Research that is free to access for all investors. Companies commission these providers to write research about them.
Brokers who write research on their corporate clients and make it available through our main bundle offering.
Research that is paid for directly by asset managers. Only accessible to institutional investors permissioned for access.
Event in Progress:
View the latest research on other companies in the sector.
We raise our estimates for 2025/26E by 4%/13%, and our 2027E estimate by 21%. In keeping with our thesis of a higher for longer price environment, we raise our long-run estimate from $2,000/oz to $2,500/oz.
Fresnillo PLC
We retain our Add recommendation, believing that recent momentum behind gold and silver prices may lead to a small re-rating of the shares. However, we see no obvious drivers of production growth, and therefore, in our view, other precious metals names offer more long-term opportunity.
While headline production looks better than expected due to the grades at Herradura, issues suggest that headwinds are coming across the portfolio, impacting output for the balance of 2025E. The company maintained guidance.
Higher cash flows for longer mean that we see value in the shares, driving our upgrade today. However, we note that this is based solely on extended strong gold and silver prices, given that Fresnillo looks some time away from detailing and executing on internal growth options.
We increase our target price by 35p to 835p, reflecting the higher EBITDA generation from Fresnillo. Growth options still seem some time away from investment decisions. We retain our Hold recommendation as we see no reason for the shares to rerate back to the 2014-22 trading range.
Whatever the intention, the raised voices in the Oval Office are seeing many historic geopolitical certainties being carefully reviewed. This may well translate into further uncertainty premiums building in the gold price, generating even larger cash flows for gold miners.
FRES HOC PAF SRB WPM
We noted stronger-than-expected operating cash flows from the group, driven by significantly lower cash tax payments. Looking ahead, even after higher dividend payments, we anticipate c.US$340m in surplus cash generation in 2025E, hinting at another special dividend. We retain our 800p TP and Hold recommendation.
For 2024, the higher gold output accounts for around half the gap between consensus gross profit (US$1bn) and guidance (US$1.2-1.3bn), with cost savings driving the rest. The lower guidance reduces this benefit, so we retain our Hold recommendation and 800p target price for the time being.
We increase EBITDA 6-8% for 2024-26E, given higher output, particularly from the Herradura operation, which is showing signs of returning to form. However, with the stock lacking growth catalysts, we are sceptical of a rerating, hence our downgrade from Add to Hold.
The better-than-expected gold output looks enough to ensure that Fresnillo delivers on guidance (580-630koz), and the small silver beat means it has a little more margin to deliver silver guidance at 55-62Moz. Better output and ongoing price strength is an appealing combination. We reiterate Add, TP 690p.
Net of these changes, our target price increases from 645p to 690p, and we retain our Add recommendation. The group offers large-cap exposure to gold and silver prices, but we remain cautious that its historical multiple premium will continue to erode given operating headwinds.
Despite the EBITDA beat, a high tax charge drove EPS of USc10.7 vs consensus of USc12, and we note a further significant build in working capital, meaning the high EBITDA beat translated into operating cash flows after interest of US$375m (vs PHe US$409m).
While the headline gold output looks weaker, most mines saw mildly better grades and/or ore throughputs, a factor that helped drive better lead and zinc output. The gold guidance for 2024 looks at risk, which may exert pressure on the shares. We maintain our 645p TP and Add rating.
Assuming the gap between ore grades and reserve grades closes, we view the shares as fairly valued on a 12-month basis. Without this, the derating of recent years is likely to continue and other precious metal names could offer better opportunities. We maintain our Hold recommendation.
Fresnillo’s FY2023 results saw the company relay another set of uninspiring results in which the negatives of its production profile and cost pressures were prominent, despite the exceptional performance of the Juanicipio operation. We have been long-term believers that Juanicipio will become the company’s most valuable operation, despite owning just 56%. Representing 41% of gross profit for the group in FY2023, this was delivered. In this note, we have revised our valuation, the outlook for the company as well as applying our revised commodity price assumptions.
Fresnillo’s H1 financial results were impacted mainly by cost inflation and strength in the Mexican Peso resulting in reduced profit vs H1 2022, despite marginally higher revenue driven by higher gold and silver volumes combined with higher prices for both.
