South Africa's Royal Bafokeng Platinum reported a 20 percent drop in first-half profit on Tuesday, hit by higher operating costs, and said it expected further costs increases.

RBPlat, a black-controlled, mid-tier producer of platinum group metals (PGMs), said diluted headline earnings per share for the six months to end-June totalled 105 cents from 132 cents a year earlier.

The company said last month it expected headline EPS of between 95 and 110 cents.

Headline EPS is the key measure of profitability in South Africa and strips out certain one-off and non-trading items.

Production for the first-half was steady at 142,100 ounces of "4E platinum group metals", which includes platinum, palladium, rhodium and gold.

RBPlat said it expects full-year production to remain at levels similar to those achieved in 2010. The company produced 288,100 ounces of 4E PGMs in the full year to December 2010.

The company also said operating costs remained a key challenge and were expected to rise at a higher rate for the remainder of the year, due to higher inputs costs and wage increases.

The company reached a three-year wage deal with the National Union of Mineworkers. The increases per year ranged from 7 to 10 percent, depending on the category of worker.

The company did not declare an interim dividend.

RBPlat shares have fallen nearly 17 percent so far this year, compared with a 6 percent fall in the Johannesburg's All-share Index.

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