De Beers does not expect any recovery in demand for diamonds until Christmas next year at the earliest and is planning to cut production drastically.
The world's biggest rough diamond producer is scrambling to scale down its business as consumers cut their spending on luxury goods and diamond cutting houses struggle to finance their purchases of rough gems.
"We are going to significantly reduce production levels to align them with levels of demand," Stephen Lussier, executive director for external and corporate affairs, said on the fringes of a mining conference in Cape Town. "There's no point digging a diamond out of the ground when you don't have a client ready to buy it."
Mr Lussier refused to put a number on the cutbacks.
Some analysts say recent auctions of diamonds - which do not trade on exchanges like other commodities - have seen prices paid for lots falling by as much as 50 per cent. Diamond industry experts have reported that De Beers' latest sale of rough diamonds in January raised $100m, compared with $600m in January 2008.
Until recently, mining executives had hoped to see some recovery in demand for diamonds later this year, but Mr Lussier's comments point to a more prolonged downturn.
Chaim Even-Zohar, a consultant and industry veteran, did little to raise the spirits of the executives and investors at the conference by predicting that demand for rough diamonds will fall by between 59 per cent and 63 per cent this year.
The US, which is feeling the brunt of the global recession, normally buys about half of all polished diamonds sold.
Mr Lussier told the Financial Times that exploration would suffer, particularly in the Democratic Republic of Congo. But De Beers would endeavour not to close any of its mines.
The mystique of their product has not made diamond miners immune to the problems affecting almost all commodity producers, with the exception of some gold miners.
Many companies are mothballing mines and curtailing exploration to conserve cash as prices tumble.
Mr Lussier said diamond markets in China and India were growing fast and would match US demand by the end of the next decade.
De Beers has pushed back its results to February 20, to be announced alongside those of its parent, Anglo American.
Copyright The Financial Times Limited 2009
