Soaring production costs incurred by Zimbabwe Platinum Mines Limited (Zimplats) are threatening to demean Zimbabwe's competitive edge as a low-cost platinum producer.

A subsidiary of Zimplats, Makwiro Platinum Mines Ltd, has incurred a $5.4 million increase in production costs after massive rises in electricity and fuel charges in the four months to June 2003.

The stabilising price of platinum delivered a corresponding increase in revenue, and extra costs continue to be offset to some degree by the generally lower cost of platinum production in Zimbabwe.

The shallower location of the country's platinum resources offers a commercial advantage over South Africa, where platinum is found at a much deeper level.

Even so, such advantages are threatened by the worsening economic situation in Zimbabwe, which has already hit many producers hard.

'It will definitely erode our competitive edge, which is why we have made proposals to the government with a view to addressing the issue', David Matyanga, an economist with the Chamber of Mines, told Mining Weekly.

But despite the difficulties, industry insiders continue to take a long-term view of the platinum market, with Impala Platinum recently offering to buy out minority Zimplats shareholders in order to fund further exploration.