De Beers is rocked by a 99% slump to £1.8m

Diamonds have lost their sparkle. De Beers, the world's top miner of the gems, today said its half-year profits plunged 99% from £192 million to £1.83 million.

Sales of untreated diamonds slumped 57% after De Beers' major markets in the US, Europe and Japan slid into recession. Although the firm has London jewellery stores in the Royal Exchange, Westfield and Harrods and on Old Bond Street, it makes most of its money by selling rough diamonds to jewellers and polishers.

Prices for the untreated stones fell by about 50% between October and mid-March, and have since made up only about 30% of their value, according to analysts.

De Beers, which is 45%-owned by mining giant Anglo American, slashed its production levels by 73% to 6.6 million carats. It cut costs by more than half, including axing 23% of its staff and mothballing mines in South Africa and Canada. Shareholders gave the group a $500 million interest-free loan during the period.

But the second quarter was much better than the first, and the company said the outlook is sparkling.

De Beers said: "With no major new diamond discoveries in more than a decade, and with worldwide reserves at an all-time low, diamonds will become more scarce.

"As demand grows in emerging markets, it is likely that sales will outpace forecast diamond supply for many years to come."