The FTSE100 2025 was a successful year – so far the indicator has increased by 18%. But this performance pales in comparison Fresnillo (LSE: FRES), which is up an astonishing 321% over the same period. With gold prices remaining above $4,000 and silver nearing $60, can the Mexican precious metals miner continue to rally through the end of the year?

New growth

Just over a month ago, shares fell more than 20% in the days following a massive after-hours sell-off in gold prices in New York. I argued at the time that this was a sporadic opportunity to consider for long-term investors willing to look beyond short-term volatility. So far, that bet seems to have paid off.

However, gold is no longer the leader – it is silver. The spot price is currently at $55, an all-time high. Silver jumped 38% in just three months, outperforming all other major asset classes, including the Magnificent 7 technology stocks.

Game used

These miners essentially rely on leveraged bets on silver and gold.

The company’s all-in sustaining cost (AISC) is approximately $17 per ounce of silver and $2,000 per ounce of gold, which means every ounce mined generates a huge cash margin.

The company is expected to produce 50 million ounces of silver and 600,000 ounces of gold over the next few years. Multiply this by the margin per ounce and it becomes clear that the company is generating staggering cash flow.

Unsurprisingly, the interim dividend has increased by 225%, leaving plenty of room for high payouts if production stays on track.

The table below shows next year’s revenue forecast based on the company’s AISC data and production estimates. It shows how much cash a company can generate to support future dividend growth.

For long-term investors, this is a textbook example of commodity leverage: petite changes in metal production or prices translate into huge returns for shareholders, both in terms of share price and potential dividends.

Risks to consider

No investment is risk-free. Cash flow and share price are very sensitive to fluctuations in silver and gold prices, which can change rapidly due to global economic conditions or investor sentiment.

Geopolitical and regulatory risks in Mexico, where most of the mines are located, could disrupt operations or raise costs. Mining is extremely energy and labor intensive, and both costs have been increasing over the last few years.

A enormous exploration portfolio brings uncertainty – up-to-date discoveries may underperform or take years to develop, which may disappoint investors. Operational problems, environmental challenges or unforeseen mine disruptions may also impact production. All of these can affect future dividends.

Conclusion

With debt levels rising in Western economies and continued elevated inflation, many investors are looking beyond established bonds and cash.

Precious metals offer a unique advantage: they benefit from central bank purchases, act as a hedge against inflation, and carry no counterparty risk, meaning their value is not dependent on the liabilities of any bank, company or government.

I fully expect continued share price volatility. However, with high margins and disciplined operations, Fresnillo offers exposure to a market beyond anyone’s control. That’s why I recently added to my position.