Fresnillo (LSE: FRES) shares were on the front foot yet again this morning (5 August), jumping 8% in early trading. This followed the release of the Mexico-based silver and gold miner’s latest set of half-year figures.
Profit explodes!
Let’s run down those headline numbers. Adjusted revenues came in 27.1% higher at $1.98bn. This was mostly down to the company benefitting from higher precious metal prices, even though lower amounts of the latter were sold.
On top of this, production costs fell a little over 20% to $673.5m, due in part to foreign exchange movements. Efforts to reduce costs also played a role.
But I bet it’s Fresnillo’s bottom line that really got investors popping the Champagne corks. Net profit of $467.6m was almost 300% higher than over the same six-month period in 2024!
All this helps to explain why Fresnillo now boasts a very strong balance sheet with just over £1.82bn in cash.
Top of the pops (sort of)
Today’s positive reaction merely adds to the incredible momentum seen in the shares in recent times.
Had an investor put £10,000 to work in the stock two years ago, their holding would now be worth around £30,000. By sharp contrast, placing that initial stake in a FTSE 100 tracker would give roughly £12,000. And that’s after an uncharacteristic good run of form from the index.
What’s perhaps even more remarkable is that this company has outperformed market darling Rolls-Royce in 2025, and by some margin (142% vs 86%).
Granted, these are two very different businesses. The aforementioned engineer has also increased 11-fold in value over the last five years alone. Fresnillo’s value is up just 21% in this period, drastically underperforming even the FTSE 100.
Can this continue?
While existing Fresnillo investors will be cheering from the sidelines, it’s worth speculating on how long this purple patch will last. No one knows for sure, of course — that’s why we’re only really focused on the long-term here at Fool UK. Even so, the outlook painted in today’s results wasn’t exactly bearish.
Management chose to raise its guidance on full-year gold production due to better performance at Herradura – one of the biggest open-pit mines in Mexico. This is now expected to be 550-590 koz, up from 525-580 koz. All other forecasts were left unchanged.
On the other hand, Fresnillo shares already traded at 17 times forecast earnings before markets opened up. That’s high for a company in the Basic Materials space, suggesting that any slight hiccup going forward could be punished.
It also goes without saying that Fresnillo has no control over the prices of what it digs up. For the last few years, that’s worked in its favour. Gold has set new record highs off the back of geopolitical tensions and trade concerns. However, we also know that demand for precious metals can be very volatile.
Safety in numbers
I tip my hat to anyone holding Fresnillo shares for the last couple of years.
While I can see why the stock might still be worth considering, I’d be cautious when it comes to assuming this run of form will just keep going. No share price rises in a straight line, after all.
As usual, spreading money around the market — into different companies and sectors — is the shrewd move.
