Fresnillo PLC 

Fresnillo PLC (LSE: FRES) is an FTSE-100 index-listed silver and gold producer. The Company is engaged in mining minerals like silver, gold, lead, and zinc. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 969.56

• Resistance near Current levels: FRES’s stock price crossed the Resistance (R1) which was stated in the previous report on 09 April 2025 therefore, there can be a possibility of a decline from resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.

• Sharp Decline in Statutory Profitability: Profit for the year dropped by 21.4% to US$226.7mn (2023: US$288.3mn), primarily due to the US$182.3mn Silverstream revaluation loss and significantly higher income tax expense.

• Surge in Tax Expenses: Income tax expense reversed from a US$205.0mn tax income in 2023 to a US$390.2mn tax expense in 2024, largely driven by a 20.0% devaluation in the spot MXN/USD exchange rate impacting tax asset/liability values.

• Silverstream Revaluation Loss: Fresnillo recorded a US$182.3mn loss (net of amortization and before taxes) due to revised assumptions following operational and financial difficulties at the Sabinas mine, directly impacting reported profit.

• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

FRES is expected to trade at a discount, considering the Sharp Decline in Statutory Profitability, Surge in Tax Expenses Silverstream Revaluation Loss, Profit Attributable to Equity Shareholders Down by 39.8% year-on-year to US$140.9mn, Decline in Basic EPS, etc. For conducting the valuation, the following peers have been considered: Hochschild Mining PLC (LSE: HOC), Rio Tinto PLC (LSE: RIO), etc.

Given its current trading levels, decline in Quarterly Revenue, reliance on Select Product Categories, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Current Market Price (GBX) 969.56 as of 11 April 2025, 09:09 AM, GMT+1. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 11 April 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.