This FTSE 100 stock soared 900% — but after a 25% crash, is the rally over?
FTSE 100 investors who backed Fresnillo (LSE: FRES) two years ago have seen extraordinary gains. After nearly a tenfold surge, the share price has now tumbled around 25% from its highs. So is the party over â or is this crash the opportunity long-term investors have been waiting for?
Share price crash
I see two main reasons for the recent 25% drop in the minerâs share price. First is obvious: prices. Silver soared to $120 an ounce earlier this year, and even after falling to $79, itâs still more than three times higher than just a couple of years ago.
But the bigger story is production. Despite delivering record results this month, output fell â silver dropped 13.5% and gold 5%.
Looking ahead to FY26, silver production is forecast in the range of 42-46m ounces, before rebounding toward 50m ounces in 2027.
The company is also laying the groundwork for future growth. Capital expenditure is rising sharply, aimed at mine optimisation and development projects.
Exploration is accelerating, with six advanced projects now in the pipeline, two more than last year. And the recent all-cash acquisition of Probe Gold in Quebec instantly adds 10m ounces of gold to the resource base while giving the miner access to established infrastructure and skilled teams.
With a clear plan to grow resources and production, the minerâs long-term appeal now hinges on whether gold and silver prices can stay strong over the coming years.
Strategic asset
Silver and gold are no longer just investment plays â theyâre critical to national security. Both the US and China have classified silver as a âcritical mineralâ, and strategic buyers move quietly to secure it before itâs needed.
These governments, along with other major players, are quietly taking delivery of physical metal â not to trade on short-term price swings, but to secure supply for manufacturing, technology, and defence.
At the same time, global demand for EVs, solar panels, 5G, and advanced electronics continues to rise, while production struggles to keep pace. New mines take over a decade to come online, creating structural shortages. Even when prices spike or fall, accumulation by strategic buyers shows no sign of slowing.
For investors, the takeaway is clear: the market may appear volatile, but the underlying scarcity and strategic importance of these metals could support Fresnilloâs earnings for years, laying a foundation for long-term gains beyond daily price noise.
Rising costs
Even with strong metals prices, Fresnillo isnât immune to risks. The single largest cost for any miner is energy â from running machinery to transporting ore â and oil prices climbing back above $100 a barrel could quickly squeeze margins.
Other operational risks remain, too. Mining is a depleting business: ore bodies eventually run out, and replacing them isnât guaranteed. Environmental regulations, safety compliance, and capital-intensive projects like deepening shafts or expanding tailings dams can also push costs higher.
Bottom line
Fresnilloâs share price has soared over the past two years but has also hit âcrash territoryâ twice in the last 12 months, each drop exceeding 20%.
Volatility is inevitable, but conviction matters just as much as charts. With gold and silver expected to remain strong, I used this pullback to add to my holdings.
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Andrew Mackie has positions in Fresnillo Plc. The Motley Fool UK has recommended Fresnillo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
