UBS lowered the firm’s price target on Fresnillo to 540 GBp from 625 GBp and keeps a Neutral rating on the shares. The firm notes Fresnillo has underperformed materially over the last 7 years, with the stock underperforming the gold price by 100% and the GDX index by 70%. In UBS’s view Fresnillo underperformance is justified by structural deterioration of its assets that has resulted in declining production, sustained cost inflation and FRES no longer has credible near-term growth options. Ahead of FY23 results, the firm remains cautious as it believes consensus remains too low on costs for FY24 and sees a risk of further downgrades to 3-year production outlook.
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