An additional US$150 million will be spent on open-pit mining, the company said.

The new underground component is being designed to operate from 2007 to 2018 before running dry and should yield around 60 per cent of Argyle's historical average of 34 million carats a year, it said, adding the quality mix of the gems would remain similar.

The decision to expand comes after the Western Australia state government agreed to reduce Rio's royalty payments and ends a lengthy review of whether to dig the extension or abandon the lode, the single largest contributor to the remote Kimberley region and a source of jobs for indigenous Australians in the area.

Analysts estimate that the global value of rough, or uncut diamond production rose over US$1 billion to some US$10,2 billion last year.

Each year about 45 per cent of the Argyle mine's diamonds are classified as near-gem quality, with 50 per cent classed as industrial-quality diamonds to be used, for example, as an additive in road pavement.

The remaining five per cent is made up of gem-quality diamonds, including the rare and highly valued pink diamonds, as well as the range of sparkling champagne and rich cognac diamonds.

-Nampa-Reuters

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