Fresnillo Plc (LON:FRES) - Part 1
The world's largest silver miner just had its best year in a generation. Here's what you need to know.
There’s a question every investor in a commodity company has to answer at some point, and for Fresnillo right now it’s an unusually sharp one: when a business posts its best financial results in years, is that the beginning of something, or the end?
In 2025, Fresnillo the world’s largest primary silver producer and Mexico’s biggest gold miner, delivered numbers that would have looked implausible just two years ago. Revenue up 30.5% to $4.56 billion. EBITDA up 80.7% to $2.8 billion. Earnings per share up 465%. A special dividend on top of an already generous ordinary payout.
But peel back the headline numbers and a more complicated picture emerges. Silver prices rose 51% in 2025. Gold hit all-time highs, up 44% on the year. In that environment, almost any well-run precious metals miner was going to look exceptional. The harder question, the one that actually determines whether Fresnillo is a buy, a hold, or a high-water mark, is what the business looks like when you strip out the tailwind.
And that’s where it gets interesting. Because beneath the record profits, Fresnillo is a company still mid-turnaround. Silver production fell 13.5% year-on-year, coming in at the lower end of guidance. Key mines like Fresnillo and Saucito are still underperforming their potential. The overall silver resource base shrank 8.5%. Two workers lost their lives. And 2026 production guidance, 42 to 46.5 million ounces of silver, 500 to 550 thousand ounces of gold, is actually lower than what they just delivered.
None of that makes Fresnillo a bad investment. It might make it a better one than the 2025 results alone suggest, if you believe the operational improvements are real and the metal price environment has structurally shifted rather than cyclically spiked. The company itself believes the latter, pointing to silver’s growing role in energy transition technology, EV batteries and solar panels, and both metals’ enduring appeal as safe havens in an uncertain world.
We will attempt to answer the one question that matters: is Fresnillo a world-class miner that happened to have a great year, or a world-class miner finally becoming what it was always supposed to be?
What Fresnillo Actually Is:
Before you can evaluate whether 2025 was a peak or a new baseline, you need to understand what kind of company Fresnillo actually is. Because it’s not quite what it looks like on the surface.
Listed on the London Stock Exchange since 2008, Fresnillo is in many ways a Mexican family business wearing a FTSE 100 suit. Its majority shareholder is Industrias Peñoles, the Mexican mining and chemicals conglomerate controlled by the Baillères family, one of Mexico’s wealthiest dynasties, and the same family whose name sits in the Chairman’s seat. That majority ownership has important implications for minority shareholders, which we’ll come back to. But it also means Fresnillo benefits from deep institutional knowledge of Mexican mining, shared infrastructure and services with Peñoles, and a long-term ownership mindset that doesn’t particularly care what happens to the share price in any given quarter.
The business itself is straightforward in concept, complex in execution. Fresnillo mines silver and gold across a portfolio of seven operating mines, mostly underground, mostly in Mexico, supported by a deep pipeline of exploration projects at various stages of development. It is, by some distance, the world’s largest primary silver producer: meaning silver is the main product, not a byproduct of copper or zinc mining as it is at many rivals. That distinction matters enormously for investors using Fresnillo as a silver price play, because the correlation between what silver does and what Fresnillo earns is unusually direct.
The asset portfolio
The six producing mines each have distinct characters. Juanicipio, a 56% joint venture (with Pan American Silver, who acquired the remaining 44% stake from MAG Silver during 2025), is currently the standout, generating $706.9 million in EBITDA in 2025 alone and performing above plan. Herradura, the large open-pit gold operation in Sonora, is the group’s biggest gold earner at $762.6 million EBITDA, and is mid-transformation following several years of underperformance. Saucito, once a core silver engine, is in turnaround mode, the interconnection of its Jarillas shaft remains a key 2026 priority. The flagship Fresnillo mine, one of the oldest continuously operating silver mines in the world dating back to 1554, is the most complex to manage: deeper, narrower veins and haulage constraints kept it below potential in 2025, though the new San Carlos shaft should begin easing those pressures.
Then there are two mines in wind-down. Noche Buena contributed just $30.4 million in EBITDA and is effectively in closure. San Julián DOB ceased mining activities entirely. These exits actually flatter the cost numbers, a portion of the 11% reduction in adjusted production costs comes from simply no longer operating higher-cost assets rather than from structural efficiency gains. That’s worth keeping in mind when reading the cost improvement story.
