JOHANNESBURG (miningweekly.com) -– Rough diamond prices were already too low to cover all the costs incurred by some diamond producers, but a drop in the price and demand for the commodity would likely become even worse before any improvement would be seen.

Financial services firm RBC Capital Markets on Thursday said that this was the clear message delivered during the London Mines & Money conference held earlier this week.

This was further evidenced by a number of diamond companies cutting output and halting exploration programmes, said RBC.

The firm asserted that there would be little hope of any significant improvement in the price of diamonds until "well into 2009".

Production cutbacks from diamond giants De Beers and Alrosa, and possibly even Rio Tinto, was expected to benefit the diamond market, however, a lack of liquidity would continue to negatively impact on the sector.

RBC noted that diamantaires were unable to raise credit, which had resulted in a deterioration in indications of demand for De Beers' December sight, leading producers to cancel planned sales before the year-end.

The firm expected further output cuts to be made, especially by the junior miners.

Aim-listed diamond producer Kopane Diamond Developments had placed its Satellite plant at the Liqhobong project, in Lesotho, on care-and-maintenance earlier this week, stating that diamond prices had declined by between 30% and 50% in the past two months.

It would conserve cash and focus on advancing the appraisal and development of the Liqhobong Main Pipe project to take advantage of a recovery in diamond prices in future.

Similarly, Aim-listed Petra Diamonds had started an operational review of its Helam and Star fissure mines, in South Africa, earlier this week, saying it could potentially place the mines on care-and-maintenance.

RBC reported that Botswana diamond-junior DiamonEx had been forced into a government-guaranteed loan following lower-than-expected price indications, while Aim-listed Kimcor had sold its small diamond operations as a result of low demand, prices and no access to funds.

Further, De Beers was, according to RBC, believed to be talking to its government partner in Botswana about curtailing output, following Gem Diamonds' announcement of output cuts in Australia and Indonesia.

Gem Diamonds had also halted exploration and bulk sampling project in the Democratic Republic of Congo and in the Central African Republic.

Diversified miner BHP Billiton had also halted some of its exploration projects.