Rio Tinto has joined rival BHP Billiton in reviewing its increasingly minor involvement in the diamond industry.

Rio operates three diamond mine: Argyle in Australia (100% owned), Diavik in Canada (60% interest), and Murowa in Zimbabwe (78% interest) and Bunder, an "advanced diamonds project" in India (100% ownership).

The company said yesterday the strategic review of the diamond business will include exploring a range of options for potential sale of the diamond interests.

Rio carries the diamonds business in its books at a value of $US1.2 billion.

Some analysts say it could fetch up to $US2 billion.

Chief executive of the company's diamonds and minerals business Harry Kenyon-Slaney said in a statement that Rio regularly reviewed its businesses to ensure they remain aligned with its strategy of operating large, long-life, expandable assets.

"The diamonds market outlook is very positive, with demand growing strongly and lack of new discoveries limiting supply," he said.

"We have a valuable, high quality diamonds business, but given its scale we are reviewing whether we can create more value through a different ownership structure."

The diamonds business lost $76 million in 2011, a result that included net impairments of more than $300 million relating to changes in assumptions about future capital costs required to complete the Argyle underground project.

Rio shares rose 39c to $64.14 in yesterday's generally buoyant market.

Rio Tinto says its share of the production from its three operating diamond mines is sold through its sales and marketing headquarters in Antwerp, with representative offices in Mumbai, Hong Kong and New York.

"It also operates a niche cutting and polishing factory in Perth for the rare pink diamonds from its Argyle mine," according to yesterday's statement.

Rio also said yesterday that the share $US7 billion buyback started in February of last year (at $US5 billion and increased by $US2 billion in August 2011) had finished on Monday of this week.

There was no word if a new buyback would happen; a hope that some shareholders hold that might founder on the lower iron ore prices resulting from the slowing demand from China.

Last November BHP said that it had started reviewing its diamonds business which is made up of interests in the EKATI Diamond Mine and the Chidliak exploration project in Canada.

BHP said the review will examine whether a continued presence in the diamonds industry is consistent with BHP Billiton's strategy and evaluate the potential sale of all or part of the diamonds business.

"BHP Billiton's strategy is to invest in large, long life, upstream and expandable assets while remaining a simple and scalable organisation.

"EKATI is a world class operation and Chidliak is a promising exploration opportunity, but many years of extensive exploration suggest there are few options to develop new diamond mines that are consistent with this approach.

"As it reviews its diamonds business, BHP Billiton will only pursue those options that will preserve EKATI's outstanding safety and environmental standards and protect the benefits that the mine has created for local communities.

"Potential transactions arising from the review will be subject to detailed analysis before a final decision is made. In the event that these criteria are not met, BHP Billiton will continue to operate its world class diamonds business in a sustainable manner," BHP said.

EKATI is located 310 kilometres northeast of Yellowknife and 200 kilometres south of the Arctic Circle. It is Canada's first diamond mine and owned by BHP Billiton (80%), Dr Stewart Blusson (10%) and Charles Fipke (10%).

EKATI has produced an average of over three million carats of rough diamonds per year over the last three years, with annual sales representing approximately 10% of global diamond supply by value.

Chidliak is a diamonds exploration project located on South East Baffin Island in Nunavut, Canada. The property consists of 860,000 hectares about 140km from Iqaluit. Chidliak is a joint venture partnership between BHP Billiton (51%) and Peregrine Diamonds Ltd (49%) and has been operated by Peregrine since 2006.

BHP announced earlier this year that it had agreed to sell its interest in the Chidliak project to Peregrine.

"The agreement follows an assessment of the project as part of BHP Billiton's review of its Diamonds business and will give Peregrine, the operator, 100 per cent ownership of Chidliak.

"Under the terms of the binding agreement, Peregrine will pay BHP Billiton C$9 million over three years and grant BHP Billiton a two per cent royalty on future production from Chidliak," BHP said in January.

BHP Billiton Diamonds and Specialty Products President Tim Cutt said: "We are pleased to sell our interest in Chidliak to its natural owner. Peregrine has been a good partner and we believe they are a strong operator that is well positioned to advance this promising exploration opportunity."

The parties have agreed to complete the transaction by 31 January 2012.

BHP said its interest in EKATI is ongoing.

BHP shares closed up 21c at $34.40.

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