Mining giant Rio Tinto says its new $2.2 billion underground diamond mine at Argyle will produce up to 20 million carats per year.

Rio opened the mine in the remote East Kimberley region of Western Australia on Tuesday, labelling it a major milestone for the company.

The company says the underground mine will extend Argyle’s overall mine life until at least 2020.

“That will help to feed the global deficit in diamonds around the world,” Argyle managing director Kim Truter told a group of around 160 guests at the opening at Argyle on Tuesday.

“Most existing diamond mines around the world are getting older and there is a dearth of new mine discoveries.”

Mr Truter said since the mine opened in 1983 it had produced 800 million carats, or around 160,000 tonnes of diamonds, which are sold to countries such as Japan, the US, India and China as well as Australia.

Underground exploration at Argyle began in 2004 as the open cut resource began to diminish.

The new underground mine now consists of 40km of underground tunnels.

Once the mine has ramped up to full production, the ore will be crushed underground and transported 3km by conveyor to the surface.

Argyle produces around 90 per cent of the world’s supply of rare pink diamonds and is the world’s largest supplier of natural coloured diamonds.

Rio Tinto chief executive Sam Walsh recently said the company was focused on raising funds by selling assets, including diamonds.

The company is understood to be considering a $2 billion float of its entire diamonds business, including assets in Canada, after beginning a strategic review last year.

In February the company announced its first ever full year net loss of almost US $3 billion.