Gem Diamonds Di Regulatory News (GEMD)

20 April 2011

GEM DIAMONDS LIMITED

April 2011 Interim Management Statement

Gem Diamonds Limited (LSE: GEMD) reports an Interim Management Statement ("IMS") for the period1 January to 19 April 2011 ("the period").

Highlights during the period:

Letšeng:

·; Letšeng achieved an average value of US$4 272 per carat for its April 2011 export, bringing the average value to US$3 067 per carat for the period (US$1 839 per carat for the first three tenders in 2010).

·; 16 rough diamonds achieved an average value in excess of US$1m each during the period.

·; Letšeng produced a total of 59 rough diamonds that achieved prices greater than US$20 000 per carat, equivalent to 68% of Letšeng's revenue for the period.

·; A 2.79 carat blue diamond sold on tender for a new Letšeng record of US$199 199 per carat.

·; Two pink diamonds of 28.37 carats and 30.68 carats were sold for US$140 994 and US$130 378 per carat respectively.

·; Letšeng produced 151 rough diamonds greater than 10.8 carats in size in the first quarter.

·; 26 541 carats recovered during the first quarter of 2011, up 29% from 2010.

Ellendale:

·; Ellendale achieved an average price of US$3 379 per carat for its fancy yellow diamonds sold to Tiffany & Co. during Q1 2011 (US$2 545 per carat in Q1 2010).

·; For its commercial goods, Ellendale achieved an average price of US$196 per carat during Q1 2011 (US$142 per carat in Q1 2010).

Gope:

·; On 14 March 2011 the Gem Diamonds Board approved the first stage of the development of the Gope mine.

·; The first phase of the mine construction has commenced with the building of the camp at Gope.

Group:

·; The Group has US$127.7 million cash as at 31 March 2011, of which US$106.2 million is attributable to Gem Diamonds.

Gem Diamonds CEO, Clifford Elphick commented:

"Letšeng's recent production achieved a Letšeng record average value of US$4 272 per carat. The successful implementation of Letšeng's sales and marketing strategy; increasing demand for diamond jewellery from the world's largest market, the US; continued very strong demand from India and China; and low stocks of rough and polished diamonds in the cutting centres have led to substantial rises in the price of both rough and polished diamonds. The industry fundamentals remain excellent, especially for the larger, higher quality diamonds produced at Letšeng and Ellendale. The benefits of the October 2010 price increase for Ellendale's fancy yellow diamonds sold to Tiffany & Co. are being seen and negotiations for the second price review are ongoing.

The initial work has already started at the Gope mine in Botswana which is due to go into production in early 2013 and the finalisation of the pre-feasibility study for the Letšeng expansion is due before the mid year, both of which will substantially increase Gem Diamonds' growth profile."

1. Lesotho

Gem Diamonds holds a 70% shareholding in Letšeng Diamonds (Pty) Ltd ("Letšeng") in partnership with the Government of the Kingdom of Lesotho which owns the remaining 30%.

1.1 Production

Letšeng continues to perform well. The forecast production targets for waste mined, ore mined and treated and carats recovered were all met in Q1 2011. As anticipated, top-soil stripping has now commenced ahead of waste stripping at the Main pipe, whilst waste stripping on Cuts 3 and 4 continues in the Satellite pipe.

As planned, the overall figures for the tonnage of ore mined and ore treated are down when compared to Q1 2010. Previously Alluvial Ventures was treating ore from the low grade De Beers stockpile, which has now to all intents and purposes been depleted, and has now commenced treating hard rock ore from the Main pipe at a lower targeted rate of 100 000 tonnes a month. This has in turn led to a significant improvement in overall grade recovered. Up until the end of March, 91% of the ore treated through Plants No 1 and 2 was sourced from the Main pipe.

Diamond recovery results from the Main Pipe continue to exceed expectation with regards to quality.

 1.2 Rough Diamond Sales

* This excludes the results of the April 2011 tender which are detailed below.

In the first quarter of 2011, Letšeng achieved an average value of US$2 383 per carat. This includes 73 carats extracted for manufacturing at a market value of US$2.7 million.

The Letšeng April 2011 export sale achieved an average value of US$4 272 per carat for the 11 126 carats exported. Of these, 125 carats with a market value of US$4.7 million were extracted for manufacturing. The total value for this export was US$47.6 million.

For the year to date Letšeng has achieved an average price of US$3 067 per carat (30 751 carats: total value US$94.3 million).

