Fresnillo PLC (LSE: FRES)

Fresnillo PLC (LSE: FRES) is a FTSE 100-listed precious metals producer, operates a portfolio of high-performing silver and gold mines across Mexico. The company's flagship Fresnillo Mine in Zacatecas stands as one of the world's oldest and most productive silver operations. Complementing this asset, the modern Saucito mine in the same region delivers robust silver and gold output through advanced mining infrastructure. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 2,642.00

• Resistance near Current levels: FRES’ stock price has approached Resistance (R1) which was stated in the previous report on 01 October 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.
• Termination of Silverstream Contract Raises Long-Term Revenue Concerns - While the company frames the Silverstream buyback as a pragmatic step, the termination of this long-standing agreement introduces uncertainty around future silver-linked income. The Sabinas mine had previously generated significant cash flows for Fresnillo (US$882 million over its lifetime), and although production was in decline, ending the contract outright—especially at a substantially reduced valuation of US$40 million—may be viewed as a short-term fix with long-term revenue sacrifice.
• Heavy Reliance on Gold Performance Masks Underlying Silver Weakness - The sharp rise in profitability and free cash flow in H1 2025 is commendable, but much of it is attributable to higher gold prices and increased gold output—especially from Herradura. At the same time, silver production dropped nearly 12%, and the loss of Silverstream contributions will weigh even more heavily in H2. Fresnillo's traditional identity as a silver-focused miner appears to be shifting, and stakeholders may question whether this pivot dilutes the company’s strategic positioning, especially if gold prices soften in the future..

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

  FRES Daily Technical Chart, Source - Refinitiv

Conclusion

FRES is expected to trade at a discount, considering Termination of Silverstream Contract and fears of global slowdown. For conducting the valuation, the following peers have been considered - Rio Tinto PLC (LSE: RIO), Hochschild Mining PLC (LSE: HOC) and others.

Given its current trading levels, Heavy Reliance on Gold Performance, recent rally in the share price, 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 of GBX 2,642.00 as of 15 October 2025 at 08:10 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 15 October 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.