Fresnillo plc (FRES.L): BCG Matrix [Dec-2025 Updated]

Fresnillo's balance sheet hinges on a few high-margin Stars-Juanicipio, tech-facing industrial silver lines and the Pyrites Plant-fuelling growth while a reliable ring of Cash Cows (Herradura, Saucito, Fresnillo district and San Julian disseminated) bankrolls dividends and new projects; management now faces pivotal capital-allocation choices on Question Marks like Orisyvo, Rodeo and Guanajuato that could become the next growth engines or costly write-offs, while several Dogs (Noche Buena, Cienega, San Julian veins) demand winding down to stop cash bleed-read on to see which bets merit heavy investment and which require containment.

Fresnillo plc (FRES.L) - BCG Matrix Analysis: Stars

Stars - high-growth, high-market-share business units that require investment to sustain rapid expansion and capture value.

Juanicipio silver operation drives growth

The Juanicipio mine operates at its full 4,000 tonnes per day capacity throughout 2025 and contributes approximately 26% of Fresnillo plc's total silver production. It functions as the primary growth engine for the group amid a silver market experiencing a 14% annual increase in industrial demand. Juanicipio delivers an EBITDA margin in excess of 54% and a cash cost of $4.60 per ounce, reflecting superior profitability and low unit costs versus legacy assets. Total development CAPEX allocated to Juanicipio exceeds $420 million to secure a dominant position in the high-grade silver segment and to support processing, underground development and concentration improvements.

• Strategic advantages: high-grade ore, low cash cost, concentrated capex to secure market share.
• Key risks: sustaining throughput, metallurgical variability, commodity price volatility.

Industrial silver segment targets technology

The industrial silver segment is positioned as a Star driven by an 18% year-on-year increase in silver demand for electric vehicle components and 5G infrastructure and a 5% increase for other industrial uses. Fresnillo plc holds a ~6% share of the global primary silver market, making it a critical supplier to technology manufacturers. Industrial applications now represent nearly 45% of total silver revenue as demand outpaces jewelry and investment sectors. Specialized processing CAPEX has been increased by 15% to meet stringent purity and specification requirements from high-tech customers, with ROI for technology-focused extraction and refining lines reaching ~22% at a stabilized silver price of $28/oz.

• Revenue mix shift: industrial sales now the largest silver revenue driver.
• Operational focus: purity, traceability, long-term supply contracts with OEMs.

Pyrites Plant expansion enhances recovery

The Pyrites Plant in the Fresnillo district has become a Star by applying advanced leaching and recovery technology to historical tailings and low-grade pyrite concentrates. It contributes ~10% of the group's total gold production while operating in a recovery-technology market growing at ~9% annually. The Phase II expansion incurred CAPEX of $160 million and materially increased recovery rates across the district by enabling extraction from previously uneconomic material. The plant achieves an EBITDA margin around 48% since feedstock is largely waste material rather than newly mined ore. This unit supports maintaining high market share in silver and gold while benchmark gold prices remain at approximately $2,400/oz.

• Advantages: low incremental mining cost, improved ESG profile by processing legacy tailings, high margin cash flow.
• Operational priorities: scale-up of leaching circuits, metallurgical optimization, tailings reclamation permits.

Fresnillo plc (FRES.L) - BCG Matrix Analysis: Cash Cows

Cash Cows

The Herradura gold mine provides stability. The Herradura mine contributed roughly 52% of total Fresnillo gold volume in late 2025 and maintains an approximate 12% market share within the Mexican gold mining sector. As a mature asset in a low-growth gold production environment, Herradura generates robust free cash flow with an ROI exceeding 21%, supporting corporate dividends and funding exploration. Sustaining CAPEX requirements have stabilized at approximately $145 million annually, focused on maintenance rather than capacity expansion. The operation's All-In Sustaining Cost (AISC) is $1,180/oz, delivering healthy margins despite inflationary pressures on labor and energy.

The Saucito silver mine delivers volume. Saucito accounted for ~19% of the company's total silver revenue during the reporting year, operating in a mature silver market with a roughly 3% annual growth rate for traditional bullion. Annual production has leveled at ~12.5 million ounces of silver. The asset is mature, with a consistent EBITDA margin of 44%, sustaining liquidity to fund development of Question Mark projects. Sustaining CAPEX is approximately $85 million per year, reflecting a fully developed and optimized complex.

