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Is Fresnillo (FRES:LSE) a good investment in the long term?

The debate about which asset is better – digital gold, aka Bitcoin, or gold – is finally over, for now.

Any keen reader of news would have seen screens of plunging prices in the digital markets lately. Worse still, crypto exchanges are in big trouble. FTX, led by former billionaire Sam Friedman, is probably insolvent and in need of a multi-billion rescue. This is causing a contagion run in many other exchanges. Who’s next (see our Coinbase share price analysis here)? Nobody knows. Spooked, investors and speculators stampeded out of crypto into ‘safer’ assets like gold and silver.

Compare silver’s price move below against that of BTC. The former appears to have completed a multi-month base breakout by closing above the $21 resistance, while BTC sinks into 18-month lows. Silver’s relative performance is bullish.

Silver versus Bitcoin

Unsurprisingly, silver’s rally dragged up most other precious metal shares, including that of Fresnillo (FRES) – the world’s largest silver miner. Fresnillo first listed in 2008, and the Mexico-based company is currently listed in the LSE as a FTSE 100 component. Its market cap is a sizeable £6.3 billion. The main assets of Fresnillo are silver and gold mines located in Mexico.

Fresnillo mines

Source: Fresnillo

But, is Fresnillo a good investment? Yes, but on one condition. Don’t overpay for the stock. Why? Because the mining industry is a cyclical one. investors should buy the sector when sentiment is bearish; and sell when it is bullish. There appears to be a ceiling (£20) and floor (£6) on Fresnillo’s long-term chart.

When is the best time to buy Fresnillo shares (LON:FRES)?

The best time to buy Fresnillo’s shares is when the entire precious metal complex is rising and when the stock market is not in a severe bear market.

Look at Fresnillo’s chart below and compare that to the silver price trend in the lower panel:

Fresnillo share price (FRES:LSE) versus silver

Fresnillo’s share price tends to rally when silver metal prices are rising. Three such instances were noted in the past decade: During 2010-11, 2016-17 and 2020-21. In each bull run, Fresnillo’s share price appreciated by more than 100%.

View another way, Fresnillo’s share is a “geared play” on silver. The best time to buy Fresnillo is when its share price breakouts of a base.

Is the (LON:FRES) Fresnillo share price overvalued or undervalued at the moment?

This is a matter of opinion at the moment.

For Fresnillo, its production of raw metal ores is steady; whilst its all-in margin remains healthy (see below). Moreover, there are some development projects in the pipeline (eg Juanicipio). By most statistics, Fresnillo appears to be a profitable miner (1H profit is $141 million).

Fresnillo (FRES:LSE) margin

Source: Fresnillo

But at the price-earnings ratio in excess of 30 and a dividend yield of just 2.6 percent, Fresnillo may seem a little pricey. That said, the stock market can value a miner highly for years. I would not be too perturbed by this.

Why has Fresnillo’s share price risen recently?

Fresnillo is doing relatively well these days because of three reasons:

  • Silver and gold are rallying into new multi-week highs
  • A rebound in stock markets
  • Stable production of silver and gold in Fresnillo mines.

More importantly, downside surprises were absent in Fresnillo’s recent report (released October 26). Hence, Fresnillo’s share price is rallying healthily along with silver.

What is Fresnillo’s share price prediction (LON:FRES)?

Until a few weeks ago, the market was soaked in negative sentiment. Investors were expecting very hawkish monetary policies; and gold and silver prices were on the cusp of a downside breakout.

That’s why most analysts are still putting a ‘Hold’ recommendation on Fresnillo.

Will Fresnillo’s base breakout change this? Perhaps. In markets, prices often run ahead of the fundamental reports. Should Fresnillo break above the psychological 1,000p ceiling, analysts may start to revise up their price targets.

Fresnillo share price (FRES:LSE) price prediction

Source: Financial Times

Date Broker name New Price Old price target New price target
26-Oct-22 Berenberg Bank  Hold 745 800 800
21-Oct-22 Barclays  Equal-weight 718 770 825
14-Oct-22 JP Morgan Cazenove  Neutral 702.2 800 750
06-Oct-22 Berenberg Bank  Hold 810 700 800
03-Aug-22 Citigroup  Underperform 676.6 620 560
03-Aug-22 Barclays  Equal-weight 676.6 770 770
Averages 721.4 743.3 750.8

How to buy Fresnillos shares (LON:FRES)

To buy shares in Fresnillo (LON:FRES), you need a trading or share dealing account. Follow these three steps if you want to buy shares in Fresnillo:

  1. Decide if you want to buy Fresnillo shares in the short-term or invest in the long-term
  2. Compare share dealing and trading fees in our comparison tables
  3. Choose which broker is right for you and open an account

How much does it cost to buy Fresnillo shares (LON:FRES)?

Buying one LON:FRES share costs 733.56p. However, as well as the 733.56p cost of buying the shares you will also have to pay stamp duty, dealing and custody account fees for holding your shares with a broker. You also have to consider the difference between the bid price (the price at which you sell shares) and the offer price (the price at which you buy shares). These fees vary depending on what sort of account you open, and with what broker.  You can compare the different costs associated with the different types of trading and investing accounts in our comparison tables below.

It’s also important to remember that share prices can move quickly, for example, the current LON:FRES share price is 733.56p which is a change of -1.44 or 0.2% from the last closing price of 733.56 with 542,853 shares traded giving LON:FRES a market capitalisation of £n/a. The most recent daily high has been 735 and daily low 712.76. The LON:FRES share price 52 week high has been 996.8 and the 52 week low 637.2. Based on the most recent LON:FRES share price opening of 733.56, the current LON:FRES EPS (earnings per share) are 0.3 and the PE (price earnings ratio) is 24.31.

Pricing data automatically updates every 15 minutes

Fresnillo share price FAQ (LON:FRES):

The answers to our frequently asked questions by people interested in buying Fresnillo shares about Fresnillo’s share price are automatically updated every 15 minutes.

What is the live Fresnillo share price?

The current Fresnillo share price is 733.56p

How much has Fresnillo’s share price moved today?

Fresnillo’s share price has moved -1.44p or 0.2% today.

How much was Fresnillo’s share price yesterday?

Yesterday, Fresnillo’s share price closed at 733.56p

How many Fresnillo shares are traded each day?

There were 542,853 shares traded in Fresnillo yesterday.

What is Fresnillo’s market capitalisation (market cap)?

Fresnillo has market cap of £5,405,521,758

What has been Fresnillo’s share price most recent daily high?

Fresnillo’s most recent daily high has been 735p

What has been Fresnillo’s share price most recent daily low?

Fresnillo’s most recent daily low has been 712.76p

How high has the Fresnillo share price been in the last year?

The Fresnillo share price 52 week high has been 996.8p

How low has the Fresnillo share price been in the last year?

The Fresnillo share price 52 week high has been 637.2p

What is Fresnillo’s earnings per share?

Fresnillo’s current earnings per share (EPS) is 0.3

What is Fresnillo’s price-earnings ratio (PE)?

Fresnillo’s current price-earnings ratio (PE) is 24.31

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