The Zimbabwean platinum industry is facing a difficult time accommodating costs, with analysts identifying an essential need for a devaluation of the domestic currency.

With prices in the industry currently rising at an annual rate of 130 per cent, industry observers say projects are coming under increasing pressure to turn a profit.

Many, such as Ian Saunders, president of Zimbabwe's Chamber of Mines, say that intervention in the currency trajectory is now crucial.

"The need for a devaluation is a no-brainer,' he told Bloomberg.

Citigroup's Fidelis Madavo, a platinum analyst in Johannesburg, agreed, saying that "they need to devalue" because input costs are so out of kilter.

The economic environment in Zimbabwe has proved a key sticking point for development in the domestic platinum industry, with the world's second largest platinum producer, Implats, among the firms leading the way.

Implats finance director David Brown said that the currency was "important for all exporters', and stressed that mining houses were facing a growing dilemma in operating there.

"With inflation in triple figures, the gross margins have been squeezed quite significantly," he said.

However, with the rate of annual inflation in Zimbabwe on the way down - down to about 127 per cent in February 2005 from 623 per cent in January last year - there is some encouraging news.

Analysts say they key now is for the government to agree to devalue the currency and to create the right economic circumstances to capitalise on the country's abundant natural resources.