The FTSE 100 is enjoying its best year since the global financial crisis. But Fresnillo (LSE: FRES) has gone into a different stratosphere altogether. In under two years, the miner’s shares have jumped roughly 650%, powered by silver’s rise from $20 to almost $70 an ounce. With some precious-metals bulls claiming $100 may still be too cheap, can this extraordinary run continue into 2026?
Silver keeps defying expectations
Silver has once again reminded investors why it’s one of the most fascinating assets in global markets. Time and again, it has moved far beyond levels most analysts once thought reasonable.
The forces driving this rally look structural rather than speculative. Governments continue to run large budget deficits, and when growth slows or crises emerge, stimulus is rarely far behind. That backdrop has prompted global central banks to rethink reserve allocations, trimming exposure to US Treasuries and favouring hard assets instead.
Silver has benefited disproportionately. Unlike gold, it sits at the crossroads of monetary demand and industrial necessity, which is why prices tend to overshoot on both the way up and the way down.
A cash cow at current prices
What makes Fresnillo particularly compelling is its cost base. The miner’s all-in sustaining cost (AISC) sits at around $17 an ounce. At today’s silver price, that creates an extraordinary margin.
When prices rise this far above production costs, profits don’t just grow – they explode. That was already clear in the company’s half-year results, with revenues rising sharply, margins expanding dramatically, and the dividend surging.
If silver prices remain anywhere near current levels into the full-year results, the business is likely to be generating vast amounts of cash. That strengthens the balance sheet, supports reinvestment, and underpins shareholder returns.
Major risks
None of this comes without risk. Silver is notoriously volatile, and sharp pullbacks can occur with little warning.
Fresnillo also carries exploration risk. Its large pipeline of projects means not every drilling programme will yield economic results. Operational disruptions, rising costs, or lower-than-expected grades could affect short-term performance.
Geopolitical and regulatory risks are also present. With operations concentrated in Mexico, any changes to mining policy, taxation, or permitting could impact profitability.
Supply and demand
Silver’s relatively small market means even modest changes in demand can have outsized effects.
Supply remains constrained. Mexico, the world’s largest producer, cannot rapidly increase output, and it typically takes over a decade to bring new discoveries into full production. Meanwhile, industrial demand from solar panels, electrification, electronics, and defence applications continues to rise.
Bottom line
After a gain of this magnitude, it would be unrealistic to expect Fresnillo to repeat this performance in 2026. But that doesn’t mean the story is over.
With silver continuing to defy gravity and production costs far below spot prices, the business remains exceptionally well positioned. Even if the metal simply holds near current levels, cash generation could be substantial.
That’s why I continue to hold the stock – and why I’ve added to my position this year. Yes, it’s been a roller coaster with some stomach-wrenching falls along the way, but that comes with the territory when investing in precious metals miners.
