Moody’s affirms Fresnillo’s Baa2 rating, outlook changed to stable

Investing.com -- Moody’s Ratings has affirmed Fresnillo plc’s Baa2 rating on its $850 million senior unsecured notes due 2050, while changing the outlook to stable from negative.

The rating agency cited easing pressures in Mexico’s operating and regulatory environment, along with Fresnillo ’s strong credit metrics and liquidity supported by high gold and silver prices.

Fresnillo’s Baa2 rating reflects its position as the world’s largest silver producer, substantial reserve base, and strong liquidity. The company maintains a dividend policy of distributing 33% to 50% of prior year’s net income and targets net leverage below 2x.

The rating is limited by Fresnillo’s relatively small scale, high operating costs compared to investment grade peers, concentration in precious metals, and exposure to Mexico’s operating environment.

On October 31, Fresnillo announced the acquisition of Canada’s Probe Gold Inc. for approximately $560 million. Probe’s main project, Novador, is expected to produce 255,000 ounces of gold annually with a mine life exceeding 12 years and All-In Sustaining Cost of $1,038 per ounce.

Moody’s views this acquisition as beneficial to Fresnillo’s business profile by reducing dependence on Mexico and providing access to resources in a country with a stable regulatory environment. However, the agency noted execution risks related to the construction phase, which won’t contribute to consolidated EBITDA until after 2029.

Fresnillo’s credit metrics are expected to remain strong through 2027, with Moody’s adjusted leverage below 1.0x and EBIT margin above 20%. The company’s operating costs stand at $1,337 per gold-equivalent ounce for the twelve months ended June 2025.

The stable outlook assumes Fresnillo will maintain strong credit metrics and liquidity while continuing to invest in current and new projects to keep production stable and reduce costs.

Moody’s indicated that a rating upgrade would require Fresnillo to maintain costs in the first quartile of the industry cost curve, Moody’s-adjusted EBIT above 23%, leverage below 2.0x, and strong liquidity. Geographic diversification would also be positive for the rating.

A downgrade could occur if the company’s cost position deteriorates, EBIT margin falls below 20%, leverage increases toward 2.5x, or liquidity weakens.

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