Gem Diamonds Di Regulatory News (GEMD)

21 March 2011

Gem Diamonds Limited

("Gem Diamonds" or the "Company")

Statement re press speculation

Gem Diamonds, a leading global diamond producer, notes the recent press speculation regarding Lucara Diamond Corp ("Lucara"). The Company confirms that as part of its ongoing review of potential value enhancing opportunities, it is in preliminary discussions with Lucara regarding a possible merger. These discussions are at a very early stage and there can be no certainty the contemplated merger will occur or of the timing or terms of any such transaction.

As stated in the Company's full year results announcement on 15 March 2011, Gem Diamonds continues to monitor potential value enhancing opportunities outside of its current asset portfolio and these preliminary discussions represent part of that ongoing strategy.

Based on the most recently published full year financial and reserve statements of each company, any transaction would be likely to be classed as a reverse takeover under the UK Listing Rules due only to the relative ratio of current published reserves. Gem Diamonds therefore draws investors' attention to the following information: Lucara is listed on the TSX Venture Exchange under the symbol LUC. Lucara publishes periodic financial reports which are available under their profile at www.sedar.com and are also available on their website www.lucaradiamond.com.

Gem Diamonds expects to publish an updated statement of reserves and resources to include its Botswana project Gope at or before the time of the Company's interim management statement in April 2011.

Shareholders are advised that there can be no certainty that the discussions between Gem Diamonds and Lucara will lead to any agreement concerning a possible merger or as to the timing or terms of any such agreement and there can be no assurance that, even if reached, any such transaction would be completed. A further announcement will be made if appropriate.

For further information please contact:

Gem Diamonds

Clifford Elphick, Chief Executive Officer

Glenn Turner, Chief Commercial and Legal Officer

Richard Chetwode, Investor Relations

Tel: +44 (0) 20 3043 0280

J.P. Morgan Cazenove - Financial Adviser

Ian Hannam / Barry Weir / Neil Passmore

Tel: +44 (0) 20 7588 2828

Pelham Bell Pottinger - PR

James Henderson / Charles Vivian

Tel: +44 (0) 20 7861 3160 / 26

Notes to Editors

• Gem Diamonds is listed on the Main Market of the London Stock Exchange and is a constituent of the FTSE 250 Index. The trading symbol is GEMD.

• Gem Diamonds is a leading global diamond producer with diamond mining operations throughout the world and headquartered in London. Gem Diamonds has a specific focus towards higher value diamonds; a segment of the market that its management believe will deliver superior long-term returns.

• Gem Diamonds is a majority shareholder in the Letšeng mine in Lesotho, a long-life, producing kimberlite mine renowned for its high quality diamonds. It also has a 100% interest in Ellendale lamproite mine in Western Australia, the only reliable producer of highly sought after yellow fancy diamonds. Currently the Company is developing its 100% owned Gope kimberlite project in Botswana into a world-class producing mine.

• For further information please refer to our website, www.gemdiamonds.com

This press release is not for distribution to United States Newswire Services or for dissemination in the United States.

FORWARD-LOOKING INFORMATION:

Except for statements of historical fact, all statements in this news release - including, without limitation, statements regarding production estimates and future plans and objectives of Gem Diamonds - constitute forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from those anticipated in such statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties such as: risks relating to estimates of reserves and recoveries; production and operating cost assumptions; development risks and costs; the risk of commodity price fluctuations; political and regulatory risks; and other risks and uncertainties as disclosed under the heading "Risk Factors" in its Prospectus and elsewhere in Gem Diamonds documents filed from time-to-time with the London Stock Exchange and other regulatory authorities. Further, any forward-looking information is made only as of a certain date and the Company undertakes no obligation to update any forward-looking information or statements to reflect events or circumstances after the date on which such statement is made or reflect the occurrence of unanticipated events, except as may be required by applicable securities laws. New factors emerge from time to time, and it is not possible for management of the Company to predict all of these factors and to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information.