FTSE 100’s Fresnillo shares pull back despite record blowout results — opportunity or mirage?

The Fresnillo (LSE:FRES) share value doesn’t do boring. The FTSE 100 treasured metals miner has surged eightfold in two years — even after silver plunged 30% in a single day earlier this 12 months. For many property, that type of drop would have killed the rally.

Now the corporate has posted record FY25 results. So traders face a easy query: is that this surge constructed on stable foundations, or stretched too far?

FY25 results

The numbers are eye-catching. Adjusted income climbed 27.6% to $4.6bn, EBITDA surged 80.7% to $2.8bn, revenue earlier than tax virtually tripled to $2.1bn, whereas earnings per share jumped greater than fourfold 12 months on 12 months.

That translated into severe money. The miner ended 2025 with a $1.9bn web money place — up from simply $458m a 12 months earlier — and proposed a $950m dividend, the most important since itemizing and comfortably above its common 50% payout coverage.

However right here’s the twist: manufacturing really fell. Silver output dropped 13.5%, and gold slipped 5%, reflecting decrease grades and the closure of San Julián DOB. In different phrases, the corporate didn’t develop by digging extra steel out of the bottom.

It grew as a result of costs have been larger and since prices have been tightly managed. Adjusted manufacturing prices fell 11%, helped by efficiencies and a weaker peso.

That’s working leverage in motion. When metals rise, earnings don’t simply improve, they speed up.

The important thing query now could be whether or not that dynamic can proceed.

Supportive backdrop

Silver isn’t only a steel — it’s each cash and equipment. Whereas governments pile up on debt, central banks proceed accumulating gold and silver as safe-haven reserves. On the identical time, demand from electrical autos, photo voltaic panels, 5G networks, defence programs and superior electronics retains climbing.

Even Washington and Beijing have now labeled silver as a necessary steel.

The issue? Provide can’t reply shortly. It will probably take greater than a decade to carry a brand new mine on-line. When demand outpaces manufacturing like this, costs have a tendency to seek out help.

That dynamic explains why silver may fall 30% in a single day earlier this 12 months — and nonetheless rebound strongly. Volatility is a part of the cycle. The structural forces beneath it are what matter.

Dangers

Mining is a losing enterprise. Ore our bodies deplete, and changing them isn’t assured. If Fresnillo fails to replenish reserves by way of exploration or acquisitions, long-term manufacturing may decline no matter steel costs.

Environmental regulation and potential mine-closure liabilities can also improve prices over time. Whereas immediately’s steadiness sheet is robust, sustaining progress in a capital-intensive trade requires steady reinvestment — and that all the time carries execution threat.

What’s the decision?

Gold and silver aren’t simply cyclical trades. They sit on the crossroads of sovereign debt enlargement, central financial institution diversification, and the worldwide push towards electrification and superior know-how. Provide stays gradual and capital-intensive, whereas demand is broadening.

That is the place Fresnillo is available in. With ultra-low manufacturing prices and twin publicity to silver and gold, even modest value strikes can drive disproportionate earnings progress. That working leverage was clear in 2025.

The query isn’t whether or not metals will swing — they all the time do. It’s whether or not the structural forces behind them are strengthening.

I consider they’re. That’s why I just lately doubled down by buying extra shares.