Fresnillo share price buoyed by surge in silver price
Fresnillo rallies as silver leaps higher
Silver's surge has helped bolster Fresnillo's embattled share price. The stock has rallied 25% in the past two weeks, providing a much-needed boost after the company's dismal full-year results. The higher silver price bodes well for Fresnillo, given its status as a major silver miner.
Fresnillo reported a 50% drop in operating profit to $142 million for 2023 due to higher operating costs. The company cited currency fluctuations that added over $100 million to costs, as well as a significant $22 million hit from the theft of 20,000 ounces of gold from one of its mines.
Despite hitting its production guidance at the low end for 2023, Fresnillo saw major increases in all-in sustaining costs across its operations, including 19% at the Herradura gold mine and 79-93% at its Fresnillo and Saucito silver mines.
The company slashed its dividend in line with its payout policy as profits declined. While the Mexican government's potential ban on new open-pit mining permits adds risk, Fresnillo is proceeding with $440 million in growth capital spending planned for the current year. Analysts expect Fresnillo's operating profit to rebound to $477 million in 2024, which could further buoy the stock if projections hold true.
Fresnillo share price – technical analysis
2023 was a great year for many shares across the globe, but miners were left out, and Fresnillo was not immune from the falls.
The share price enjoyed a good end to 2022, rallying 57% from the lows of July, but this turned around dramatically from January 2023. The shares peaked in the first two weeks of the year and then slumped throughout the next 14 months, losing over 50% by the time it hit the pandemic lows around 220p.
But the surge in silver prices has proved to be a boon for the shares, which have enjoyed a rally of 25% since the middle of March.
The gains have carried the price back to the 200-day simple moving average (SMA), which it has not touched since April 2023. In the short-term, further gains will target the late-January high at 548p, and beyond this lies strong resistance around 600p, which marked a peak in September and December.
