Investing.com -- S&P Global Ratings has revised its outlook for Fresnillo (LON: FRES ) PLC, a mining subsidiary, from negative to stable, and affirmed its ’BBB’ issuer credit and issue-level ratings. The move mirrors a similar action taken on the company’s parent firm, Industrias Peñoles S.A.B. de C.V.
Fresnillo has maintained strong profitability margins of over 40% and has seen increased cash generation due to a lean cost structure, higher market prices, and committed production sales. The stable outlook reflects S&P’s view that Fresnillo will continue to deliver strong leverage metrics and cash generation while supporting its parent company for the next 12 to 24 months.
On May 21, 2025, S&P Global Ratings revised its outlook on Industrias Peñoles to stable from negative due to improved leverage prospects. Peñoles has strengthened its EBITDA through cost efficiencies and higher prices on precious metals. The group is expected to maintain a leverage of below 1.5x over the next two years.
Fresnillo has maintained steady leverage metrics due to consistent production rates and stronger prices. It has kept adjusted net debt to EBITDA ratios below 1.0x, and in some years, at 0.0x due to its strong cash position. S&P forecasts that the adjusted net debt to EBITDA will remain close to 0.0x in 2025 and 2026.
The value of precious metals has increased throughout 2024 and the first quarter of 2025 due to current economic uncertainty and changes in U.S. trade policies. Large economies are increasing demand for precious metals like gold and silver, which is pushing up prices.
However, commodity mineral prices, including zinc, lead, and copper , dropped an average of 5%-10% during the same period. Economic uncertainty has paused high-investment projects across major industries, leading to higher inventories while mining companies reduce production.
Fresnillo, viewed as a core subsidiary of Peñoles, accounted for about 53% and 82% of Peñoles’ consolidated revenue and EBITDA, respectively, in 2024. Fresnillo’s production is committed to its parent company, thereby reducing colocation risks.
Fresnillo has a robust pipeline, including four main projects expected to come on-stream over the next several years. Most of these projects involve gold as the main mineral, which will bring exponential growth between 2028 and 2030. These projects will take over the San Julian mine, as it has reached the last years of life.
S&P could lower the ratings on Fresnillo if it did the same on the ratings on Peñoles, or if the company posts debt-to-EBITDA ratios above 1.5x and free operating cash flow (FOCF) to debt below 40%, consistently. The ratings could also be lowered if unforeseen events hamper production volumes, negatively affecting top-line results, or if Fresnillo undertakes aggressive investments and requires additional debt.
On the other hand, S&P could raise the ratings in the next 12 months if it were to raise the ratings on Peñoles, triggering the same rating action on the subsidiary.
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