Rio’s diamonds feel the pinch

Rio Tinto will suspend diamond production in Western Australia for up to three months in response to flagging demand caused by the global financial crisis.

Rio Tinto will suspend diamond production in Western Australia for up to three months in response to flagging demand caused by the global financial crisis.

The mining giant will also slow work at its Argyle underground operation, located in the Kimberley region of Western Australia.

“Given global market conditions, we will also reduce diamond production by taking an extended maintenance shutdown of the diamond processing facilities for up to three months,” chief operating officer of the Rio Tinto subsidiary Argyle Diamonds Kevin McLeish said.

McLeish said the shutdown would begin in March.

Analysts expect more cuts to follow after the company announced its fourth quarterly production figures yesterday.

According to the company, earnings declined at its aluminium and copper units because of falling prices.

Aluminium inventories will be written down as the slide in prices “negatively impacted” profitability, London-based Rio said in a statement.

Copper earnings fell about $360 million in the second half.

The company has already said it will cut 14,000 jobs and reduce capital spending by five billion US dollars to help shrink its 38.9 billion US dollar debt amid sluggish demand for commodities.

The underground project at the Argyle operation was due to be completed by 2010 and was designed to extend the life of the mine, which currently produces about 20 million carats of diamonds a year, past 2018.

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