The Fresnillo district silver operations endure. The original Fresnillo mine continues as a key Cash Cow, contributing ~15% of group silver production and producing roughly 11.0 million ounces annually. It commands a significant share of regional output in a steady global silver demand environment. The mine posts an EBITDA margin of ~41% and limits CAPEX to essential infrastructure upgrades and San Carlos shaft deepening at approximately $110 million annually, preserving cash generation for corporate needs.

The San Julián disseminated ore body has transitioned to Cash Cow status. San Julián now contributes ~12% of total silver revenue and maintains a stable position in the silver-gold concentrate market. The operation achieves a steady-state throughput of ~6,000 tpd, sustaining an ROI near 18% and an AISC of $12.50 per silver equivalent ounce. Sustaining CAPEX has been reduced to ~$65 million annually, focused on maintaining current throughput and optimized logistics to ensure predictable cash flow.

• Collective Cash Flow: These Cash Cows generate the majority of free cash flow used for dividends, exploration, and funding Question Mark developments.
• CAPEX Focus: Sustaining CAPEX across Cash Cows totals approximately $405 million annually (Herradura $145m + Saucito $85m + Fresnillo $110m + San Julián $65m = $405m), reflecting maintenance-heavy spend profiles.
• Margin and Cost Resilience: Aggregate AISC and EBITDA margins indicate strong margin cushions versus spot price volatility; Herradura and Saucito are primary margin drivers.
• Strategic Use: Cash Cow cash is earmarked for dividend policy stability, targeted exploration near existing mines, and selective investment into higher-growth Question Mark assets.

Fresnillo plc (FRES.L) - BCG Matrix Analysis: Question Marks

Question Marks

The Orisyvo gold project targets growth and is positioned as a high-potential Question Mark within Fresnillo's portfolio. Estimated resource base is 9.6 million ounces of gold (inferred and indicated), with the global gold market growing at approximately 5% annually. Orisyvo currently holds 0% market share and contributes no revenue or EBITDA while in pre-development. Fresnillo has budgeted $35 million for advanced exploration and metallurgical testing in the near term to de-risk the project. Projected incremental production on successful development is estimated at ~160,000 oz Au/year. The required capital expenditure to move Orisyvo from Question Mark to Star is estimated at ~$550 million CAPEX, creating a significant capital allocation decision and a high capital-at-risk profile. Estimated payback metrics and ROI remain speculative until a final investment decision (FID); preliminary modelling indicates payback could be longer than 6-8 years under base case gold prices (~$1,900/oz), with NPV highly sensitive to gold price and grade conversion.

The Rodeo exploration project shows promise as another Question Mark. Rodeo is a greenfield site in Durango targeting high-grade gold and silver mineralization. It operates within a high-growth exploration sub-sector where new high-grade discoveries are uncommon, increasing strategic optionality if commercially viable ore is proven. Current contribution to group revenue is 0% and market share is nil. Fresnillo invested approximately $15 million in 2025 fiscal year for diamond drilling, geochemistry and environmental permitting activities. Geological results to date indicate several high-grade intercepts, but total reserve size and continuity remain unconfirmed. Development would likely require an estimated CAPEX of ~$300 million; project economics are highly conditional on eventual reserve size and metallurgical recoveries.

Guanajuato district exploration ventures are positioned as strategic Question Marks aimed at diversifying Fresnillo's silver base beyond Zacatecas. These ventures form part of a broader $160 million global exploration budget focused on identifying high-margin silver deposits. Currently the Guanajuato projects account for 0% market share and contribute nothing to the current-year EBITDA. Regional silver exploration investment is growing, with competitor investment expanding ~7% year-on-year in the region, heightening competition for high-quality targets. Conversion of inferred resources into proven reserves remains the pivotal determinant of ROI; as of December 2025 this conversion is unverified and the timeline to commercial production is uncertain.