Fresnillo’s Q2/H1 FY2023 production results were marginally ahead of Panmure Gordon forecasts. Within the group’s portfolio, performances were mixed, with the exception of Juanicipio, where the ongoing ramp up in output is going from strength to strength and enabling the group to mitigate ore grade variability at other operations. Investors were also provided with a cautionary warning regarding costs, as the impact of inflationary pressures, the strength of the Peso to name just two, are expected to negatively impact the upcoming FY2023 interim results, scheduled for 1st August.
Fresnillo’s FY2022 results saw the company reiterate the previous message of staffing issues, cost inflation and delays to growth projects. However, with Juanicipio now connected to the national power grid and undergoing commissioning, there is the potential for a more positive view towards the end of the year. In this note we have revised our outlook for the company as well as applying our revised commodity price assumptions.
Despite the weaker-than-expected operating cash flow, the Fresnillo team announced a USc13.4 final dividend, well ahead of our USc10 estimate. That said, with capex and exploration spend budgeted higher than our estimates, we see a larger draw on 2023E cash balances than in our present estimates. With the stock near fair value we retain our Hold.
A mixed outlook for 2023 – Juanicipio could prove a positive catalyst for FRES in 2023, but we suspect investor focus will remain on costs.
Maintain Hold rating – While all companies are experiencing cost inflation this year, the breadth of cost rises seen in 2H22 was once again above our expectations and a key factor behind our cautious stance on FRES.
Risks still remain on FRES operations – While we have a stronger YoY outlook for 2023, we also believe risks remain on several FRES operations in the coming year. The commissioning of Juanicipio continues to go slower than we anticipated, while the grades at Saucito and Cienega remain on the low side.
A challenging 18 months ahead – While we still feel FRES has good silver production growth potential in the medium term, near-term cost headwinds pose the most immediate challenge. We now forecast steady-state silver production at FRES will be reached a year later, in 2024E.
Fresnillo’s H1 FY2022 results saw the company relay another set of figures below Panmure Gordon and wider market forecasts. As noted at the company’s full year results, staffing issues, cost inflation and delays to growth projects continue as a drag on the company. However, with Juanicipio set to be connected to the electricity grid imminently, there is the potential for a more positive view towards the end of the year. In this note we have revised our outlook for the company as well as applying our revised commodity price assumptions.
Lowering target price to 875p, downgrade to Add We have lowered our gold production forecast for 2023 and increased our 2022-24 capex forecasts in line with company guidance. Our total capex from 2022-24E now represents 77% of our combined OCF forecasts, leaving FRES a highly capital-intensive company in the medium term. The FRES share price has recovered 30% since its February lows, but is now trading within 10% of our target. We therefore downgrade our rating to Add (from Buy). While we still like the silver volume growth FRES offers going into 2023E, we also think the heavier cost profile will offset much of the OCF gains. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 2-page note
Volume growth expected from 2H22 We make only small changes to our 2022E forecasts, with negative mark-to-market adjustments for silver and gold prices in 2Q22E more than offsetting a net positive impact from higher silver production in 1Q22. We lower our 2022E EBITDA 1-2% and our EPS 3%. We still expect better volumes at FRES from 2H22E, when we expect both Juanicipio and the pyrites plant phase 2 to be commissioning. We maintain our 880p target price and Buy recommendation. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 2-page note
Fresnillo’s Q1 FY2022 production results were marginally better than our estimates as operational stability returned, albeit at far lower output rates than historically achieved. As such, the company has reiterated that it remains on track to meet its FY2022 production targets.
