Fresnillo PLC: The Silver Leader Capitalizing on Green Tech's Rise

The energy transition is reshaping global demand for commodities, and among the metals critical to this shift, silver stands out. With its unparalleled conductivity and corrosion resistance, silver is a cornerstone of solar panels, electric vehicles (EVs), and advanced electronics. Enter Fresnillo PLC (LSE:FRES), the world’s largest primary silver producer, which is uniquely positioned to capitalize on this secular trend.

Why Fresnillo? Cost Leadership in a High-Demand World

Fresnillo’s dominance begins with its industry-leading cost structure. At its flagship Juanicipio mine (56%-owned), Fresnillo achieved an All-In Sustaining Cost (AISC) of $2.04 per silver ounce in Q1 2025—a staggering 67% below its annual guidance of $6.00–8.00 and among the lowest in global silver mining. This mine’s sub-$9 AISC (after by-product credits) places it in the lowest quartile of the global silver cost curve, ensuring profitability even during price volatility.

The company’s cost advantage stems from:
- High-grade reserves: Juanicipio’s silver head grades average 430 g/t, with richer zones exceeding 500 g/t.
- By-product synergies: Gold, zinc, and lead credits reduce effective costs, while Mexico’s established mining infrastructure minimizes capital demands.
- Operational efficiency: Record silver recovery rates (96% in Q1 2025) and optimized throughput (337,000 tonnes) amplify output without overextending budgets.

Silver’s Green Tech Demand Surge: Fresnillo’s Tailwind

The Silver Institute forecasts total demand to hit 1.2 billion ounces in 2025, with industrial demand surpassing 700 million ounces for the first time. Key drivers include:
1. Solar Energy: Each photovoltaic panel requires 20–30 grams of silver, and installations are projected to surpass 400 GW annually by 2030.
2. EVs and Advanced Electronics: Silver’s role in semiconductors, batteries, and ADAS systems is growing, with EVs using 50% more silver than internal combustion engines.
3. Energy Storage: Silver-based batteries are emerging as a breakthrough in grid-scale storage solutions.

Fresnillo’s production targets align perfectly with this demand. The company aims to produce 49–56 million silver ounces annually by 2025, with Silverstream (a new processing project) set to add 10 million ounces by 2026.

ESG Credentials: A Sustainable Play

While explicit ESG updates are sparse, Fresnillo’s operational strategy implicitly aligns with environmental goals:
- Energy efficiency: Investments in R&D and automation are reducing energy costs, which account for 50% of production expenses.
- Community engagement: As Mexico’s largest silver producer, Fresnillo’s long-standing presence in mining regions ensures local job creation and infrastructure development.
- Carbon footprint reduction: The shift toward high-grade reserves reduces energy-intensive processing, lowering emissions per ounce.

Risks to Consider

1. Commodity Volatility: Silver prices remain tied to macroeconomic cycles. A recession could dampen industrial demand.
2. Operational Hurdles: Equipment shortages and lower grades at mines like Ciénega pose near-term risks.
3. Regulatory Headwinds: Mexico’s evolving mining policies could increase compliance costs.

Conclusion: A Buy with a Multi-Year Horizon

Fresnillo’s $2.04/AISC at Juanicipio and its strategic focus on high-grade, low-cost assets make it a leveraged play on silver’s structural demand. With a 22% rise in silver prices in 2024 and deficits forecast for the fifth consecutive year, the company is poised to outperform.

Rating: Buy
Target Price: £5.50/share by end-2026 (based on $25/oz silver price and 2026 production guidance).

Investors seeking exposure to the energy transition should act now: Fresnillo’s cost discipline, reserve quality, and alignment with green tech demand make it a rare high-conviction, long-term investment in the mining sector.

Disclaimer: This analysis is based on publicly available data and does not constitute financial advice. Always conduct thorough due diligence before investing.