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The entry point for Diavik diamond mine in the North West Territories.JOHN LEHMANN/The Globe and Mail

Rio Tinto, the world's third-largest miner, effectively invited bids on Tuesday for its diamonds business, on its books at $1.2-billion (U.S.), and joined rival BHP Billiton in a retreat from an industry that has lost its sparkle.

Rio Tinto, which runs three mines in Australia, Canada and Africa, said it was reviewing its diamond business and would consider selling it, as it focuses on expanding in more profitable commodities such as iron ore, copper and uranium.

Its diamond business - the 100-per-cent owned Argyle mine in Australia, famous for its pink diamonds, as well as 60-per-cent owned Diavik mine in Canada and 78-per-cent owned Murowa mine in Zimbabwe - could come on the market at the same time as BHP Billiton tries to sell its Ekati diamond mine in Canada.

"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," Rio Tinto's diamonds and minerals CEO Harry Kenyon-Slaney said.

Deutsche Bank valued Rio Tinto's diamond arm, which accounts for less than 2 per cent of core profit, at some $2.4-billion.

It could attract the same bidders in the running for BHP's Ekati diamond mine stake, including private equity firm KKR and luxury jeweller Harry Winston, which already has a 40-per-cent stake in Rio's Diavik mine.

A drop in diamond prices since July, knocked by Europe's downturn, has hit sentiment towards the sector, but the longer-term dynamics for the industry are looking up, with India and China expected to drive longer-term growth in demand.

Rio mined 11.7 million carats of diamonds last year, about a third of the amount dug up by each of the world's top two producers, Russia's state-owned Alrosa and De Beers.

Alrosa produces 24 per cent of the world's diamonds, De Beers 21 per cent, and Rio and BHP about 7 per cent each.

Rio and BHP's exit from diamonds is unlikely to resurrect the diamond cartel they broke up a decade ago when they refused to sell their diamonds through De Beers, as the South African giant is now owned by global miner Anglo American.

"I'm not sure that's a way De Beers wants to go, or they are the right buyer to snap it up," said David Lennox, an analyst with broker Fat Prophets, adding there could be antitrust issues for the world's largest diamond producer by value.

De Beers Chief Executive Philippe Mellier, speaking at the Reuters Mining and Metals summit, said global miners BHP and Rio had understood that in their large portfolios of commodities "they had something that was not a commodity" and did not fit.

"They have to play a key role in everything they do and they are very small players in the diamond world - maybe the interest is no longer there," Mr. Mellier said

He declined to comment on De Beers' own interest in the asset: "We are here to grow the business. We will look at any sensible opportunity, but we will never comment on it," he said.

For Rio, diamonds last year accounted for less than 0.1 per cent of group net earnings, slumping 86 per cent to just $10-million on revenue of $727-million.

The open-pit Argyle mine, undergoing a $2.1-billion expansion underground, is the largest diamond producer in the world by volume and the largest source for pink diamonds, though only 0.1 per cent are actually considered pink.