Last year’s best-performing FTSE 100 stock, Fresnillo (LSE: FRES), delivered a staggering 410% price gain, comfortably outpacing every other constituent in the index.
The primary driver behind that extraordinary rally was a dramatic surge in precious metals prices, with gold repeatedly hitting record highs throughout the year.
Central banks continued purchasing gold in significant volumes, investors sought safe-haven assets, and expectations mounted that interest rates would eventually move lower.
Silver also enjoyed an exceptional year, benefiting from its precious metal status as well as growing industrial demand linked to renewable energy and electronics sectors.
Fresnillo sits at the centre of this story as the world’s largest primary silver producer and a major gold miner, meaning rising commodity prices flowed directly into its profits.
Crucially, costs did not increase at the same pace as revenues, meaning much of the higher income translated into stronger margins and meaningful earnings growth across the business.
EBITDA rose by 80.7% to £2.07bn, with net cash reaching £1.41bn, significantly strengthening the balance sheet and giving the company considerable financial flexibility.
However, 2026 has brought a sharp reversal of fortune, with Fresnillo shares down 27% so far this year, turning a hypothetical £5,000 January investment into just £3,650 today.
Management has also reduced its production outlook for both silver and gold this year following changes to mine plans and operational sequencing, adding further pressure on the stock.
Gold and silver prices have fallen from their peaks, which negatively impacts Fresnillo’s earnings potential in much the same way that last year’s rally provided such powerful support.
Despite the pullback, there are reasons to remain constructive on the outlook, with elevated geopolitical tensions providing a potential catalyst for precious metals prices to recover.
The recent decline in gold and silver prices also creates a more attractive entry point for new investors who may have missed the exceptional 2025 run entirely.
That said, 2025’s performance was clearly an outlier, and it would be unrealistic to expect Fresnillo to replicate such returns within a single calendar year again in the near term.
The company has very little control over the prices it receives for gold and silver, and this fundamental characteristic of mining stocks must be kept firmly in mind when assessing risk.
For investors without existing commodity exposure, a small allocation to Fresnillo could be worth considering, though the cyclical nature of mining stocks demands patience and a long-term perspective.