Fresnillo plc (LON:FRES) has announced its interim results for the six months to 30 June 2025.
Octavio Alvídrez, Chief Executive Officer, commented:
“I am pleased to report a strong operating and financial result in the first half of 2025. Our profitability has significantly improved, driven not only by favourable precious metals prices but also by a consistent operational performance and rigorous cost discipline. This has led to a substantial free cash flow generation. Our balance sheet remains robust, with ample liquidity, allowing us to declare an interim dividend of US20.8 cents per share in line with our policy. On the operational front, gold production saw impressive growth through optimised operations, particularly at Herradura, while silver production was partially impacted by the planned closure of San Julián DOB, and the lower contribution from the Fresnillo mine and the Silverstream. Looking ahead, we have increased gold production guidance for the year to reflect the continued strong performance at Herradura, and we have adjusted silver production guidance to reflect the end of Silverstream contributions following the buyback agreement with Peñoles. In terms of equivalent silver ounces, our 2025 guidance remains unchanged. These results highlight our steadfast focus on productivity, cost control, and creating lasting value for our shareholders.”
First half highlights
Financial highlights (1H25/1H24 comparisons)
· Adjusted Revenues[1] of US$1,982.9m, up 27.1%; mainly due to higher gold and silver prices, and increased volumes of gold sold, partly offset by a lower volume of silver sold.
· Revenues of US$1,936.2m, up 30.1%; driven by the increased adjusted revenues and lower treatment and refining charges.
· Adjusted production costs[2] of US$673.5m, down 20.2% over 1H24 primarily due to the devaluation of the Mexican peso vs. the US dollar, the net decrease in volumes of ore processed, mainly at Fresnillo, Herradura, and Ciénega, the decrease in adjusted production as a result of the closure of San Julián DOB, and the positive impact of efficiencies and cost reduction initiatives, mainly at Herradura.
· Cost of sales of US$913.2m, down 16.7% mainly as a result of the lower adjusted production costs and decreased depreciation, partly offset by the less favourable effect of the variation in change in inventories.
· Gross profit and EBITDA[3] of US$1,022.9m and US$1,102.1m, up 160.7% and 102.5%, respectively.
· Profit from continuing operations before net finance costs and income tax of US$860.8m, up 266.0%.
· Following operational and financial difficulties impacting silver production and the long-term viability of the Sabinas mine, and an evaluation of the options available, Peñoles has agreed to buy back the Silverstream Contract for US$40.0m, which results in a non-cash Silverstream loss, net of taxes, of US$133.0 million. See further information below.
· Profit for the period before income tax of US$660.3m, up 137.7%.
· Income tax expense and mining rights of US$192.8m, up 20.4%
· Profit for the period of US$467.6m, up 297.3% from US$117.7m.
· Basic and diluted EPS from continuing operations of US$53.4 cents per share, up 399.1% from US$10.7 cents per share.
· Adjusted EPS[4] of US$71.5 cents per share, up from US$4.4 cents per share in 1H24.
· Cash generated from operations, before changes in working capital, of US$1,103.6m, up 101.4%.
· Free cash flow[5] of US$1,026.1m in 1H25 (US$187.4m in 1H24).
· Strong balance sheet with cash and other liquid funds as at 30 June 2025 of US$1,823.0m (31 December 2024: $1,297.8m).
· Interim dividend of 20.8 US cents per share, totalling US$153.3m (1H24: US$47.2m).
Operational highlights (1H25/1H24 comparisons)
As disclosed in the 2Q25 production report on 23 July 2025:
· First half attributable silver production of 24.9 moz (including Silverstream), down 11.7% vs. 1H24 mainly due to the cessation of mining activities at San Julián DOB, a decrease in volume of ore processed, lower ore grade and decreased recovery rate at Ciénega and lower ore grade at Juanicipio.
· First half attributable gold production of 313.8 koz, up 15.9% vs. 1H24 mainly due to the optimisation of mine operation standards for better selectivity, which led to higher gold ore grade, and the additional gold contents recovered from the oxidised high grade ore deposited at the Herradura leaching pads. This was partly offset by the lower ore grade and decreased volumes of ore processed at Saucito and Ciénega, and the lower volume of ore processed at Fresnillo.
