Shoppers browse the window display of a De Beers store in London, UK, on May 19, 2009.

De Beers, the world’s largest diamond company, posted the biggest drop in sales of unpolished and uncut gems since at least 1974 after demand crumbled as the US, Europe and Japan slid into recession.

This year’s output will drop by about half from 2008, said De Beers, which mined 48.1 million carats last year. Rough-diamond prices slid about 50 percent on average between October and mid-March, said RBC Capital Markets analyst Des Kilalea. Second-quarter confidence among wealthy Americans rose by a record, signaling the worst of the recession is over for sellers of luxury goods, researcher Unity Marketing said on July 23.

“The second half will be better,” Gareth Penny, managing director at De Beers, the world’s largest diamond company, said Friday on a conference call.

‘Much more optimistic’

The gem producer declined to provide a date for comparing the magnitude of the first-half drop. The plunge is the biggest in the records of Johannesburg-based Allan Hochreiter Ltd., said James Allan, founder of the corporate-finance company.

“I am much more optimistic than I was in the first quarter,” Allan said. “We are not out of the woods yet.”

Penny also said De Beers, which is 45 percent-owned by Anglo American Plc, has yet to use $500 million borrowed in February from shareholders to help cope with the slump in gem demand. The diamond producer has no plans to sell shares to raise funds, he added.

“We feel we’ve got the facilities and enough cash going forward,” Penny said. “We are not out of the woods yet.”

The loss exceeded the $112 million estimate of Johann Pretorius, an analyst at Nedcor Securities in Johannesburg.

Anglo fell 8.5 pence, or 0.4 percent, to 1,929.5 pence at 11:42 a.m. in London trading, paring Thursday’s 5 percent gain.

Bank talks

Prices of rough diamonds have advanced almost 30 percent since the middle of March, according to RBC’s Kilalea, who is based in London. Traders “have been willing to pay higher prices,” Peter Davey, head of mining research at Ambrian Partners Ltd., said from London Friday, adding that prices were still below last year’s peaks.

De Beers is in talks with banks to renew a $1.5 billion term loan facility that expires next March. Discussions are expected to close in the second half, the company said. Net debt was $4.06 billion at the end of the first half.

Namdeb, a joint venture between Namibia’s government and De Beers, temporarily halted production from the beginning of April. Debswana, the joint venture between De Beers and Botswana’s government, suspended operations in February.

De Beers has cut 4,700 jobs from all of its operations, Penny said, adding that some workers may get their jobs back when mining production rises.

De Beers, which traces its history back to 1888, is 40 percent-owned by the Oppenheimer family. Botswana controls 15 percent.

Source: Bloomberg