De Beers cuts diamond production by 40 per cent

De Beers, the largest producer of rough diamonds in the world, is cutting production by as much as 40 per cent to save $1.5 billion in operating costs this year.

This was key to keeping the company profitable through 2010, after which we are expecting a recovery in diamond demand, said Stuart Brown, finance director of the diamond giant.

The industry's problems were triggered by a global drop in demand for luxury items of all kinds, including gemstones.

The company, which mines 40 per cent of the world's diamonds, said it has closed its flagship mines in Botswana and its two new Canadian mines, whose costs left the company with heavy debt, had lowered production after they opened in August.

Brown said, ''trading conditions are tough but, because we saw it early and took dramatic steps around the business, we're in a position to weather trade in 2009 and 2010 without recourse to shareholder funds."

Analysts expect that in the year to October, consumer demand for diamonds will drop by about 15 per cent, creating a ''ripple effect'' in the supply chain that will cut rough diamond demand by 62 per cent.