· Ongoing focus on safety, cost control, and productivity.
Highlights for 1H25
| US$ million unless stated | H1 25 | H1 24 | % change |
| Silver production (koz) * | 24,882 | 28,169 | (11.7) |
| Gold production (oz) | 313,840 | 270,872 | 15.9 |
| Total revenues | 1,936.2 | 1,488.3 | 30.1 |
| Adjusted revenues1 | 1,982.9 | 1,560.2 | 27.1 |
| Cost of Sales | 913.2 | 1,095.9 | (16.7) |
| Gross profit | 1,022.9 | 392.4 | 160.7 |
| Adjusted production costs2 | 673.5 | 844.2 | (20.2) |
| EBITDA3 | 1,102.1 | 544.2 | 102.5 |
| Silverstream effects | (190.1) | 66.5 | N/A |
| Profit for the period | 467.6 | 117.7 | 297.3 |
| Cash generated by operations before changes in working capital | 1,103.6 | 547.9 | 101.4 |
| Basic and Diluted EPS (US$)4 | 0.534 | 0.107 | 399.1 |
| Basic and Diluted EPS, excluding post-tax Silverstream revaluation effects (US$) | 0.715 | 0.044 | 1525.0 |
| Dividend per ordinary share (US$) | 0.208 | 0.064 | 225.0 |
* Silver production includes volumes realised under the Silverstream contract
1 Adjusted revenues are the revenues shown in the income statement adjusted to add back treatment and refining charges. The Company considers this is a useful additional measure to help understand underlying factors driving revenue in terms of volumes sold and realised prices
2 Adjusted production costs are calculated as cost of sales less depreciation, profit sharing, hedging, change in inventories and unproductive costs. The Company considers this a useful additional measure to help understand underlying factors driving production costs in terms of the different stages involved in the mining and plant processes, including efficiencies and inefficiencies as the case may be and other factors outside the Company’s control such as cost inflation or changes in accounting criteria.
3 Earnings before interest, taxes, depreciation and amortisation (EBITDA) is calculated as profit for the year from continuing operations before income tax, less finance income, plus finance costs, less foreign exchange gain/(loss), less revaluation effects of the Silverstream contract, less other operating income plus other operating expenses and depreciation.
4 The weighted average number of shares for H1 2025 and H1 2024 was 736.9m. See Note 8 in the Interim Consolidated Financial Statements.
Commentary on the Group’s results
Operating results
First half attributable silver production of 24.9 moz (including Silverstream) decreased 11.7% vs. 1H24, mainly due to the cessation of mining activities at San Julián DOB, a decrease in volume of ore processed, lower ore grade and decreased recovery rate at Ciénega and lower ore grade at Juanicipio.
First half attributable gold production of 313.8 koz, increased 15.9% vs. 1H24 mainly due to the optimisation of mine operation standards for better selectivity, which led to higher gold ore grade, and the additional gold contents recovered from the oxidised high grade ore deposited at the Herradura leaching pads. This was partly offset by the lower ore grade and decreased volumes of ore processed at Saucito and Ciénega, and the lower volume of ore processed at Fresnillo.
First half attributable by-product lead production decreased 5.2% vs. 1H24 mainly due to the lower ore grade and decrease in volumes of ore processed at Fresnillo and the cessation of mining activities at San Julián DOB, partly mitigated by the higher ore grade at Saucito.
First half attributable by-product zinc production decreased 3.2% vs. 1H24 mainly due to the cessation of mining activities at San Julián DOB and the lower ore grade, decreased recovery rate and lower volume of ore processed at Ciénega, partly mitigated by the higher ore grade at Saucito.
We are sad to report the tragic loss of two of our colleagues in separate fatal incidents, one at Ciénega in June and another at Juanicipio in July. We have redoubled our efforts to instill a safety culture, focusing on identifying preventive measures, training, and maintaining stringent adherence to our safety policies to provide a safer environment for our workforce and contractors.
