Rio Tinto today declared it would resume the expansion of the world's biggest diamond mine next year as global demand for jewellery begins to recover from the recession.

The mining giant shut down processing facilities at the Argyle mine in Western Australia from January to June as the diamond market slumped. Work has now restarted, however, and the mine's chief operating officer Kevin McLeish said he would be ordering a $1.5 billion (£906 million) expansion programme to resume.

Argyle supplies about 20% of the world's new diamonds and 90% of prized pink diamonds, used only in jewellery. Diamond prices are rebounding after a slump that hit Rio's profits hard, along with those of De Beers and ZAO Alrosa, the other major producers.

"There are some positive signs of recovery," said McLeish. "Given the price and recovery forecast, we will see a significant improvement in the performance of the diamond group within Rio through 2010."

Growing jewellery demand in China and India has helped underpin an increase in prices triggered mainly by hopes of a US economic recovery.