The world's largest diamond group, De Beers, said its three shareholders have agreed to loan the company $500 million to help it weather the economic downturn, following muted sales in 2008.

De Beers Managing Director Gareth Penny said on Friday the global economic crisis was having a negative impact on sales of retail diamond jewelry, liquidity and demand for rough diamonds, which had hurt the group's sales of rough diamonds.

We expect trading conditions to remain challenging throughout 2009, said Penny.

Last year had two very distinct halves, there was tremendous growth in production and sales and increased prices, then sales slowed down significantly, Penny told a media teleconference from London.

Anglo American Plc, which owns 45 percent of De Beers, said in a statement on Friday it would inject $225 million into the company, as part of the $500 million in loans from the company's three shareholders.

In light of the weak outlook for diamond sales, the shareholders of De Beers have agreed to provide loans to De Beers, proportionate to their shareholdings, Anglo said.

De Beers' two other shareholders are Central Holdings, representing the Oppenheimer family, with a 40 percent stake, and the government of Botswana, which has a 15 percent stake.

Finance Director Stuart Brown told a presentation that the cash would be a buffer, but that De Beers was not cash-strapped.

The additional funds will help De Beers withstand any shocks that may come through during the year in these uncertain economic times, Brown said.

Anglo said De Beers' net interest bearing debt fell to $3.55 billion from $4.06 billion in 2007 as a result of the benefits of a stronger dollar, repayment of debt and shareholder support.

De Beers said total sales for 2008 rose 1 percent to $6.9 billion after demand collapsed in the last quarter of the year.

Production fell 6 percent to 48.1 million carats, with production sharply lower in South Africa after it sold its Cullinan mine and closed The Oaks mine, the company said.

De Beers, which controls around 40 percent of the rough diamond market, said its marketing unit, the Diamond Trading Company (DTC), had posted record sales in the first nine months of last year, but sales tumbled in the fourth quarter as the economic slowdown bit.

PRODUCTION CUTS

Penny repeated De Beers would cope with the expected slowdown in its business this year by significantly reducing output levels, costs and capital expenditure at its operations to help the group weather the tough times.

Penny declined to give specific figures on the production cuts and said the reductions would affect all its mines, so that the mines can run at sustainable levels.

He said the company could not give an estimate of how far prices had fallen this year, but would give a figure when presenting its half-year results.

He said prices had risen 14 percent in 2008 versus the previous year.

De Beers earnings before interest, taxes, depreciation and amortization (EBITDA) rose 0.5 percent to $1.22 billion.

(Reporting by James Macharia; editing by Simon Jessop)

Botswana South Africa Anglo american plc