The ASX 200 stocks attracting the biggest broker upgrades: Alumina, Silver Lake

Analysts were busy upgrading ASX 200 resource companies last week as copper prices crossed US$4.5/lb for the first time since June 2022, gold scored its fourth consecutive record weekly close and several base metals including iron ore, aluminium and nickel continued to recover from recent lows.

Nickel (red), copper (green), gold (orange) and iron ore (blue) | (Source: TradingView)

Alumina received the largest consensus upgrade last week, although the stock remains largely pegged to its suitor Aloca. The merger is 100% scrip based (Alumina shareholders will be entitled to receive 0.0285 shares of Alcoa for each Alumina share held) and currently subject to relevant government, regulatory and shareholder approvals.

Alumina entered into a scheme implementation deed with Aloca in early March – so the stock is expected to trade in line with the NYSE-listed Aloca. Aloca shares have rallied more than 30% since February, largely reflect a roughly 20% rally in aluminium prices over the same period.

Alumina 12-month price chart (Source: Market Index)

Biggest ASX 200 Upgrades

'Target price' is an aggregate of Refinitiv broker target prices. Target % Chg compares target prices between Friday 12 April and Friday 17 April 2024

Gold prices might be ripping higher but adverse weather conditions in WA have cut the production outlook for several miners including Regis Resources (ASX: RRL), Gold Road (ASX: GOR) and Westgold (ASX: WGX). Within this context, it was surprising to see Silver Lake topping March quarter expectations.

"Silver Lake reported 3Q24 sales of ~64,500 ounces, 20% about our 53,800 ounce estimate. The strong YTD performance of the Australian operations sees production for the first three quarters at 85% of the production guidance mid-point and 81% of the top end of guidance," Macquarie analysts said in a note dated 8 April, adding that the company is "very comfortably on track for guidance."

The company is currently working its way through a merger with Red 5 (ASX: RED). "Completion of the Scheme with RED (expected completion in June 2024) is now the key catalyst for Silver Lake," the analysts said.

Red 5 12-month price chart (Source: Market Index)

Evolution Mining had one of the biggest share price rallies this quarterly reporting season, up 7.5% on Wednesday, 17 April. The numbers for the March quarter were largely in-line with analyst expectations, and the company reiterated its full-year guidance. Many analysts noted the potential for robust cash flow generation, buoyed by higher commodity prices and the company's substantial exposure to copper, which accounts for roughly a third of its earnings.

However, there were some concerns about the company's ability to meet the lower end of its FY24 production guidance, especially considering the challenging start to the first half of the year. Analysts raised doubts about the company's need to achieve record quarterly production at most of its assets in the fourth quarter of FY24.

Interestingly, analysts from JPMorgan, CLSA and Macquarie downgraded their ratings (mostly from Buy to Neutral) but raised their target prices.

Evolution 12-month price chart (Source: Market Index)