Futures & Commodities

Commodities bounce back—sustainable rally or just a false dawn?

Precious metal price trend encouraging: Lonmin CEO
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Precious metal price trend encouraging: Lonmin CEO
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We’ve done what we’ve promised we' do: Lonmin CEO
These were a great set of results: Vedanta Resources CEO
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An uptick in prices across a range of commodities in 2016 may have been welcomed by miners and traders, but one CEO has told CNBC that he's not getting carried away just yet.

"They always say 'a swallow doesn't make a summer'," Ben Magara, the CEO of London-listed platinum miner Lonmin said.

"We have seen dollar prices improve from a low in January to where they are now so the trend is quite encouraging ... we have seen that rand low price in November and it continues on that upward trend. Indeed, it's early days a swallow doesn't make a summer but it's very helpful."

A pumpjack sits on the outskirts of town at dawn in the Permian Basin oil field on January 21, 2016 in the oil town of Midland, Texas.
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Magara's comments add to a similar view by Tom Albanese, the chief executive of Vedanta Resources. He told CNBC last week that the recent respite from the commodities rout is a "bit overdone" and investors should watch out for further retracement. He also noted that investors were not getting out their chequebooks just yet in his industry.

Platinum prices are up nearly 18 percent year-to-date after a painful couple of years for the miners. Gold is up 20 percent since the start of the year, silver up 24 percent, and mirrors the gains seen across the whole commodity spectrum.

Capital Economics predict, however, that price rises could continue throughout the rest of the year. A new research note on Friday suggested China's manufacturing activity will pick up in the second half of this year which should prompt a recovery in the price of copper. It also said that precious metals could be buoyed by increased demand in India and China after some temporary disruptions.

Lonmin cut costs in the face of these price pressures last year and reported on Monday a core profit of $36 million for the first half, compared to a loss of $6 million for the same period last year. Shares of Lonmin climbed 16 percent on Monday.

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Magara told CNBC that market sentiment had been negative in the commodity space but noted that the underlying had been favorable.

"For the last three years we have seen annual deficits in platinum between demand and supply so the fundamentals have been there ... I surely hope that that market sentiment is beginning to ease as we have seen the lows of January and possibly a potential bottom and then for it to come to move forward," he said.

"What has been crucial for us at Lonmin is really to manage what we can control, we have cut costs."