Rio Tinto's Diamond Income +6.6% in 2011

Rising costs and heavy rains are the story of Rio Tinto Diamonds in 2011. The heavy rains in Australia in the first quarter, coupled with lower ore grades and maintenance shut downs in the fourth quarter led to a 24 percent decline in production at Argyle and a loss of revenues.

To make up for the lost revenues, the company decided in December to earmark an additional $0.5 billion for the Argyle underground project.

The project will extend the mine life to at least 2019. To date, Rio Tinto approved a $2.1 billion investment in the project.

Argyle's production decline was partly offset by Diavik where production was three percent higher year-over-year, due to improved throughput partly offset by lower grades.

Total production from the company's three mines declined 15 percent to 11.7 million carats.

Rough diamond prices improved 24 percent year-over-year, despite softening prices in the last four months of 2011. Despite the increased revenues, net earnings dropped 85.5 percent to $10 million.