Letšeng produced a total of 59 rough diamonds that achieved prices greater thanUS$20 000 per carat during the period, achieving an average price of US$42 746 per carat and contributing 68% of Letšeng's revenue for the period under review. A total of 16 individual rough diamonds achieved over US$1 million each during the period. The following ten rough diamonds achieved the highest unit prices for the period:

2. Australia

The Ellendale mine ("Ellendale"), located in Western Australia, is owned and operated by Gem Diamonds' wholly owned subsidiary, Kimberley Diamond Company NL.

2.1 Production

Compared to the wet season in 2010, twice the amount of rain has fallen in the 2011 wet season (75 recorded rain days with over 1 000 mm of rainfall versus 34 recorded rain days with 560mm of rain fall in the corresponding period in 2010). Heavy rain has continued to fall beyond the end of the normal wet season consistently through into April, and the shortfall in processing and carats recovered can be associated with the difficulty experienced with treating wet clay-rich material. Run of mine stockpiles are saturated and conditions have been extremely challenging. As conditions dry out, so too will the ore which will lead to improved throughput rates. Mining operations recommenced in March 2011, with satisfactory production outputs. The recovered grade is in line with expectations and management therefore maintains its existing guidance range for carats recovered from Ellendale in 2011.

In order to better handle the wet, sticky ore, designs to modify the front end of the processing plant have been finalised. These changes will be completed in the second half of the year.

2.2 Rough Diamond Sales

Overall, Ellendale sold a combined total of 32 453 carats at an average price of US$478 per carat forQ1 2011. 2 884 carats of fancy yellow diamonds were sold to Tiffany & Co in Q1 2011 at an average price of US$3 379 per carat (compared to US$2 545 per carat in Q1 2010) and 29 569 carats of commercial goods were sold at an average price of US$195 per carat (US$142 per carat in Q1 2010).

The second price review for the fancy yellow diamonds sold exclusively to Tiffany & Co. is ongoing.

3. Botswana

Gem Diamonds holds 100% of the shares in Gope Exploration Company ("Gope") which holds a mining licence in respect of the Gope deposit.

A logistics "staging" camp is being established at Lephephe and construction of the on-site camp at Gope has commenced. The mobilisation for the underground access via a decline is on schedule to commence in the third quarter of 2011.

4. Mineral resources and reserves

A detailed Mineral Experts Report (MER) detailing the Group's mineral resources and reserves has been compiled and will be published during May 2011. This document will be made available on www.gemdiamonds.com.

5. Health, safety, corporate social responsibility and environment:

Gem Diamonds recorded its first fatality since April 2008 at Letšeng in March 2011. In a vehicle accident at Letšeng, the passenger of the vehicle was seriously injured and subsequently passed away. Prior to this unfortunate incident, the Gem Diamonds Group recorded 15.3 million manhours fatality free.

Two Lost Time Injuries ("LTIs") occurred at Letšeng during the first quarter of 2011, ending the 14 month LTI-free period of over 5.1 million manhours (one of these LTIs being the injury sustained by the passenger in the vehicle accident noted above).

For further information:

Gem Diamonds Limited

Clifford Elphick, Chief Executive Officer

Glenn Turner, Chief Commercial and Legal Officer

Tel: +44 (0) 203 043 0280

Richard Chetwode, Investor Relations

Tel: +44 (0) 203 043 0280

Mob: +44 (0) 759 0064 883

Gem Diamond Technical Services (Pty) Ltd

Sherryn Tedder, Corporate Affairs

Tel: +27 (0) 11 560 9600

Mob: +27 (0) 83 943 4505

Pelham Bell Pottinger

Charles Vivian

Tel: +44 (0) 207 861 3126

Mob: +44 (0) 7977 297 903

James MacFarlane

Tel: +44 (0) 207 861 3864

Mob: +44 (0) 7841 672 831

About Gem Diamonds:

Gem Diamonds is an international diamond mining company that has pursued a long term growth strategy through targeted acquisitions and the development of its existing assets. Following the recovery in diamond prices in 2010 the Company's focus has been to place itself in a position to take advantage of long term growth opportunities.

The Company's mining portfolio comprises producing kimberlite and lamproite mines in Lesotho and Australia, as well as a development project in Botswana.

With Letšeng's production of the world's most sought after remarkable white diamonds and Ellendale's production of rare fancy yellow diamonds, Gem Diamonds remains focused on higher value diamonds. This segment of the market is likely to deliver attractive long term returns.

www.gemdiamonds.com