at Herradura and an increased contribution from the Noche Buena operation aided gold output during this latest quarter. Production of by-products - lead and zinc - fell 5% and 3% over the first half compared to H1 2024.
Fresnillo continues to expect silver production of between 49 kOz and 56 kOz in 2025, potentially down from 2024’s 56.3 kOz.
Full-year gold output is also still expected to come in at between 525 kOz and 580 kOz, a fall from 2024’s 632 kOz.
Broker Morgan Stanley expects to upgrade its first-half adjusted profit (EBITDA) forecast by a low single digit amount. First-half results are scheduled for 5 August.
ii view:
Headquartered in Mexico, Fresnillo shares are listed on both the Mexico and London Stock Exchanges. The precious metals miner employs around 7,000 people at eight mines across Mexico including Fresnillo, Saucito, Ciénega and San Julián, as well as four advanced exploration projects. The group also owns mining concessions and exploration projects in Peru and Chile.
For investors, silver production for 2025 is expected to come in flat at best compared to 2024, with gold retreating. A highly focused portfolio of mined commodities heightens risks compared to more diversified rivals like Glencore (LSE:GLEN) and Rio Tinto. A share price-to-net asset value ratio above the three-year average may suggest the shares are not obviously cheap, while currency moves between Mexican operations, precious metals priced in dollars and shares traded in pounds also warrant consideration.
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To the upside, gold production is trending towards the upper end of management’s full-year guidance. The price of both gold and silver are up by around a third so far in 2025. A management focus on improving operational efficiency persists, while group net cash held as of late 2024 contrasted with net debt a year earlier.
For now, a possible reduction in output of key commodity silver during 2025 generates some caution. That said, the payment of an unexpected special dividend in 2024 and a current forecast dividend yield above 3% are likely to leave fans of this precious metals miner happy.
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:
Strong hold
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