Fresnillo (LSE:FRES) has led the FTSE 100 higher in the last year, but I’m staying well away in my own portfolio. The stock might climb further, but it’s not one for me.

With gold and silver prices where they are, the company looks beautifully positioned for the near future. But I don’t think that’s a good enough reason to consider buying the stock as an investor. 

Asset base

The main thing that separates one mining company from another is the quality of its asset base. And there’s a lot to like about Fresnillo from this perspective.

There are two main axes of evaluation – cost and reliability. On the first point, the FTSE 100 company’s vertical integration and scale gives it a cost advantage over competitors.

On the second, having mines located in areas like Mexico, Peru, and Chile has historically been beneficial. In general, these have been relatively stable and supportive jurisdictions.

These are genuine strengths of Fresnillo that investors are entitled to take very seriously. Realistically, though, they’re not the reason the stock has climbed 400% in the last 12 months.

Gold and silver prices

The main reason the stock has surged is that gold and silver prices have rocketed higher. Gold has gone from $2,981 per troy ounce to $4,999 and silver is up 145% since February 2025.

That has an outsize effect on mining profits. If costs stay largely the same, the additional revenue generated by higher prices drops straight through to the bottom line as net income.

The trouble is, the reverse is also true – if gold and silver prices fall, for whatever reason, the lower prices immediately cut into margins as well as sales. And that’s the risk right now.

Are they going to? Forecasting commodity prices isn’t my speciality (and that probably ought to be enough by itself to keep me on the sidelines) but I can see reasons for caution.

What happens next?

There’s absolutely no guarantee prices are going to fall in the near future. With silver, in particular, demand has outstripped supply over the last few years and this looks set to continue.

One reason for this is that silver is mostly produced as a by-product of other metals. That makes it hard for supply to adjust as miners also need to find outlets for other base metals.

The big risk right now, though, is the US dollar. Resilient inflation has led to speculation of higher interest rates, fueled partly by the latest minutes from the US Federal Reserve.

That could be a big problem for silver and gold prices, which are denominated in dollars. So if fears about a weakening dollar cause investors to change course, there could be a real issue.

Wrong time

The time to buy shares in companies is when the market is underestimating them. But I think it’s hard to see that this is plausible with Fresnillo right now. 

It’s no accident that gold and silver prices have surged recently. But it’s also not clear that the forces that have propelled them higher are going to continue over the long term.

If they do, then Fresnillo shareholders stand to do very well. But with the stock trading where it currently is, I think the risks mean I can find better opportunities elsewhere right now.