The Fresnillo share price gains after 2024 profits soar. Is it time to invest in silver demand?

The Fresnillo (LSE: FRES) share price perked up when the market opened Tuesday (4 March) on the back of a big boost in 2024 full-year revenue and earnings. At the time of writing, it’s up 3.4%. And we’re looking at a 25% rise so far in 2025 for the world’s largest primary silver producer.

Silver production for the year was unchanged, with gold output up just 3.4%. So it’s really all about rising precious metals prices. The silver price rose 21% in 2024, and it’s up almost another 10% so far in 2025. Gold has performed similarly, up 40% since the start of 2024.

CEO Octavio Alvídrez acknowledged the impact of prices, speaking of “a solid financial performance for Fresnillo in 2024, underpinned by higher precious metal prices, operational discipline, and a continued focus on cost efficiencies.”

He added: “Our adjusted revenue grew by 26.9% to US$3.64 billion, while EBITDA more than doubled to US$1.55 billion.”

The bottom line’s complicated by tax issues related to Fresnillo’s Silverstream agreement with Peñoles of Mexico. But excluding those effects, Fresnillo reported a 17.4% rise in earnings per share.

More to come?

Fresnillo’s production guidance for 2025 indicates a slight slowdown for its two key metals. The company says it expects attributable silver production of between 49 and 56 million ounces of silver, after recording 56.3 million ounces in 2024. Gold guidance suggests between 525,000 and 580,000 ounces, down from 2024’s 631,573 ounces.

Even with that, forecasts show EPS rising strongly in the next few years. And it could be enough to drop the price-to-earnings ratio to under 13 in 2025 and 2026.

The question is, does that make the Fresnillo share price look cheap?

Global outlook

If there’s one positive thing we can say about the tragic global situation, it’s good for precious metals prices as investors seek a hedge against risk. But silver’s more than just that, as it’s in demand for industrial uses too. It’s used in making solar panels, and in a wide range of consumer electronics. And I don’t see demand for either of those dropping off soon.

I could easily see another strong couple of years for silver and gold prices. But profits for miners can be very cyclical in the long term, and I’d need to think forward further than 2026. But that’s not easy.

I’m also wary of what’s been going on with Fresnillo’s Silverstream partnership. So I’d need to dig deeper into that before I considered buying. And maybe wait and see another year’s progress first.

Tempting

The biggest attraction I see is that relatively small percentage rises in metals prices can bring about higher percentage rises in profits. Because of that gearing effect, I think investors who are bullish about silver and gold might do well to consider Fresnillo shares.

The down side though, is that metals price declines can lead to bigger percentage profit falls. It’s a sector for those who can stand volatility, I’d say.

This post was originally published on Motley Fool