Close to 100 people at the Argyle Diamonds subsidiary of the Rio Tinto Group are poised to lose their jobs as the company implements a cost-cutting plan amid plans to divest the diamond business unit.

The company had begun talks last week with the Argyle workers, a report by The West Australian said. About 80 posts out from the 500-strong workforce will be taken off, most affected of which are at those at the middle management level.

"Like others in the industry, Argyle is facing increasing costs," spokesman Bruce Tobin said. "We cannot do this effectively without reducing employee costs and unfortunately this does mean some roles will no longer be needed," he said.

The Argyle mine, known for its scarce and pricey pink diamonds, began operating in 1983 in the remote north of Western Australia. It accounts for about one-fifth of the world's natural diamond production, the company said.

Although Argyle has Rio Tinto's major diamond asset, it however has failed to make a large contribution to the Anglo-Australian company's bottom line, prompting the latter to plan its eventual sell-off. Analysts had earlier pointed to the possibility of Rio Tinto combining its diamond assets with equally global miner, BHP Billiton.

"The rationale would be the creation of the largest listed diamond company with a solid asset base and lower overall sovereign risk," Nomura analysts said in www.miningaustralia.com.au.

Noting the outlook for the diamond industry was good, diamond assets of BHP Billiton and Rio Tinto have strong growth potential.

"The market has positive fundamentals with maturing mines and growing Asian demand," it said.

In March, Rio Tinto, the world's third-largest mining company, announced it wants to divest its diamond business unit after a review revealed the business no longer fit its strategy.

In August, Rio Tinto reported underlying profit dipped 34 per cent to $5.2 billion, where sales from the diamond operations accounted for only 1.3 per cent of total first half revenue.