SYDNEY--Rio Tinto Ltd. will spend $803 million ramping up production from its Argyle diamond mine in Western Australia state's Kimberley region as jewelry demand from burgeoning Asian markets depletes existing gemstone resources.
The company said in a statement Tuesday it would start construction work on an underground mine to complement the existing open pit operation in the first six months of 2011, extending the life of the mine to 2019.
Argyle, in the arid east Kimberley region of northwestern Australia, is one of the world's largest diamond mines and the largest supplier of gem diamonds to the mass market jewelry industry in Japan, southeast Asia and the U.S.
Plans to upgrade the mine were put on the slow track in 2009 in the wake of the global financial crisis, but the company said signs of recovering demand justified the renewed investment.
"This investment...underlines our commitment to, and confidence in, the world diamond industry," Rio Tinto Diamonds and Minerals Chief Executive Harry Kenyon-Slaney said.
De Beers, which is thought to control about 40% of the world's diamond supply, more than doubled production of diamonds in the first six months of the year from a year earlier to 15.4 million carats.
In interim results in July, De Beers said that its pickup in sales had been driven by double-digit growth in demand from emerging markets, particularly China and India.
Argyle alone accounts for around 20% of global diamond supply and more than 90% of the world's production of pink diamonds, a rare variety historically popular in India.
"There's not many other new areas of supply coming on stream and we're seeing increasing marketing in China and India, where people are moving into the middle class and increasing consumer spending," a Rio Tinto spokesman said.
Rio Tinto had long set aside $1.5 billion for the ramp-up work at the mine, with the spending announced Tuesday representing the balance of spending at the site. The mine is targeting 9 million tons of raw production by 2013.
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