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Gaborone - Debswana, the world's biggest diamond producing company by value, said on Thursday it would reduce output to match the prevailing level of demand for rough diamond on the back of the global financial crisis.
Debswana, which is a 50/50 joint venture between the government of Botswana and De Beers Group, produces approximately 33 million carats of the precious stones a year, which it sells to its marketing arm Diamond Trading Company for further exports to the global market.
The company said the credit crisis was affecting the mining sector worldwide and that Debswana is "not likely to be spared the adverse effects of this development".
"The global recession may impact demand for rough diamonds in the short-term and Debswana is fully prepared to reduce production to be consistent with the prevailing level of demand for new rough diamond for our clients," the company said.
The financial and economic crisis has led De Beers, 45% owned by mining group Anglo-American Plc <AAL.L), to cut the supply of rough diamonds. De Beers accounts for around 40% of global rough diamond supply.
"In this regard, Debswana is considering a number of options including the re-allocation of resources to projects that contribute to its growth and sustainability such as waste mining," said the statement.
Debswana said in future that the shortage of diamonds and rising demand would help the sector recover.
"Global diamond reserves are at an all time low, making diamonds rarer and rarer," the company said.
"The increasing supply shortages forecast for the next decade, coupled with increase in consumer demand, will support industry growth in the long term and enable the diamond industry to bounce back from the short term impact in the global recession," the company said.
The announcement follows Botswana's President Ian Khama's warning in his State of the Nation Address earlier this month that the main risk to Botswana was the crisis' potential effect on diamond exports.
Diamond export revenue averages a third of Botswana's total economic output. Botswana is the world's biggest diamond producer.
- Reuters