* Dominion owns minority of Rio Tinto's Diavik diamond mine

* Rio has said it may exit diamond business

* Dominion dropped Harry Winston name on jewelry unit sale

TORONTO, April 4 (Reuters) - Dominion Diamond Corp has the means to buy Rio Tinto's majority stake in the Diavik diamond mine in northern Canada if the price is right, Dominion's chief executive said on Thursday.

Global miner Rio has said it may pull out of the diamond business, and Dominion, formerly Harry Winston Diamond Corp, already owns 40 percent of Diavik, in Canada's Northwest Territories.

"I think we have certainly got the head room to undertake a transaction with Rio on Diavik, should that be available at the right price," Dominion CEO Robert Gannicott said on a conference call with analysts and investors. He was responding to a question about whether Dominion's balance sheet could support such a deal.

Toronto-based Dominion said late Wednesday that its sales rose in its fiscal fourth quarter, helped by an 11 percent increase in the price of rough diamonds. Operating profit from continuing operations fell, hurt by transaction costs.

Dominion agreed in January to sell its luxury jewelry business to Switzerland's Swatch and focus on mining, and it renamed itself Dominion Diamond.

That followed a separate deal to buy BHP Billiton's stake in the Ekati diamond mine, also in the Northwest Territories. That deal is expected to close next week.

BMO Capital Markets analyst Edward Sterck said the comments on Diavik were not a surprise.

"I think after the Swatch transaction, they've got quite a lot of flexibility," he said. "I took it to mean that they've got the flexibility to take on additional funding if required. The company's not terribly leveraged."

Sterck said the fourth-quarter results were slightly below his forecasts because of higher costs, but he said there was "nothing to get too worried about".

Dominion's shares rose 3.4 percent to $16.26 in thin trade on the New York Stock Exchange on Thursday.