Our safety indicators improved in 1H25, with the Total Recordable Injury Frequency Rate (TRIFR) and the Lost-time Injury Frequency Rate (LTIFR) decreasing to 6.98 (7.59 in FY 2024) and 4.40 (4.75 in FY 2024), respectively.
Peñoles to buy back Silverstream Contract
Fresnillo has agreed terms for Peñoles to buy back the Silverstream Contract (or “Agreement”) in exchange for US$40 million.
Over the lifetime of the Agreement, Peñoles has paid Fresnillo US$882 million for the approximately 52 million payable ounces of silver produced by the Sabinas mine. The Agreement was signed in 2007 and Fresnillo paid an initial consideration of US$350 million.
Background
On 12 November 2024 Fresnillo announced it had received notification from Peñoles, the owner and operator of the Sabinas mine, that the mine was experiencing operational and financial difficulties impacting silver production and the long-term viability of the mine and consequently of the Agreement. Under the Agreement, Peñoles has the unilateral right to close the mine or indefinitely suspend the mine operations. In such a situation, only a very modest payment, as outlined below, would be due to Fresnillo.
Fresnillo and Peñoles immediately set up a working group to identify a realistic and sustainable solution for the Sabinas mine and the Agreement. Strategic options for the mine considered at the time, given the financial profile of the mine whereby revenues did not cover its operational costs nor the obligations imposed by the Agreement, were: i) changing the terms and conditions of the Silverstream Agreement (increasing the strike price), ii) the transfer of ownership of the mine to Fresnillo (becoming the owner and operator) and other ownership structures, in lieu of the Agreement, or iii) immediate suspension of mine operations for an indefinite period.
In January, following a period of thorough analysis, and based on the information provided by the Sabinas team, including related to the most recent reserves report at the time and cut-off grade, Fresnillo’s technical team, together with Peñoles, defined a new mine plan and sequencing programme. This included mine development, ore volumes, ore grade, recovery rates, sustaining capex, operating costs and cashflow amongst other factors, while also taking into account potential blue sky growth prospects within the Sabinas licence area.
Fresnillo reported a revaluation loss of the Agreement, net of its amortisation and before taxes, of US$182.3 million in its 2024 accounts (published on 4 March 2025), valuing the Agreement at US$258 million before taxes, which was consistent with the expected value of the Sabinas mine at that time.
More recently Fresnillo received an updated reserves report from Peñoles for the Sabinas mine, certified independently by SRK Consulting, which used a rigorous criteria, including higher cut-off grades and analysis of new infill exploration data. This showed a significant reduction in reserves from previous reports (more than 50%). In light of this new information, a revised mine plan and sequencing programme were drawn up which materially impacted future production and free cash flow projections. It became clear the mine was facing more significant challenges than the January review identified.
Subsequently, using the same modelling exercise to value the Sabinas mine, with validation from SRK Consulting, which included the working assumption of Fresnillo as operator being able to increase operating efficiencies by c.35%, through better equipment utilisation, lower absenteeism and other cost savings, Fresnillo, together with Peñoles, determined a new value of the Sabinas mine to be in the range of US$47 to US$50 million (excluding Silverstream settlement payments), substantially below previous estimates. Based on the above analysis and after careful consideration, Fresnillo does not see any realistic prospect of increasing the expected value of the mine in this way nor the possibility of continuing with the Agreement in its current form.
The Board of Fresnillo considered all of the strategic options and determined there to be considerable operational, regulatory, community and financial risk with taking ownership of the mine and concluded that the risk/reward profile was not in line with the Company’s interests, while a mine closure or indefinite suspension of mine operations would result in an immediate end to payments under the Silverstream and only a deferred payment of approximately US$8.6 million due in 2032.
This narrowed the strategic alternatives considered by both parties to: a one-off payment (buyback price) to end the Agreement, or immediate mine closure or indefinite suspension of mine operations, which would have a material impact on the different stakeholders of the Sabinas mine, including workforce and communities. Following negotiations, both parties agreed that US$40 million would be a fair buyback price for ending the Agreement, whilst removing any associated future risk, and provide optionality to Peñoles to avoid a disorderly closure, which could also have indirect adverse consequences for Fresnillo, or suspension of the mine and continue to operate it if they so choose.
