ii view: shareholder returns shine at silver miner Fresnillo

Full-year results to 31 December

• Adjusted revenue up 27% to $3.64 billion (£2.88 billion)
• Adjusted profit (EBITDA) up 136% to $1.55 billion (£1.22 billion)
• Final ordinary dividend of 26.1 US cents per share
• Total ordinary dividend for the year of 32.5 cents per share, up from 5.6 cents per share in 2023
• Special dividend of 41.8 cents per share
• Net cash held of $458 million (£362 million), improved from net debt of $304 million a year ago

Chief Executive Octavio Alvidrez said:

"I am pleased to report a solid financial performance for Fresnillo in 2024, underpinned by higher precious metal prices, operational discipline, and a continued focus on cost efficiencies. 

"Looking ahead, we remain committed to responsible growth with the safety of our people at its heart, further cost optimisation, and advancing our exploration pipeline to ensure long-term value creation for our stakeholders.”

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ii round-up:

Precious metals miner Fresnillo (LSE:FRES) today detailed shareholder returns that beat City expectations and including a proposed special dividend. 

Higher precious metal prices combined with cost savings helped adjusted annual 2024 profit (EBITDA) more than double to $1.55 billion (£1.22 billion). A final dividend of 26.1 US cents per share, payable to eligible shareholders on 30 May, takes the total ordinary payment to 32.5 cents per share. An unexpected special dividend of 41.8 cents per share, also payable on 30 May, brings the total payout for the year to $547.5 million – the top of Fresnillo’s 33-50% dividend policy payout ratio.

Shares in the FTSE 100 company rose 3% in UK trading having come into these latest results up by close to 60% over the last year. That’s similar to Anglo American (LSE:AAL) and comfortably above a 15% improvement for the FTSE 100 index over that time. 

Fresnillo operates a series of mines across Mexico. It is the world's largest primary silver producer and Mexico's largest gold producer.

Average realised prices for the group’s mined silver and gold over the year rose by 21.7% and 25.3% respectively. That helped the miner’s adjusted revenue climb 27% to $3.64 billion.

Total silver production was flat at 56,307 kilo ounces (kOz), with gold output rising 3.4% to 632 kOz. Silver production for 2025 is expected to come in at between 49 kOz and 56 kOz, with gold at 525 kOz to 580 kOz.

Fresnillo forecasts capital expenditure or investment in operations during 2025 to total between $520 million and $530 million, up from a previous estimate of $490 million. 

Group net cash as of 31 December stood at $458 million, improved from net debt of $304 million a year ago. A first-quarter production update is scheduled for 23 April. 

ii view:

Headquartered in Mexico, Fresnillo shares are listed both on the Mexico and London Stock Exchanges. The group employs around 7,000 people at eight mines across Mexico including Fresnillo, Saucito, Ciénega and San Julián, as well as four advanced exploration projects. It also owns mining concessions and exploration projects in Peru and Chile.

For investors, silver production for 2025 is expected to come in flat at best, with gold potentially retreating. Proposed US trade tariffs on Mexico could have some impact. A highly focused portfolio of mined commodities heightens risks compared to more diversified rivals like Glencore (LSE:GLEN) and Rio Tinto Registered Shares (LSE:RIO), while currency moves between Mexican operations, precious metals priced in dollars and shares traded in pounds all warrant consideration.  

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More favourably, a focus on improving operational efficiency persists. Group expansion projects include the full commissioning of the San Carlos shaft at the Fresnillo mine. A price-to-net asset value below the three-year average suggests improved value, while net cash held compares to a position of net debt at the end of 2023.

In all, projected flat to reduced production for key commodity silver in 2025 offers some caution. That said, potential for special dividends and what equates to a 2024 dividend yield of over 7%, is likely to keep fans of this precious metals play happy.   

Positives: 

• Pursing efficiency measures
• Income generation and exposure to precious metals

Negatives:

• Lacks the product and geographical diversity of other miners
• Currency movements can impact

The average rating of stock market analysts:

Hold