Gem Diamonds Di Regulatory News (GEMD)

18 June 2012

GEM DIAMONDS LIMITED

("Gem Diamonds" or the "Company")

Fatalities at the Ghaghoo Mine Project

The Company announces with great regret that an incident, involving the collapse of ground at the face of the tunnel development in adverse ground conditions, has occurred at the Ghaghoo mine project in Botswana which has resulted in two fatalities to contractors on the site. The incident has been fully investigated and the Department of Mines has given permission for the project to continue. Further and additional safety precautions have been put in place.

Clifford Elphick, CEO said : "The Company again extends its condolences to the families of the two deceased and commits itself to continuing to strive for the highest safety standards for its employees and contractors at all of its operations ".

Although a full assessment of the likely impact upon the project timeline and overall project costs is on-going, early indications are that the adverse ground conditions encountered (and as reported in the IMS issued by the Company on 16 April 2012), together with this incident, will result in a delay to the production of the first diamonds until H1 of 2014. The project is presently on budget with some US$ 31 million of the overall budget of US$ 85 million already spent. The impact upon the tunnel portion of the project costs is still under assessment.

The construction of the plant and associated civils, as well as the infrastructure, on the Ghaghoo project is well advanced and is on time and on budget.

For further information:

Gem Diamonds Limited

Sherryn Tedder, Investor Relations

Tel: +27 (0) 11 560 9600

Mob: +27 (0) 83 943 4505

Kim O'Farrell, Public and Media Relations

Tel: +44 (0) 203 043 2080

Mob: +44 (0) 776 506 1316

Pelham Bell Pottinger

James MacFarlane

Tel: +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 acquisition. The strategy has been implemented with a view to capitalising on the steady improvement in the diamond market seen during 2010-11 and the supply demand dynamics which are expected to continue for the foreseeable future.