Rationale for the Buyback
The decision to end the Agreement therefore follows a comprehensive review by Fresnillo and its independent advisers SRK, of the ongoing operational and financial issues at the Sabinas mine. After carefully considering the strategic options, the Board has concluded that ending the contract through this buyback transaction is the best option for the Company and its shareholders.
The Independent Directors of Fresnillo have received financial advice from BofA Securities in relation to the consideration payable by Peñoles to Fresnillo to buy back the Silverstream agreement.
The Independent Directors believe the valuation offered by the buyback of the Silverstream Agreement is fair and in the best interests of Fresnillo shareholders given the considerable challenges identified.
Therefore, post period end, Fresnillo will receive a one-off payment (buyback price) of US$40 million from Peñoles to buy back the Silverstream Agreement and has written down the value of the Agreement held on the balance sheet to US$40 million as of 30th of June, creating a non-cash US$133.0 million loss after tax and net of the period’s profit amortisation in the 2025 half year income statement. The cash effect will be an inflow of US$40 million in 2H25.
This buyback will result in no production from the Silverstream being recorded in the second half of 2025 nor in subsequent years, though guidance remains unchanged, with 2025 silver production expected to be in the lower part of the range.
Financial results
Total revenue increased by 30.1% to US$1,936.2 million in 1H25, mainly due to higher gold and silver prices and increased volumes of gold sold, partly offset by the decrease in silver ounces sold.
The average realised silver price increased 21.9% from US$27.6 per ounce in 1H24 to US$33.7 per ounce in 1H25, while the average realised gold price rose 45.8%, from US$2,171.9 per ounce in 1H24 to US$3,167.6 per ounce in 1H25. The average realised zinc by-product price remained at US$122.3 cents per pound, while the average realised lead price decreased to US$88.6 cents per pound, down 7.8% vs 1H24.
Adjusted production costs[6] decreased by 20.2% to US$673.5 million in 1H25. The US$170.6 million decrease resulted primarily from the devaluation of the Mexican peso vs. the US dollar, the net decrease in volumes of ore processed, mainly at Fresnillo, Herradura and Ciénega, the decrease in adjusted production as a result of the closure of San Julián DOB, and the favourable impact of efficiencies and cost reduction initiatives, mainly at Herradura.
Depreciation decreased 20.6%, primarily due to the closure of San Julián DOB, and to a lesser extent, decreased amortisation of capitalised mining works and lower depletion factors at Saucito and Ciénega.
These favourable effects were partly offset by the less favourable effect of the variation in the change in inventories in 1H25.
The factors mentioned above resulted in a 16.7% decrease in cost of sales compared with 1H24.
The increase in revenues, together with the decrease in cost of sales, resulted in a 160.7% increase in gross profit to US$1,022.9 million in 1H25.
Driven by an increase in gross profit, EBITDA increased by 102.5%, with EBITDA margin rising from 36.6% in 1H24 to 56.9% in 1H25. Similarly, profit from continuing operations before net finance costs and income tax increased from US$235.1 million in 1H24 to US$860.8 million in 1H25.
The total Silverstream effect recorded in the 1H25 income statement was a net loss of US$190.1 million, before taxes (see “Peñoles to buy back Silverstream Contract” section below).
Despite the Silverstream effect loss, profit from continuing operations before income tax increased 137.7% from US$277.8 million in 1H24 to US$660.3 million in 1H25.
Income tax expense for the period was US$122.2m, up 36.5% from US$89.5 million in 1H24. The effective tax rate, excluding the special mining rights, was 18.5% (1H24: 32.2%), which was below the 30% statutory tax rate. This variance resulted from the revaluation of the Mexican peso/US dollar spot exchange rate on the tax value of assets and liabilities and the effect of the inflation rate (Mexican Consumer Price Index) that impacted the inflationary uplift of the tax base for assets and liabilities.
Profit for the period increased from US$117.7 million in 1H24 to US$467.6 million in 1H25, a 297.3% increase half-on-half as a result of the factors described above. Profit due to non-controlling interests increased 89.0% to US$73.8 million, reflecting the profit generated at Juanicipio, where MAG Silver owns 44% of the outstanding shares. Accordingly, the profit attributable to equity shareholders of the Group was US$393.8 million, a 400.7% increase half-on-half.
