UPDATE: In a stunning development, shares of Fresnillo (LSE: FRES) have surged approximately 650% in under two years, driven by an astronomical rise in silver prices, now nearing $70 an ounce. This remarkable performance positions Fresnillo as a standout within the FTSE 100, which is experiencing its most significant gains since the global financial crisis.
The surge in silver prices—from just $20 an ounce—is attributed to a combination of structural market forces, rather than fleeting speculation. As governments worldwide grapple with substantial budget deficits, central banks are increasingly favoring hard assets. This shift has resulted in a significant uptick in silver’s monetary and industrial demand, pushing prices to unprecedented heights.
Fresnillo’s operating cost is another compelling aspect, with its all-in sustaining cost (AISC) hovering around $17 an ounce. With current silver prices soaring far above this cost, the company is poised for explosive profit growth. Recent half-year results have already shown a sharp rise in revenues and margins, alongside a substantial dividend increase.
“If silver prices remain near current levels, Fresnillo could generate enormous cash flows, strengthening its balance sheet and enhancing shareholder returns,” analysts report.
However, the path forward is not without risks. The inherent volatility of silver can lead to sudden price corrections. Additionally, Fresnillo faces exploration risks, as not all drilling projects guarantee economic returns. Operational challenges, rising costs, and geopolitical factors, particularly related to its Mexican operations, could also impact profitability.
The silver market’s relatively small size means that even minor shifts in demand can cause significant price fluctuations. With Mexico being the largest silver producer globally, supply constraints persist, as it typically takes over a decade to bring new discoveries into production. Meanwhile, industrial applications for silver continue to grow, driven by sectors such as electronics and renewable energy.
While it may be unrealistic to expect Fresnillo to replicate its astounding 425% gain in 2025, the ongoing resilience of silver and the company’s low production costs suggest that it remains well-positioned for continued success. Even if silver prices stabilize, Fresnillo could still generate substantial cash flow.
Investors are encouraged to monitor this situation closely as the market evolves. With silver showing no signs of retreat, Fresnillo’s trajectory could remain a critical point of interest for shareholders and market analysts alike.
As of now, I continue to hold and even expand my position in this FTSE 100 powerhouse, despite the roller coaster nature of investing in precious metals. The potential for substantial returns keeps Fresnillo on the radar for savvy investors.
Stay tuned for further updates on this developing story as we track Fresnillo’s performance and the silver market’s trajectory in 2026.
