Harry Winston Diamond Corp. says the Diavik mine in Canada’s Northwest Territories produced 1.9 million carats in the fourth quarter of 2012, up 19 per cent from a year earlier.

The Toronto-based company attributed the increase from 1.6 million carats produced in the fourth quarter of 2011 to better grades of kimberlite, the mineral that contains raw diamonds.

The mine, 300 kilometres northeast of Yellowknife, is jointly owned by Rio Tinto PLC and Harry Winston.

The production report follows Harry Winston’s announcement on Monday that it will sell its retail high-end jewellery operation to Swiss watch company Swatch in a $1-billion deal, including $250-million of assumed debt.

Harry Winston, which will be renamed Dominion Diamonds, said it intends to use some of the $750-million cash it gets to fund growth in its mining business — which has been focused on Canada’s Far North.

Some analysts suggest the company may buy Rio’s 60-per-cent stake in Diavik or the Anglo-Australian mining giant’s entire diamond division.

Harry Winston recently acquired diamond business of BHP Billiton , another Anglo-Australian mining giant, for $500-million. That included BHP’s stake in the Ekati diamond mine, also in Canada’s Northwest Territories.