Excluding the effects of the Silverstream, profit for the period increased from US$71.2 million to US$600.6 million, up 743.5%.
Cash generated by operations before changes in working capital increased by 101.4% to US$1,103.6 million, mainly as a result of the higher profit from continuing operations generated in the year.
Other proceeds included US$149.5 million from the sale of MAG Silver shares previously held by Fresnillo.
Capital expenditure in 1H25 totalled US$157.9 million, a 7.3% decrease over 1H24. Investments during the period included mine development and stripping, purchase of in-mine equipment, construction of a leaching pad at Herradura, the deepening of the Jarillas shaft at Saucito and investments in tailings dams.
Other uses of funds during the period were dividends paid of US$501.0 million (US$31.0 million in 1H24), income tax, special mining rights and profit sharing paid of US$255.4 million (US$71.4 million in 1H24), and dividends paid to non controlling interests in subsidiaries of US$59.4 million (US$ nil 1H24).
Fresnillo plc continued to maintain a solid financial position during the period with cash, cash equivalents and short-term investments of US$1,823.0 million as of 30 June 2025, increasing 40.5% versus 31 December 2024 and 163.8% versus 30 June 2024.
Interim Dividend
The Board of Directors has declared an interim dividend of 20.8 US cents per Ordinary Share totalling US$153.3 million, which will be paid on 17 September 2025 to shareholders on the register on 15 August 2025. The dividend will be paid in UK pounds sterling unless shareholders elect to be paid in US dollars. This interim dividend is higher than the previous period due to the increase in profit in 1H25, and remains in line with the Group’s dividend policy. This decision was made after a comprehensive review of the Group’s financial situation, ensuring that the Group is well placed to meet its current and future financial requirements, including its development and exploration projects.
As previously disclosed, the corporate income tax reform introduced in Mexico in 2014 created a withholding tax obligation of 10% (including to foreign nationals). The 2025 interim dividend will be subject to this withholding obligation.
Outlook
Attributable silver production guidance for 2025, and expected production for 2026 and 2027, have been adjusted for the Silverstream buyback, with no further Silverstream contribution from 2H25 onwards.
Silver production guidance for 2025, and silver production expectations for 2026 and 2027, for all other operations remain unchanged.
2025 gold production guidance has been increased to reflect the better performance at Herradura. 2025 lead and zinc production guidance remain unchanged, as well as gold, lead and zinc production expectations for 2026 and 2027.
| PREVIOUS GUIDANCE 2025 | UPDATED GUIDANCE 2025 | EXPECTED 2026 | EXPECTED 2027 | |
| Attributable silver production, incl. silverstream (moz) | 49.0 to 56.0 | 47.5 to 54.5 | 45 to 51 | 45 to 51 |
| Attributable gold production (koz) | 525 to 580 | 550 to 590 | 515 to 565 | 535 to 595 |
| Attributable lead production (kt) | 56 to 62 | 56 to 62 | 54 to 59 | 51 to 57 |
| Attributable zinc production (kt) | 93 to 103 | 93 to 103 | 85 to 95 | 93 to 103 |
| Silver eq. (moz)1 | 91 to 102 | 91 to 102 | 88 to 98 | 90 to 101 |
Exploration expenses for 2025 are expected to be c. US$190 million.
Capex for 2025 has been revised from US$530 million to US$450 million primarily due to delays in development and the construction of ventilation robbins at Saucito and the installation of the conveyor belt at Juanicipio, the resequencing of sustaining capex and through extending the life of current in-mine equipment.
Analyst Presentation
Fresnillo plc will be hosting a webcast presentation for analysts and investors today at 9:00am (GMT). A link to the webcast will be made available on Fresnillo’s homepage: www.fresnilloplc.com or can be accessed directly here:
https://kvgo.com/IJLO/Fresnillo_1H25_Interim_Results
For those unable to access the webcast, a conference line will also be provided, please pre-register here:
https://www.netroadshow.com/events/login?show=833d4ea7&confId=84777
