Rio hopes destocking over in diamond sector

LONDON, June 2 (Reuters) - Miner Rio Tinto (RIO.L) expects the plunge in diamond sales to taper off as destocking ends, but its mines could see further cutbacks if an improvement fails to emerge, an executive said on Tuesday.

Rio Tinto has cut diamond production by about a quarter due to the downturn, Bret Clayton, chief executive if Rio's diamond and copper unit, told the Mining Investment Congress in London.

Prices have slid by around 30-40 percent, Clayton said.

"Our anticipation is that the destocking of the supply chain has largely finished," he said.

"While we're not anticipating a recovery in the market, what we're anticipating is normal pull-through of the volumes."

Sales of unpolished or rough diamonds have collapsed by about 70 percent, but that is expected to improve to about a 30 percent fall, in line with underlying retail diamond jewellery sales, Clayton added.

"That's a market we're watching very closely. If we don't start to see that trend, we'll step back and make another assessment of our operations."

While in copper, Rio had no fears of its operations becoming cash negative due to the slide in prices, the situation in diamonds has been more difficult.

"In diamonds we've been working to be close to break even." (Editing by Jon Loades-Carter)