The Peñoles relationship
One structural feature of Fresnillo that investors often overlook is just how embedded it is within the wider Peñoles group. Fresnillo shares services, infrastructure and geological expertise with its parent. The Silverstream contract, a long-running arrangement under which Fresnillo received silver produced from Peñoles’ Sabinas mine, was actually bought out and terminated in 2025, simplifying the corporate structure but also removing a passive income stream. The Board’s independent directors had to be brought in to verify the deal was fair to minority shareholders, which gives some comfort on governance, but the episode illustrates the inherent complexity of being a publicly listed subsidiary of a family-controlled conglomerate. Related-party considerations are a permanent feature of the landscape here.
The exploration edge
If there’s one area where Fresnillo’s competitive moat is genuinely hard to replicate, it’s exploration. The company runs a team of 95 geologists operating across Mexico, Peru and Chile, with a track record of finding world-class deposits. That pipeline now includes Guanajuato, a 40-kilometre epithermal vein field that could become a major future silver source, Orisyvo, a gold project in Chihuahua, and Rodeo, a heap-leach gold project in Durango. The January 2026 acquisition of Probe Gold added 10 million ounces of gold resources in Quebec, Canada, for approximately US$555 million, a significant diversification both geographically and in terms of commodity mix.
The Operational Reality: Mine by Mine, What’s Actually Working
The headline production numbers for 2025, 600,300 ounces of gold, 48.7 million ounces of silver, tell you what Fresnillo delivered. They don’t tell you how hard it was, or which parts of the portfolio are genuinely improving versus which are masking deeper problems. That distinction matters enormously when assessing whether 2025 is a turning point or a temporary reprieve.
To understand it, you need to go mine by mine.
Herradura: the standout recovery
The clearest turnaround story in the portfolio is Herradura, Fresnillo’s large open-pit gold operation in Sonora. It produced 356,100 ounces of gold, 59% of the group’s total and delivered $762.6 million in EBITDA, a segment profit up 137% year-on-year. Cash costs fell 15.7% to $1,215 per ounce while the gold price was surging. That’s a good operational improvement, not just a metal price story.
The transformation here has been methodical: cost reduction initiatives, tighter planning and execution, recovering gold content from previously deposited oxidised ore at the leaching pads. All five of Herradura’s 2025 objectives were fully achieved, the only mine in the portfolio to score a clean sweep. Underground mining works are now expected to commence in 2026, with production set to follow in early 2027, which should extend the asset’s life well beyond its current 11.4 years. For investors, Herradura is the part of Fresnillo that’s doing exactly what a well-managed mine should do.
Juanicipio — the crown jewel, with caveats
Juanicipio is Fresnillo’s highest-grade silver operation and, on paper, its most exciting asset: silver grades of 423 g/t, $706.9 million EBITDA, 19.8% of group silver production. The joint venture with Pan American Silver (who acquired the stake from MAG Silver mid-year) is performing above plan and Juanicipio’s Veins outperformed expectations in 2025.
The caveats are structural rather than operational. Ore grades fell 9.6% year-on-year as the mine works deeper into lower-grade areas, and the development rate target of 1,300 metres per month was not achieved, flagged explicitly as “NA” (not achieved) in the annaul report. An underground conveyor belt is under construction to reduce haulage costs, which suggests the cost base will continue rising as the easy ore recedes. At 8.6 years of mine life remaining, Juanicipio is brilliant but finite, and converting its resource base into reserves is a stated priority that has also, so far, not been achieved.
Saucito — turnaround in progress, incomplete
Saucito is the most important mine to watch for the medium-term silver thesis. Contributing 28.3% of total silver production and $602.5 million in EBITDA, it’s central to the group, but it’s been underperforming for several years. The 2025 story is one of partial recovery: the Saucito turnaround “has started to deliver the anticipated outcomes” in the CEO’s words, but the key Jarillas shaft interconnection wasn’t completed during the year. Equipment availability remained a problem, with reduced availability and increased corrective maintenance flagged as key drags. The improvement in costs is real, the 2026 silver grade guidance of 200–220 g/t represents a stable outlook, but the shaft interconnection, now expected to make Saucito fully operational in 2027, remains the critical milestone that hasn’t yet been crossed.
The Fresnillo mine — the most complex problem
The flagship mine, one of the world’s oldest continuously operating silver operations, in production since 1554, is the most candid example of the gap between asset quality and current execution. Ore throughput fell 10% despite ore grades holding relatively stable. The reason: deeper, narrower, more distant veins that are harder and more expensive to access. Production was flat year-on-year in silver terms (10.3 million ounces) only because grade improvements offset the throughput decline, a pattern that can’t continue indefinitely.