1Q22 production mixed, but showing progress QoQ Despite a mixed set of production results for 1Q22, on balance we believe FRES did slightly better than expected and may be managing recent challenges better than we had anticipated. Silver production beat by 7% in 1Q22, while gold production missed by 4%, and both by-products beat to help on costs. Juanicipio volumes are creeping up, and the company still expects the tie-in by mid-year. With Covid-related absenteeism easing going into 2Q22E, it seems as if FRES management will have more time to focus on operational progress. Buy, TP 880p. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com
EBITDA & EPS lower on costs, dividend and net cash beat The P&L for 2021 came in lower than we anticipated due to higher costs, with 2021 EPS of USc57 vs PHe at USc65. However, both cash flows and the balance sheet were stronger, due to stronger working capital inflows and lower capex, helping FRES report a net cash position of US$68m vs our US$34 net debt forecast. DPS was held flat at USc34 for the full year, vs PHe at USc30. FRES has maintained all guidance for 2022E for now, but operationally we still expect it to have a tough year ahead at its major mines, and attempting to get the Juanicipio tie-in completed around mid-year. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com
Fresnillo’s FY2021 results were mixed vs. Panmure Gordon forecasts but significantly lower than wider market expectations according to Bloomberg. The key positive was the 24c final dividend payment. However, the ongoing concerns around costs, predominantly at the underground operations, will continue to play a key role in determining how and if, the company can benefit from the elevated precious metals prices seen in Q1 FY2022.
Target lowered 21% to 885p, cost outlook a focus We have made small downward adjustments to our 2021E P&L forecasts, and a sizeable 18%/37% cut to our 2022E EBITDA/EPS forecast. We have also cut our DPS forecasts 14%/29% for 2021/22E. We are below consensus on EPS and DPS for 2022E, but remain cautious on the inflationary cost outlook, which FRES is set to provide in March. We cut our target price from 1,120p to 885p but retain our Buy rating. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 2-page note
Fresnillo’s Q4/FY2021 production results saw the company relay a sombre outlook for the company in FY2022, with staffing issues, cost inflation and delays to growth projects providing a prile of bad cards for investors. We have long been cautious on the growth outlook for the portfolio when one strips out the joint venture at Juanicipio. In this note we have revised our outlook for the company as well as applying our revised commodity price assumptions.
2021 production directly in line, 2022E guidance weak FRES released a solid end of year production report which was in line across all metals. However, the Juanicipio commissioning has been pushed back slightly to the end of 2Q22 (vs mid 2Q) and restaffing efforts at Fresnillo and Cienega will now likely drag on to 3Q22. Guidance for 2022 is also looking lower, especially for gold on the back of grade declines at Herradura and Saucito, while Noche Buena nears the end of its mine life. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com
Fresnillo’s Q4/FY2021 production results saw silver production in line with our expectations and gold production positively recovering in the final period of FY2021. However, this bounce appears to be fleeting considering the negatively revised outlook for FY2022 will require a material negative revision to forecasts.
Fresnillo’s Q3 FY2021 production results are by and large below Panmure Gordon forecasts. Whilst silver production was less than 1% away from Panmure Gordon forecasts, gold production was significantly impacted during the period. Labour reforms in Mexico resulting in a general shortage of personnel, cost pressures and the strength of the Mexican Peso vs. the Dollar are all going to weigh on sentiment leading into the company’s full-year results.
Fresnillo’s Q2/H1 FY2021 production results are generally above Panmure Gordon forecasts. Production is up across the board vs H1 2020, for Gold in particular, up 12%. With ongoing strong commodity prices, this will drive good cash flows for the company.
P&L for 2021E steady, volume growth from later in the year The first quarter of the year was a more solid operational start for FRES than for some of its peers. If FRES can continue to deliver strong operational results in Q2 and Q3, we should then see Juanicipio kick in from Q4, with stronger volume growth in 2022E. We maintain our 1,340p target price and Buy rating. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 2-page note
A good start to 2021, guidance unchanged Fresnillo has had a good operational start to 2021 with a mixed Q1 production report but net positive overall. Lower silver grades but higher gold and by-product grades at Saucito led the broader trends for FRES in Q1, while Herradura put in another strong performance. Importantly, the Juanicipio plant still looks on track for commissioning by Q4. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com
