ii view: reaction to Fresnillo's favourable update

Second-quarter production update to 30 June

• Silver production of 10,928 kilo ounces (koz), down 1.7% from Q1
• Gold production of 154,812 ounces, up 13.8% from Q1

Guidance:

• Continues to expect 2026 silver production of 42-46.5 million ounces (moz)
• Continues to expect 2026 gold production of 500-550 koz

Chief Executive Octavio Alvidrez said:

"We have delivered a solid operational performance in the second quarter, driven by consistent execution across our asset portfolio.

"Looking ahead to the second half of the year, our operational plans are tracking in line with expectations. We will continue to focus on efficiency, cost control, and consistent volume performance across our operations to drive shareholder value. Above all, safety remains our highest priority."

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ii round-up:

Precious metals miner Fresnillo (LSE:FRES) today detailed a mixed second-quarter production update, with silver output below forecasts and gold beating estimates.

Expected grade variability at its Saucito and Juanicipio mines left silver production down 1.7% from the prior quarter at 10,928 kilo ounces (koz). Higher than expected grades at its Fresnillo operation pushed gold output up 13.8% from Q1 to 154,812 ounces. Analysts had expected outcomes of 11,246 koz and 136,000 ounces respectively. 

Shares in the FTSE 100 company rose 3% in UK trading having come into this latest news down by close to a quarter so far in 2026. Gold and silver prices have fallen by 4% and 16% respectively year-to-date. The FTSE 100 index is up nearly 8%.

Fresnillo operates a series of mines across Mexico. The City estimates single digit percentage upgrades to first half adjusted profits (EBITDA) following the mixed update.

The miner left existing full-year production estimates unchanged. Silver production for 2026 is expected to come in at between 42 moz and 46.5 moz. A potential retreat from 48.7 moz in 2025.

Predicted annual gold production of 500-550 koz is potentially down from 600 koz last year.

Other developments saw a change in the chief operating officer for the group’s Central Region. The current vice president of the region is to take over on a temporary basis.

First-half results are scheduled for 4 August.

ii view:

Headquartered in Mexico City, Fresnillo came to the UK stock market in 2008. Tracing its roots back to 1887, today the miner employs around 7,000 people across eight operating mines in Mexico.  These include underground mines at Fresnillo, Saucito, Juanicipio and Ciénega, as well as open pit mines at Herradura and Noche Buena.

For investors, silver and gold output both fell in 2025 compared to 2024, with further falls forecast for this year. A share price-to-net asset value ratio comfortably 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 deserves consideration.

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To the upside, a return to similar silver and gold production levels seen in 2025 are forecast for 2027 and 2028. Group net cash held of $1.92 billion (£1.44 billion) as of late December points towards a robust balance sheet. A move in late 2025 to acquire Canadian miner Probe Gold for $556 million brings new resources and geographical diversification, while management’s focus on improving operational efficiency is ongoing.

In all, expected falls in annual production offer caution. However, elevated global geopolitical tensions and a forecast dividend yield of around 5% will likely to keep investors interested.

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