The Fresnillo (LSE:FRES) share price doesn’t do boring. The FTSE 100 precious metals miner has surged eightfold in two years — even after silver plunged 30% in a single day earlier this year. For most assets, that kind of drop would have killed the rally.

Now the company has posted record FY25 results. So investors face a simple question: is this surge built on solid foundations, or stretched too far?

FY25 results

The numbers are eye-catching. Adjusted revenue climbed 27.6% to $4.6bn, EBITDA surged 80.7% to $2.8bn, profit before tax almost tripled to $2.1bn, while earnings per share jumped more than fourfold year on year.

That translated into serious cash. The miner ended 2025 with a $1.9bn net cash position — up from just $458m a year earlier — and proposed a $950m dividend, the largest since listing and comfortably above its usual 50% payout policy.

But here’s the twist: production actually fell. Silver output dropped 13.5%, and gold slipped 5%, reflecting lower grades and the closure of San Julián DOB. In other words, the company didn’t grow by digging more metal out of the ground.

It grew because prices were higher and because costs were tightly controlled. Adjusted production costs fell 11%, helped by efficiencies and a weaker peso.

That’s operating leverage in action. When metals rise, profits don’t just increase, they accelerate.

The key question now is whether that dynamic can continue.

Supportive backdrop

Silver isn’t just a metal — it’s both money and machinery. While governments pile up on debt, central banks continue accumulating gold and silver as safe-haven reserves. At the same time, demand from electric vehicles, solar panels, 5G networks, defence systems and advanced electronics keeps climbing.

Even Washington and Beijing have now classified silver as an essential metal.

The problem? Supply can’t respond quickly. It can take more than a decade to bring a new mine online. When demand outpaces production like this, prices tend to find support.

That dynamic explains why silver could fall 30% in a single day earlier this year — and still rebound strongly. Volatility is part of the cycle. The structural forces underneath it are what matter.

Risks

Mining is a wasting business. Ore bodies deplete, and replacing them isn’t guaranteed. If Fresnillo fails to replenish reserves through exploration or acquisitions, long-term production could decline regardless of metal prices.

Environmental regulation and potential mine-closure liabilities may also increase costs over time. While today’s balance sheet is strong, sustaining growth in a capital-intensive industry requires continuous reinvestment — and that always carries execution risk.

What’s the verdict?

Gold and silver aren’t just cyclical trades. They sit at the crossroads of sovereign debt expansion, central bank diversification, and the global push toward electrification and advanced technology. Supply remains slow and capital-intensive, while demand is broadening.

This is where Fresnillo comes in. With ultra-low production costs and dual exposure to silver and gold, even modest price moves can drive disproportionate earnings growth. That operating leverage was clear in 2025.

The question isn’t whether metals will swing — they always do. It’s whether the structural forces behind them are strengthening.

I believe they are. That’s why I recently doubled down by acquiring more shares.