The De Beers diamond company said it plans to cut $1.5 billion in operating and capital expenditures in 2009, Reuters reported.



The diamond exploration company said it will achieve a positive interim and full year bottom line despite slashing diamond output by 90% in the first quarter, according to the Reuters report.



The diamond market, hammered by the global downturn, is slowly improving but De Beers is pushing forward with a plan to slash 2009 operating and capital costs by $1.5 billion, David Prager, director of communications, told Reuters.



“We've definitely seen signs of recovery in the diamond market, but we're talking about first half numbers and it's certainly no surprise that at least the first quarter of the first half was historically difficult,” he said in a telephone interview.



“It won't be negative... clearly there'll be a drop, but I don't think it will be dramatic... maybe some people will even be surprised because it's better than they thought.



“The company will be profitable this year and obviously that's critically important.”



De Beers expects operating costs to slide by 47% this year and has already cut staff numbers in London by a quarter to 300 in the first quarter, Mr. Prager said.



The heavy cost cutting would leave the group in a strong position for the future as recovery takes hold.



According to the Reuters report, demand is stronger in China than elsewhere and interest is ramping back up in the key US jewelry market, which accounts for around half of global diamond jewelry sales.



“Obviously things aren't back to normal and people are still cautious, but we're certainly not in the place we were even in March,” he said.



Sales of engagement and wedding rings have held up during the downturn and research has shown that people are delaying, not cancelling other diamond purchases, Mr. Prager added.



“We expect to see in the second half a further return in demand for diamonds, and then moving into 2010, more of a return to normal diamond trading conditions. All the signs point to a progressive recovery.”



The total diamond turnover at the “sights” in March/April, May and June was triple the level of those in December, January and February, said the report.



The increased demand may also spur a further rise in output in the second half after the heavy cuts early in the year that saw the group's Debswana unit in Botswana shut down completely, cutting first quarter output by 91%, the report said.



Botswana is back in production and the Namibian mines restarted this month. Full year output was forecast to fall 50%, but he declined to provide a figure for the first half.

Mr. Prager confirmed that De Beers was in talks on renewing its $1.5 billion (US) loan facility due March, 2010, and that it had agreed a waiver on loan covenants. Reuters Loan Pricing Corp quoted a banking source as saying on Wednesday that De Beers had secured a waiver on $3 billion of its existing loans at the end of last week.

“Those discussions are going on now and they're going well... They hope to have the bigger news, about the loan discussion outcome, later in the year, within a few months.”