GABORONE (Reuters) - Botswana's Debswana said it is considering diversifying from diamonds in a bid to cushion its revenues, with industry sources saying it favours commercial mining of coal and energy.

Debswana is a 50/50 joint venture between the government of Botswana and De Beers, which is 45 percent owned by mining group Anglo American PLC, which mines coal in South Africa.

Boyce Sebetela, group manager in charge of corporate strategy, declined to confirm which minerals it was considering or give a time frame.

"Discussions are ongoing at the moment and we can't say with certainty what areas we are going to pursue," he said.

"We are still trying to find what would be the best for Debswana and at the same time we have to be mindful of the fact that our shareholders are already involved in some of the minerals which we might be interested in.

"We have to be mindful of the possible conflict on interest with our shareholders," Sebetela told a briefing.

Debswana's core business is diamond mining although it owns a colliery which supplies the Botswana Power Corporation with coal for its thermal power station.

Due to the economic crisis, Debswana only produced 17 million carats in 2009 down from 32 million carats in 2008.

The company said it was ready to increase its production target from 20 million carats in 2010 if markets conditions improve.

After reporting better-than-expected sales in the first quarter of this year, Debswana's Managing Director Blackie Marole said demand for diamonds will be significantly higher this year compared with 2009, but will not reach 2008 levels.

"Prospects for this year and beyond look good and already first quarter sales are already showing signs of improvement," he said.

At $1.7 billion the 2009 sales were 39 percent lower than in 2008, he said.

The United States accounts for half of all diamond jewellery sales, while China and India between them account for about a fifth.

Hammered by the collapse in demand for the precious stones due to the financial crisis, Debswana suspended mining for months earlier last year, the first shut down in 40 years.