The world’s biggest diamond-miner, De Beers, has begun to see “signs of improvement” in the market, and expects the trend to continue for the rest of this year.

Demand for rough diamonds fell sharply in the fourth quarter of 2008, as cutters, polishers and retailers responded to the financial crisis by conserving cash and reducing inventory levels, instead of buying new rough stones.

The diamond-mining industry reacted quickly to the drop in demand, curtailing production and, in some cases, halting mines altogether.

De Beers, in which diversified miner Anglo American owns a 45% stake, has announced production cutbacks in South Africa, Botswana and Canada, and has also said it will cut jobs to lower costs.

In Botswana, mines owned and operated by the Debswana joint venture between De Beers and the government were temporarily halted for 50 days in February, although maintenance work continued on the assets during the stoppage.

De Beers announced that Debswana’s Jwaneng, Orapa and Letlhakane mines restarted operations last week, while the smaller Damtshaa mine and the Orapa number 2 plant will remain suspended until the end of 2009.

The first quarter of the year was “a challen- ging time”, De Beers Botswana chairperson Stephen Lussier said in a statement last week.

However, there are signs of improvement in the market and De Beers expects this to continue as the year unfolds, Lussier said.

“The economic downturn has impacted [on] all stages of the diamond pipeline, and, as retailers have lowered their level of purchasing, it has taken time for inventory to work through the pipeline, leading to a disproportionately negative knock-on effect on production.”

Earlier this month, Canadian diamond- miner and high-end jewellery retailer Harry Winston Diamonds said that it had begun to see some improvement in the pricing and demand for the diamonds produced at its Diavik mine, in Canada’s Northwest Territories, which it owns with Rio Tinto.

The market may have reached a bottom, CEO Robert Gannicott said at the time.

In the long term, economic growth in emerging markets will likely ensure that demand outpaces what are expected to be lower levels of demand supply, Lussier said last week.

In February, Anglo American revealed that it, together with two other De Beers shareholders – the Oppenheimer family and the Botswana government – had extended a $500-million loan to the diamond-miner to help it get through the difficult economic climate.

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