Higher costs forecast through 2023E We have lowered our target price for Fresnillo by just 1% to 1,340p, as we raise our cost profile across three mines in the coming three years. We expect cost containment will be a prime focus for FRES in 2021E, as will project delivery. However, even with higher costs at the three biggest mines, balance sheet strength and strong silver prices serve as a strong offset in 2021E. Maintain Buy. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 4-page note
FY20 EBITDA miss, but EPS and net debt beat Fresnillo reported FY20 EBITDA below our forecast due to higher than expected costs at Herradura and Noche Buena in late 2020. Herradura costs will continue to be a focus going into 2021, especially with FRES cautious on the operating outlook. However, stronger operating cash flows have resulted in lower net debt at year end, which should support a growing dividend going into 2021. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com
Lowering target price 5% to 1,355p While the Juanicipio plant delay has grabbed investor focus on FRES for 2021E, in our view it puts more pressure on the company in 2022E, as it now has to deliver most of the Juanicipio production growth in that year. Lower gold production forecasts in 2021E (driven by grades) drive our 2021E EBITDA down 4%. Our revised target on FRES is down 5% to 1,355p, but we retain our Buy. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 4-page note
4Q20 production mixed, 2021 outlook slightly lower A mixed 4Q production report should not alter our forecasts significantly, but FRES has highlighted a slightly lower outlook for both silver and gold in 2021. Lower silver grades and dilution at a few mines with lower gold grades at Cienega are the drivers. Meanwhile, the commissioning of the Juanicipio plant has been pushed back to 4Q21, a delay that will be noted by the market. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com
Strong silver growth forecast by 2022E Fresnillo has an impressive silver growth profile for 2020-22E, which we believe will drive strong gains across the P&L. However, we forecast capex above US$400m pa and a dividend payment rising to +US$200m pa, which should continue to drive single-digit FCF yields for FRES. We forecast capex/OCF at 50-60% through 2022E, which could prove a hurdle for a further re-rating. We initiate with an Add, 1,300p TP. Tim.Huff@peelhunt.com, Peter.Mallin-Jones@peelhunt.com 15-page note
BASE RESOURCES^ (BSE, NR, CNP) – FY20 production at upper end of target; guiding for slightly lower FY21; rutile to come under pressure | FRESNILLO^ (FRES, NR, CNP) – H1 2020 financials see improved gross profit but lower net profit; importantly, cash generation strong | TITANIUM SECTOR – Iluka takes Chemours to court over rutile take-orpay breaches; Iluka and Base have contrasting market views
Fresnillo PLC Base Resources Limited
DANAKALI^ (DNK, NR, CNP) – Colluli mobilisation on track; on-going FEED review identifies opps, we believe should have positive implications | FRESNILLO^ (FRES, NR, CNP) – FY19 financials poor, as expected; production to stabilise in 2020, increasing in 2021
Fresnillo PLC Danakali Limited
FRESNILLO^ (FRES, NR, CNP) – Changing of the NEDs: Jaime Lomelin has retired; Myriam Guadalupe De la Vega to be proposed for election at AGM | RESOLUTE MINING^ (RSG, NR, CNP) – CY19 P&L: net loss “disappointment”; CY20 guidance reiterated, to be adjusted after Ravenswood sale completes)
Fresnillo PLC Resolute Mining Limited
Fresnillo (FRES LN) has announced strong results on the back of production increases. Silver production of 28mnoz was up 11.2% YoY in H1 and revenue of US$1,070m was up 11.5% YoY. Gold production of 446koz was broadly unchanged. The incremental production came primarily from the San Julian phase 1 ramp up.
Fresnillo (FRES LN) has delivered strong results driven by a recovery in silver and gold prices as well as strong operational performance. Revenue of US$1.9bn was up 32% YoY on the back of a 7% YoY increase in silver production to 50.3mnoz as well as a 23% YoY increase in gold production to 934koz. EBITDA of US$1bn, up 89% YoY, benefitted from the stronger top line as well as depreciation in the Peso versus the US Dollar. As a consequence of the strong earnings improvement, net income was up from US$69m in 2015 to US$425mn in 2016.
This Morning’s News Fresnillo (FRES LN) Polymetal International (POLY LN)
Fresnillo PLC Solidcore Resources plc.
Fresnillo (FRES LN) has released solid quarterly production results and although silver production of 12.2moz was down 1.7% YoY and flat QoQ, gold production was up strongly by 26% YoY and 7% QoQ to 230koz. FRES is therefore on track to meet annual guidance of 49-51moz silver and 775- 790koz gold.
This Morning’s News BHP Billiton (BLT LN) Fresnillo (FRES LN) Hochschild Mining (HOC LN)
Fresnillo PLC Hochschild Mining plc
This Morning’s News Fresnillo (FRES LN) VSA Metals Comment
This Morning’s News Fresnillo (FRES LN)