The good news is structural: the new San Carlos shaft is now operational and will start reducing haulage costs from deeper sections of the mine over the coming years. The 2026 silver grade guidance of 160–180 g/t is actually a step down from the 168 g/t achieved in 2025, which signals management is being realistic rather than optimistic. Reserves increased 26% to 131.9 million ounces, partly due to lower cut-off grades enabled by higher prices, which is worth noting as a price-dependent reserve figure rather than a purely geological improvement.
Ciénega — an honest problem
Ciénega is the portfolio’s most troubled asset. Silver production collapsed 42.6% year-on-year, gold fell 5.1%, and ore throughput dropped 15%. Silver ore grade fell 24.7%. Zinc production effectively ceased after an economic analysis concluded it was no longer contributing meaningfully to profitability. With just 4 years of mine life remaining and a resource base that shrank 34.9% (partly due to accounting reclassification, but not entirely), Ciénega is a late-life mine fighting geological decline. The 2026 plan focuses on transitioning to long-hole mining methods and consolidating recent exploration results, neither of which is a quick fix.
The Price Dependency Question: How Much of 2025 Was Actually Fresnillo?
Let’s do the uncomfortable maths first.
Of the $1,005 million increase in adjusted revenue between 2024 and 2025, the company’s own financial review tells you exactly where it came from. Higher metal prices contributed $1,446 million. Lower volumes sold subtracted $441 million. In other words, every single dollar of revenue growth, and then some, came from the silver and gold price. Volume was a drag, not a tailwind. Strip out the commodity price move and Fresnillo’s underlying revenue would have fallen year-on-year.
It’s the nature of mining. But it is the central fact that investors need to sit with before drawing conclusions from the 2025 results.
What the price sensitivity actually looks like
Fresnillo doesn’t publish a formal price sensitivity table in this report, but the data is there to construct one. Silver contributed $2.16 billion of adjusted revenue in 2025 at an average realised price of $43.6 per ounce. Gold contributed $2.07 billion at an average of $3,532.7 per ounce. A rough estimate: every $5 per ounce move in the silver price is worth roughly $250 million in annual revenue at current production volumes. Every $200 per ounce move in gold is worth roughly $120 million. These are not small numbers relative to a cost base that sat at $1.4 billion in adjusted production costs.
It also worth noting that Fresnillo’s reserve and resource estimates, the foundation of the company’s long-term asset value, are calculated at price assumptions of $2,300 per ounce gold and $30 per ounce silver for resources, and $2,100/$26.50 for reserves. Current spot prices are substantially above those levels. That’s both good news (it means the reserve base could grow further if prices stay elevated) and a quiet warning: a material portion of what’s currently classified as economically mineable ore was only reclassified because prices rose. If they fall, some of that resource base goes back to being uneconomic.
The cost structure: what’s genuinely improved
To Fresnillo’s credit, the cost story in 2025 is not simply “prices went up and everything looked cheaper.” Adjusted production costs fell 11.1% in absolute terms, from $1.58 billion to $1.41 billion. The company identifies $13.8 million in genuine operational efficiencies, primarily at Herradura, on top of structural savings from the wind-down of higher-cost assets like San Julián DOB.
The Mexican peso is also quietly doing significant work here. The peso devalued approximately 5.1% against the dollar during 2025, and because the majority of Fresnillo’s operating costs are peso-denominated, labour, contractors, domestic energy, while revenues are almost entirely dollar-denominated, every percentage point of peso weakness mechanically reduces the cost base in reporting currency. The company estimates the FX effect alone drove $51.6 million of the cost reduction. It's a legitimate tailwind, but not one Fresnillo controls and it doesn't take much imagination to see it running in the other direction
Strip out the mine closures, the FX tailwind, and the lower depreciation from fully-depreciated assets at San Julián, and the underlying cost efficiency improvement is meaningful but modest: roughly $13–14 million on a base of nearly $1.4 billion. That’s around 1% of the cost base. Progress, yes. Transformation, not yet.
End of Part 1
In Part 2: Fresnillo's stock has risen nearly 400% from its 52-week lows. The annual report explains why. What it can't tell you is whether you've already missed it, or whether the real move is still ahead. We look at the valuation, the pipeline, and the risks the market may not have fully priced in.
Thanks for reading,
Ollz