Rio Tinto Group put its diamond operations on the block on Tuesday, March 27, joining BHP Billiton Ltd., which is already looking for buyers for its remaining diamond operations.

"Rio Tinto has begun a strategic review of its diamond business that will include exploring a range of options for potential divestment of its diamond interests," the company said.

Diamond mining has fallen out of favor at the world's two biggest mining companies because of the operations' relatively small scale and the lack of opportunity to increase production to meet their internal growth targets.

"The diamonds market outlook is very positive, with demand growing strongly and lack of new discoveries limiting supply," said Rio Tinto diamond and minerals CEO Harry Kenyon-Slaney. "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."

London and Melbourne, Australia-based Rio Tinto has four diamond operations including its 100%-owned Argyle and Bunder diamond businesses in Australia and India; Canada's Diavik mines, in which it owns a 60% stake; and the Murowa operation in Zimbabwe, in which it owns 78%. It also has an Antwerp-based diamond sales and marketing operation through which it sells about 15% of the world's diamonds by volume.

Rio Tinto's diamond operations posted Ebitda of $190 million for 2011, up from $157 million a year earlier. It made revenue of $727 million in 2011, up from $682 million in 2010.

The operations have a book value of $1.17 billion, though analysts' estimates of the value of the business have varied widely. The operations could be worth about $2.65 billion, according to a Bank of America Corp. note published earlier this month. That is more than twice the roughly $1 billion valuation suggested by analysts at Australia's Macquarie Bank, who noted a lack of evident buyers for the assets.

"There are perhaps limited trade sale buyers, with De Beers constrained by competition concerns and BHP Billiton also considering divesting its diamond business," Macquarie analysts wrote.

Rio Tinto's decision to seek a buyer for its diamond assets mirrors that of BHP, which put its diamond operations on the block in November, after noting that they were a poor fit with its strategy of focusing on "large, long life, upstream and expandable assets."

Melbourne, Australia-based BHP in December sold its 51% stake in Canada's Chidliak diamonds exploration project for C$9 million ($9 million). It is still looking for a buyer for its 80% stake in the Vancouver, B.C.-based Ekati diamond mine. That operation has been linked with Harry Winston Diamond Corp. and private equity suitors including Kohlberg Kravis Roberts & Co. and Apollo Global Management LLC.

Rio Tinto's London-listed shares traded Tuesday at 3,436.5 pence ($54.60), up 72 pence , or 2%, on their previous close.