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The FTSE 100 has had a strong year in 2025, with the index up 18% to date. But that performance pales in comparison to Fresnillo (LSE: FRES), which has surged an astonishing 321% over the same period. With gold prices holding above $4,000 and silver edging toward $60, can the Mexican precious metals miner continue to rise to the end of the year?
New surge
Just over a month ago, the stock plunged more than 20% in a matter of days after a massive after-hours sell-off in gold prices in New York. At the time, I argued this was a rare opportunity to consider for long-term investors willing to look past short-term volatility. So far, that bet appears to be paying off.
However, it’s no longer gold leading the charge – it’s silver. The spot price currently sits at $55, an all-time high. Silver has jumped 38% in just three months, comfortably outperforming every other major asset class, including the Magnificent 7 tech stocks.
Leveraged play
Miners like this are essentially leveraged bets on silver and gold.
The company’s all-in sustaining cost (AISC) sits around $17 per ounce for silver and $2,000 per ounce for gold, meaning each ounce mined generates a huge cash margin.
Over the next few years, the firm is expected to produce 50m ounces of silver and 600,000 ounces of gold. Multiply that by the margins per ounce, and it’s clear the business is generating eye-watering cash flow.
It’s no wonder the interim dividend jumped 225%, with plenty of room for strong payouts if production stays on track.
The following table gives forecast for next year’s revenue, based on the company’s AISC figures and production estimates. It illustrates just how much cash the business could generate, supporting future dividend increases.
Expected productionCash margin per ounce (simplified)Approx cash generated50,000,000 oz (silver)$38$1.9bn600,000 oz (gold)$2,000$1.2bn
For long-term investors, this is a textbook example of commodity leverage: small changes in output or metal performance translate into massive gains for shareholders, both in share price and potential dividends.
Risks to consider
No investment comes without risk. Cash flow and the stock’s price are highly sensitive to silver and gold price swings, which can move sharply due to global economic conditions or investor sentiment.
Geopolitical and regulatory risks in Mexico, where most of its mines are located, could disrupt operations or raise costs. Mining is extremely energy and labour intensive, and both these costs have been rising over the past few years.
Its large exploration portfolio carries uncertainty – new discoveries may underperform or take years to develop, potentially disappointing investors. Operational issues, environmental challenges, or unforeseen mine disruptions could also affect production. All have the potential to impact future dividends.
Bottom line
With debt levels rising in Western economies and inflation remaining elevated, many investors are looking beyond traditional bonds and cash.
Precious metals offer a unique advantage: they benefit from central bank purchases, act as a hedge against inflation, and carry no counterparty risk – meaning their value isn’t dependent on any bank, company, or government meeting obligations.
I fully expect ongoing share price volatility. But with strong margins and disciplined operations, Fresnillo offers exposure to a market beyond anyone’s control. That’s why I recently topped up my position.
