Fresnillo shares slide as shining profit fails to offset fears in production
Mining company Fresnillo saw its share price sink in morning trading, as lowered guidance took the shine off soaring profits.
The group’s share price fell 5.1 per cent to 3,910 pence, bringing its staggering 419.3 per cent year-long rally to a halt, as investors became wary of a drop in production.
The Mexico-based group reported record financial results, as prices for gold and metal soared, with revenue climbing 30.5 per cent to $4.5bn (£3.4bn).
Pre tax profit nearly tripled to $2bn, driven by booming precious metal prices, with gold hovering at $5,209.5 while silver stands at $82.50.
The miner ended the year with a net cash position of $1.9bn, up from just $458m a year earlier.
This led the Board to propose a final ordinary dividend of 128.92 cents per share, against 35.2 cents in 3035, marking the highest payout since listing.
Slumping production
But while gold production exceeded guidance, reaching 600.3koz, it was down five per cent compared to 2024, primarily driven by lower ore grades, volumes processed and the cessation of mining activities at its San Julian site.
Meanwhile, silver production hit 48.7moz, in line with guidance, but also dropped 13.5 per cent from 2024 from similar issues that impacted gold, as well as the lower contribution from the Silverstream.
Adam Vesette, market analyst at Etoro, said: “Fresnillo’s results are a triumph of price over production, delivering record earnings amid the silver bull market.
“Yet beneath the gloss, volumes tell a tougher story… cost controls shone, but mine challenges persist, from grades at Fresnillo to the Silverstream termination loss.”
Production costs also fell 11.1 per cent to $1.4bn, driven by lower volumes processed at its Herradura, Fresnillo, Cienega and Saucito sites.
The end of Fresnillo’s glittering rally?
The drop in production highlighted to investors that growth surged on the back of higher prices buoyed by geopolitical uncertainty and the green energy transition, coupled with tightly controlled costs.
Chris Beauchamp, chief market analyst at IG, said: “For shares that have seen such a big jump in valuation, the expected increase in production costs and a lower production forecast mean that investors see little reason to chase the shares at current levels, especially in such a risk-off environment.”
Dan Coatsworth, head of markets at AJ Bell, added that the “lukewarm reception” to the results will need to be offset by future profit growth, which will likely “require the company to start getting more gold and silver out of the ground”.
He said: “There may also be a modicum of disappointment at the lack of a special dividend to reflect an extraordinary year for Fresnillo, even if the ordinary dividend has been hiked substantially.
“Fresnillo is swimming in cash like a veritable Scrooge McDuck but wants to keep some of these riches on hand to enable it to invest for future growth and to give it scope to target M&A, an approach which has some logic.”