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Rio Tinto has signed a state support agreement with the government of Madhya Pradesh relating to the Bunder diamond project, which is said to be one of the biggest new discoveries of recent years.

Rio Tinto has signed a deal with the government of Madhya Pradesh in India that sees it commit to expanding its Bunder diamond project.

It has reached a state support agreement with the authorities and will now work towards advancing progress at the site, which is located 500km south-east of Delhi.

Research by the mining giant has indicated Bunder has an inferred resource of 27.4 million carats and managing director of the company's Indian operations Nik Senapti noted it has "significant" possibilities.

He described the arrangement as "a key milestone in our journey to unlock this potential by developing a world-class diamond mine".

The discovery was recently hailed as one of the largest diamond finds in the last decade by head of exploration for the business Eric Finlayson in an interview with Bloomberg.

He noted Rio Tinto is carrying out other exploration projects in the country, adding he is "pretty sure" they will be successful.

The Russian mining giant is in talks to supply rough diamonds to three Indian companies, with the deals expected to be signed next year.

Russian diamond miner Alrosa is planning to open an office in India and is in negotiation to supply the precious stones to three companies in the country.

Domain-B reports Russian news agency RIA Novosti as saying the state-owned firm will distribute rough diamonds to the three enterprises – Diamond India, Ratilal Becharlal & Sons and Rosy Blue – providing they can agree contracts.

It is seeking to sign three-year deals with each business, which would see it provide rough gems worth $490 million (£308 million).

Signing of the agreements is expected to take place in March 2011, when Russian prime minister Vladimir Putin will make a working visit to Russia.

Recent figures released by the mining giant – which is responsible for 97 per cent of Russia's total diamond output – showed it expects to have sold rough and polished examples of the precious stones worth in excess of $2.78 million in the first nine months of 2010.