Precious Metals

Market Overview

As a major silver and gold mining company, we are exposed to the market dynamics common to the global precious metals industry. In addition, given that the majority of our people and operations are located in Mexico, country specific factors can affect our strategy and outlook. Mexico however, has a long-established history of mining going back more than 500 years, underpinned by its vast geological potential, skilled workforce, robust mining laws and mechanisms for creating shared value.

Our top line performance and that of our peers is driven by precious metals prices, which reflect traditional supply and demand dynamics that arise from the industry's production capacity in relation to consumption, which in turn is driven by market sentiment. However, market sentiment has become significantly less predictable in response to geopolitical and macroeconomic variables in recent years. We are now exploring opportunities to apply the expertise and knowledge we have gained over the years to new locations in Mexico as well as elsewhere in Latin America.


In silver, we consider our peer group to be other primary silver mining companies, notwithstanding the fact that close to two thirds of global output is derived as a by-product of gold, lead, zinc and copper mines. Irrespective, Fresnillo has long been the top global producer of silver, both by-product and primary, and we aim to maintain that leadership position going forward. Demand for silver is primarily driven by fabrication (industrial applications, photography, jewellery etc) and investment; either directly through coins and bullion or via Exchange Traded Funds (ETFs). Mine output provides the majority of silver supply, while recycling and scrap amount for most of the remainder, with government sales a minor and unpredictable source.  


We are also Mexico’s largest gold producer, with our peers being other global gold mining companies producing similar levels of annual production. For gold, demand is largely driven by its status as a safe haven, with consumers and investors buying the metal to protect their savings and purchasing power and as a means to diversify away from the US dollar. In some markets gold has strong cultural allure, with China and India leading the demand for gold jewellery. Mine output accounts for the majority of the global gold supply, with the remainder coming from recycling.

Precious Metals

Market Size and Position

In Silver, our peer group are other primary silver miners, although much of global silver production is derived as a by-product of gold, lead, zinc and copper mines. Our strategy has always been to invest across all price cycles, while maintaining a strong balance sheet. We have long been the top global producer of silver, both by-product and primary, and we aim to maintain our leadership position amongst global producers.

AR20 Peer Group Silver Gold

AR17 Our Markets Silver Demand By SectorAR17 Our Markets Gold Demand By Sector 

Benchmarking our performance in the industry

To assess our competitiveness within our peer groups, we look primarily at the following two factors, neither of which are materially influenced by market dynamics;

  1. Average cash cost per metal: We track all-in sustaining costs (AISC) in accordance with the guidelines issued by the World Gold Council, as a means to monitor current production costs and preparations for future production; however, we continue to use the traditional cash cost metric as we believe it is more representative of the production costs incurred during the period, eliminating distortions caused by non-recurring sustaining costs. We define cash cost as the total cash cost (cost of sales plus treatment and refining charges, less depreciation), less revenues from by-products, divided by ounces of silver or gold sold. Our strategic objective is to remain in the lowest quartile of the cost curves.

  2. Quality and quantity of our mineral assets: Cash costs provide a picture of a company’s current ability to extract its resources at a reasonable cost, but longterm competitiveness is dependent on the actual size of the resource base. A strong indicator of future production is the ability to convert measured, indicated and inferred resources into proven and probable reserves. We continuously invest in exploration across price cycles to expand and strengthen our asset base, using strict cost criteria to ensure that extraction will be economically viable even in low metal price environments. As a result, our total resources and reserves have grown at a fairly steady pace and we have a range of organic growth projects that extend across the prospecting, drilling and resource definition stages, ensuring that we can benefit from the next cyclical upswing.

Related Links

The Silver Institute »
World Gold Council »