Gem Diamonds Di Regulatory News (GEMD)

 30 November 2011 Announcement

GEM DIAMONDS LIMITED

("Gem Diamonds" or the "Company")

Approval of Letseng expansion project

Gem Diamonds Limited (LSE: GEMD) ("the Company") is pleased to announce that the expansion project (known as Project Kholo) at the Company's Letšeng mine in Lesotho has been approved by the Company's Board and by the Board of Letšeng Diamonds Pty Limited ("Letšeng"). 

Project Kholo will commence in January 2012, and will ramp up to full production by July 2014. The project will increase the annual treatment capacity of the Letšeng mine to 10 million tonnes per annum (currently 5.6 million tonnes per annum) with carat output increasing to circa 200,000 carats per annum (currently 100,000 carats per annum). The total project capital expenditure for Project Kholo is estimated at US$ 280 million. The project IRR is expected to be 40% and payback is expected in 2016. Project Kholo will be funded out of existing and future cash flows (based on current diamond prices and exchange rate assumptions). The NPV of the Letšeng mine (100%), including Project Kholo, is US$ 2.5 billion.

Gem Diamonds currently has US$ 151 million cash on its balance sheet and Letšeng has recently secured a revolving credit facility of Maloti 250 million (US$ 31 million) for general corporate purposes.

The Company is currently considering all of its options regarding its Ellendale mine asset in Australia and has appointed advisors to assist in this regard.

Gem Diamonds CEO, Clifford Elphick commented:

" Gem Diamonds is very pleased to announce that as a result of the approval given by the Company's Board to the expansion project at the Letseng mine, the number of carats of the remarkable diamonds which it produces will effectively be doubled. Given the industry consensus around the extremely positive supply/demand dynamics for high end diamonds, it is an investment which signals Gem Diamonds' confidence in its future growth. "

For further information:Gem Diamonds Limited

Sherryn Tedder, Investor RelationsTel: +27 (0) 11 560 9600Mob: +27 (0) 83 943 4505

Kim O'Farrell, Public and Media RelationsTel: +44 (0) 203 043 2080

Mob: +44 (0) 776 506 1316

Pelham Bell PottingerJames MacFarlaneTel: +44 (0) 20 7861 3232

About Gem Diamonds:

Gem Diamonds is a leading global diamond producer with a focus on high value diamonds. Its production portfolio comprises kimberlite and lamproite mines in Lesotho and Australia, and a mine development project in Botswana. Both production mines are world-leaders in production of the highest quality, highest value gems: remarkable whites from the Letšeng mine in Lesotho; fancy yellow diamonds from Ellendale in Australia. This production positions the Company strongly in a segment of the market expected to generate attractive returns over the long term.

Gem Diamonds has a clear and consistent growth strategy, based on development of its existing assets and carefully targeted acquisitions. The strategy has been implemented with a view to capitalising on the steady improvement in the diamond market seen during 2010 and 2011 and the favorable supply demand dynamics which are expected to continue for the foreseeable future.

www.gemdiamonds.com