Fresnillo (LON:FRES) — Part 2
Is Fresnillo still a buy at 3,370p? We ran the numbers.
Dear reader,
In Part 1 we went mine by mine through the 2025 results and asked whether the exceptional numbers were really Fresnillo's doing or just the gold and silver price doing the heavy lifting. In Part 2 we go deeper into the financials, look at what the balance sheet is being used for, and try to answer the question that matters most for investors right now: after a 308% rise over five years, is there still a genuine investment case here, or has the market already priced in the good news?
Dividend yeild: 2.84
Forward P/E: 13.11x
Trailing P/E: 24.63x
Return on Equity: 33.90%
EV/EBITDA: 12.20x
1Y Market Cap Change: +310.86%
Next Earnings: 4 August 2026
First, the five-year picture
Before analysing 2025 in isolation it’s worth stepping back and looking at what kind of financial trajectory Fresnillo has actually been on. The five-year EPS history tells a story the headline results don’t:
This is not a company that has been compounding steadily upward. Between 2021 and 2024 earnings per share fell nearly 40%, as rising costs, operational underperformance and a difficult price environment squeezed the business hard. The same pattern shows up in EBITDA: $1.21 billion in 2021, dropping to $655 million in 2023 before recovering to $1.55 billion in 2024 and then surging to $2.80 billion in 2025.
What this tells you is that 2025 was not the continuation of a trend, it was a discontinuity. A business that was earning $0.31 per share in 2023 earned $2.06 in 2025. That is an extraordinary swing.
The explanation, as we established in Part 1, is largely the metal price. But the five-year context adds an important layer: this is a business that demonstrably struggles when prices are merely average. The 2022 and 2023 numbers weren’t produced in a crisis, silver averaged around $21-$24 per ounce in those years, which is historically a reasonable price. Yet Fresnillo earned less than $0.36 per share. That’s the baseline reality the market needs to price, not just the 2025 peak.
The Income Statement:
The 2025 income statement reads like a company firing on all cylinders. Revenue of $4.56 billion, gross margin surging from 35.6% to 58.4%, operating profit of $2.29 billion. But the key question is whether these numbers reflect something durable, or a favourable moment in time.
The gross margin jump is the telling detail. It didn’t happen because Fresnillo became dramatically better at mining. It happened because the cost base is largely fixed and metal prices surged. That is the defining characteristic of a precious metals miner in a bull market, and the reason the same leverage works painfully in reverse when prices fall.
The cost reduction deserves scrutiny too. Costs fell 15.7% in absolute terms, but a significant portion came from depreciation dropping $129.2 million following the San Julián DOB closure. That is an accounting outcome from a wind-down, not evidence of the business becoming structurally leaner.
Two adjustments matter below the gross profit line. The Silverstream revaluation, a $189.2 million non-cash charge, distorts reported profit. The adjusted EPS of $2.058 is the honest number, not the reported $1.878. And the 15.1% effective tax rate is almost entirely a product of exchange rate movements on deferred tax balances rather than anything structural. Both figures flatter 2025 and are unlikely to repeat.
The income statement confirms the quality of 2025’s cash generation. It also quietly warns you that the same operating leverage that produced a 58% gross margin in a bull market will compress it sharply if conditions normalise.
The Balance Sheet
The headline number is net cash of $1.92 billion, up from $458 million at the start of the year. Cash and liquid funds of $2.76 billion against $839.9 million in long-dated debt at 4.25%, maturing 2050. For a company operating entirely in Mexico, that financial fortress isn’t a luxury. It is the reason Fresnillo can sustain investment through cycles that would force a more leveraged competitor to cut.
Property, plant and equipment came in at $2.47 billion, slightly below the prior year despite $400 million of capex. Depreciation is running ahead of new investment, consistent with end-of-life closures at San Julián and Noche Buena. It is not a signal of underinvestment, but it is worth watching as the portfolio transitions toward newer assets.
One important caveat on the cash figure. Income tax payable jumped from $113 million to $523 million sitting on the balance sheet awaiting payment in 2026. The real liquid position after that obligation clears is closer to $2.24 billion. Still strong, but a meaningful difference from the headline number.
Total equity grew to $5.07 billion despite $757 million in dividends paid across the group. Retained earnings up $818 million to $3.62 billion. The balance sheet today is the strongest it has been in years, and it gives Fresnillo genuine strategic flexibility that wasn’t available to it twelve months ago.
The Cash Flow Statement
Operating cash flow of $2.29 billion tracked EBITDA of $2.80 billion closely. Clean cash conversion, no red flags. Working capital absorbed $128 million, driven by higher trade receivables from the Peñoles smelter as elevated metal prices inflated outstanding balances. Explainable, and partially reversible if prices moderate.
Taxes paid surged to $369.5 million from $97.1 million in 2024, a direct consequence of higher profitability. With $523 million now sitting as income tax payable on the balance sheet, the 2026 cash flow statement will absorb a significant hit before operational performance even enters the picture.
The investing section is where retail investors need to read carefully. Net investing activities were cash positive at $67.4 million, which sounds counterintuitive for a capital intensive miner. The reason is a cluster of one-off receipts: $176.6 million from the MAG Silver disposal, $85.9 million from the Silverstream termination, and $94.7 million from short-term investment drawdowns. None of those repeat in 2026. Strip them out and the underlying investing position consumed roughly $360 million after capex.
Fresnillo generated $1.55 billion in net cash in 2025 after all investing and financing activities. The quality is high and the conversion is clean. But 2026 faces three headwinds that don’t appear anywhere in last year’s numbers. The deferred tax bill. The absence of one-off disposal proceeds. And potentially lower metal prices. Investors modelling forward cash generation should haircut 2025 meaningfully before using it as a baseline.
What Is Fresnillo Actually Worth?
Miners are notoriously difficult to value. The metal price moves, reserves deplete, and a single bad year can make any multiple look misleading. Rather than anchoring to one number, the more useful approach is to run a few different methods and see where they agree.
