The Fresnillo (LSE: FRES) is back in focus today (8 April), emerging as one of the standout movers in the FTSE 100. After a six-fold surge in 2025 followed by a bruising 30% decline in recent months, the question now is whether sentiment is beginning to turn again for one of the index’s most extreme cyclical performers.

Macro reset

Over the past few weeks, many investors have been puzzled by the lack of strength in precious metals following heightened geopolitical tensions in the Middle East. In fact, prices have been relatively subdued.

Now, with a temporary ceasefire in place, metals are beginning to move higher again. So what has actually been driving the volatility?

Part of the explanation may lie in positioning. When silver surged to around $120 before falling sharply by 30% in a single session, a significant amount of speculative excess was flushed from the market. That kind of move tends to reset positioning and remove froth.

But beneath the surface, the broader macro backdrop remains largely unchanged. US debt has continued to climb, moving beyond $39trn, while the dollar has been gradually weakening over the past year.

Historically, a softer dollar tends to be supportive for precious metals as global investors seek alternative stores of value.

Silver story

Beyond the short-term noise, the more important driver for silver is the depth and breadth of industrial demand.

This is no longer a single-sector story. Silver now sits inside a wide range of critical technologies — from advanced electronics and data infrastructure to defence systems, EVs and renewable energy components. In many of these applications, there’s no simple substitute without a loss of efficiency.

What matters more, however, is the supply side.

New production cannot respond quickly. Developing a mine is a slow, capital-intensive process that can take well over a decade from discovery to full output. Even when prices rise sharply, output does not adjust in real time.

That creates a structural imbalance: demand is increasingly diversified and growing, while supply remains rigid. In fact, the market has spent multiple recent years in deficit, with demand consistently running ahead of new supply.

This is why price volatility can look extreme in the short term, yet the underlying market can still tighten over time.

Risks

Fresnillo is not immune to structural risks, even in a strong metals environment. The most immediate pressure point is energy costs, which represent the largest component of a miner’s cost base.

Recent volatility across energy markets is likely to lead the industry to increase hedging activity in future. This could potentially lock in a higher long-term cost base.

As always, mining remains capital-intensive, cyclical, and sensitive to both input costs and operational execution.

What’s the verdict?

The key question now is whether the worst of the sell-off is over and whether gold and silver have found a level of support after recent volatility. That remains uncertain.

However, Fresnillo’s latest results highlight a very different point: even at current prices, the business is generating substantial cash flow and record dividends.

This is a classic high-volatility, high-leverage miner. Prices will swing sharply, but the underlying cash engine is already working. For investors willing to tolerate the volatility, it remains a stock worth considering.