Common characteristics across these Question Marks:

• Zero current revenue share and 0% market share for each project while in exploration/pre-development.
• High up-front exploration and development costs (Orisyvo $35M exploration + $550M CAPEX; Rodeo $15M exploration + $300M CAPEX; Guanajuato part of $160M program).
• High upside if resources convert to reserves: potential +160,000 oz Au/year (Orisyvo) and Herradura-comparable output potential (Rodeo).
• High uncertainty: resource conversion risk, metallurgical recoveries, permitting timelines, community engagement, commodity price sensitivity.
• Strategic options include continued phased exploration, JV/asset sale to de-risk CAPEX, or prioritised capital allocation contingent on positive drill results.

Risk and decision triggers to monitor:

• Positive infill drilling and resource upgrades (measured/indicated conversion rates).
• Metallurgical test results improving recovery assumptions and feed grades.
• Permitting progress and timelines (environmental/social license milestones).
• Commodity price scenarios (gold sensitivity analysis at $1,600/$1,900/$2,200 per oz).
• Availability of capital or partnering options to share ~$850-$1,150M combined development CAPEX across projects.

Fresnillo plc (FRES.L) - BCG Matrix Analysis: Dogs

Dogs - Noche Buena mine closure phase

The Noche Buena mine is classified as a Dog: operational life ended and in final reclamation. Current contribution to group revenue is 0.8% (down from a peak of ~12% during its major-gold years). Market share from this asset is negligible as corporate focus shifts to Juanicipio and Herradura. Operating cash cost escalated to USD 1,950/oz in the most recent period; when closure provisions and environmental liabilities are included, the unit registers a negative margin. Production fell by -85% YoY as ore was exhausted and milling activity ramped down. Corporate CAPEX allocation to Noche Buena is USD 0 (zero growth CAPEX), with maintenance CAPEX limited to statutory reclamation and safety works funded from closure reserves.

Key figures for Noche Buena:

Implications and near-term actions for Noche Buena:

• Complete staged reclamation and environmental monitoring funded from closure reserves.
• Redirect remaining operational cashflow to remediation and liabilities settlement.
• Cease all non-mandatory sustaining CAPEX; maintain only regulatory compliance spend.
• Decommission milling circuits and consider sale of residual equipment if valuation exceeds dismantling cost.

Dogs - Cienega maturing gold operations

The Cienega mine is trending toward Dog classification driven by falling ore grades and increased mining depth, pushing extraction costs higher. Current contribution to group gold revenue is approximately 4% and has declined steadily over three fiscal years (from 6.5% to 4.0%). District market growth is stagnant (0-1% annual growth), and Cienega's share of the Mexican primary gold output is contracting. EBITDA margin compressed to 12%, well below the group's average EBITDA margin of 35%. Recent sustaining CAPEX of USD 40M produced a negative ROI (estimated -15% to -20% on that tranche), prompting management to evaluate long-term economics and potential de-risking options.

Operational and financial snapshot - Cienega:

Strategic considerations and tactical responses for Cienega:

• Defer non-critical growth CAPEX; prioritize low-cost extension drilling only where clear reserve uplift metrics exist.
• Assess alternative mining methods or fleet optimization to reduce USD/oz by targeting cost savings of 20-30%.
• Model mine life extension vs. closure scenarios and adjust asset retirement obligation estimates accordingly.
• Consider joint-venture or partial divestment to transfer operational risk if remediation of economics is unlikely.

Dogs - San Julian Veins segment decline

The Veins segment at San Julian faces geological complexity and lower-than-expected silver grades, reducing its commercial viability. It now contributes roughly 3% of total silver production. The segment failed to meet targeted ROI of 15%; current ROI is negative to breakeven after capital and processing costs. Market preference has moved to large-scale open-pit and bulk underground operations; narrow-vein high-cost segments have lost competitive market share. The unit records an All-In Sustaining Cost (AISC) of USD 22/oz, nearly double the AISC of the Juanicipio Star asset (USD 11-12/oz), squeezing margins and prompting suspension of expansion CAPEX-only minimal maintenance spending continues until economic depletion.

San Julian Veins metrics:

Actions under consideration for San Julian Veins:

• Maintain only essential sustaining CAPEX; freeze growth projects.
• Re-evaluate reserve model and narrow-vein mining cost drivers to identify potential unit-cost reductions ≥30% required for competitiveness.
• Explore asset rationalization: mothballing, staged closure, or selective divestment of vein packages.
• Accelerate reclamation planning and provision updates to reflect lower production profiles and expected closure timing.