PRG.L Regulatory News (PRG)

Paragon Diamonds Limited

("Paragon" or the "Group")

ADMISSION TO AIM AND £3.8M PLACING

Key Highlights

·; £3.8 million Placing through the issue of 18,985,000 new Ordinary Shares

·; Key assets: Konoma alluvial diamond mine, Sierra Leone and Mabuki Kimberlite targets, Tanzania

·; Corporate strategy to:

- Build a significant, high margin, diamond company in Africa supported by immediate revenues

- Expand diamond production  at Konoma, Sierra Leone

- Progress exploration in Sierra Leone and Tanzania

- Assess potential new acquisitions

Paragon Diamonds (TIDM "PRG") today announces that it has been admitted to AIM and placed 18,985,000 new Ordinary Shares at 20p raising £3.797 million for the Company and £3.182 million after expenses. The shares will begin trading on AIM at 08:00 Monday 1st November 2010 and, at the Placing Price on Admission, the Company will have a market capitalisation of £21.36 million. ZAI Corporate Finance is acting as nominated adviser and broker.

On admission, Paragon will acquire the entire issued share capital of Sierra Leone Hard Rock Limited ("SLHR) from Obtala for £17.48 million which will be satisfied through the issue of 87,490,000 new Ordinary Shares. SLHR, through its local subsidiary, owns and operates the Konomo Mine in Sierra Leone. The Company will also acquire the entire issued share capital of African Rock Resources Ltd ("ARR") for £2.5 million, which will be satisfied through the issue of 12,500,000 new Ordinary Shares. The acquisition of ARR is conditional upon the admission to AIM, the renewal of Mabuki Diamond Licence and the consent from the relevant Tanzanian licensing authority to its change of control which has not yet been received but is anticipated within two months of Admission.

Following the acquisitions, Paragon Diamonds' principal assets will comprise of a 100 per cent. interest in four diamond mining licences, including a producing mine, in Sierra Leone, West Africa and one exploration licence in Tanzania, East Africa. The licences cover a combined total area of over 162 km2 in Sierra Leone and 64 km2 in Tanzania. Detailed geological work has been undertaken on a number of areas within the mining licences in Sierra Leone where an Indicated Mineral Resource and Inferred Mineral Resource of 119,000 carats of diamonds has been estimated.

The Group intends to use the net proceeds of the Placing to purchase specific fixed assets and to provide general working capital in order to increase the current level of diamond production from its Konoma Mine in Sierra Leone. Alluvial mining is a relatively low cost form of mining thereby enabling Paragon to develop a profitable mining operation. On 27 September 2010, the first sale and export of 2,480 carats of rough diamonds for US$744,270 was achieved with a further share of profits from downstream cutting, polishing and sale to retail to follow. The diamonds were recovered from bulk sampling activities and included a selected blend of "special" stones, gem quality stones and industrial stones. The "special" stones, being those classified as individually greater than 10.8 carats, are of particular importance to the Group as historically they have commanded a significantly higher price per carat. Within the parcel there were 4 "special" stones of 23.26, 14.90, 11.93 and 11.34 carats which were valued at $3,105, $4,776, $2,280 and $2,715 per carat each respectively. The average $/carat of the special stones was $3,278; the average $/carat of the gem quality diamonds was $321.9 and the average $/carat of the industrial quality diamonds was $31 giving an overall parcel average $/carat value of $300.

The Group plans to sell parcels of diamonds quarterly in order to generate revenues, although this will be reviewed on an ongoing basis depending on prevailing market conditions and production levels of the Group. It is anticipated that future diamond sales will be of larger parcels of carats as production increases. In order to benefit from the downstream profits that can be realised through the sale of large polished stones, Paragon has taken an assignment of a distribution agreement with VL Holdings Limited of Hong Kong ("VL") from Obtala Resources Limited. VL has more than 40 years of expertise in rough, polished and diamond manufacturing and in supplying the most renowned jewellery brands with the best cut diamonds. VL will act as the exclusive distributor responsible for the collection, safe transportation, marketing and selling of stones. VL has further agreed to pay an amount equal to the price per carat as determined by the Government Diamond Valuator ("GDV") plus a 15 per cent. premium on all stones.

The Group also intends to progress exploration in Sierra Leone and in the Mabuki licence area in Tanzania. The Tanzanian licence area is situated approximately 81km southeast of the city of Mwanza, in northern Tanzania. Currently artisanal mining of alluvials is taking place to the immediate southwest of the licence. Although no exploration work has been undertaken to date, the geological setting of the licence indicates the area may have the potential for, as yet, undiscovered diamond deposits. The Group may in future allocate a proportion of the Placing proceeds to the exploration of its current portfolio, or towards acquisitions of other potential diamond and gemstone assets.

Commenting today Frank Scolaro, Executive Chairman, said: "Today's placing allows us to rapidly expand diamond production at our Sierra Leone mine in addition to progressing further exploration. Recovery and sales from Sierra Leone during the 2010 redevelopment have been very encouraging with high value larger stones being recovered and sold. Our objective is to rapidly build up a producing, African focused diamond company able to repeatedly deliver value from a portfolio of assets. We have also ensured that further value is delivered from our mineral assets through the sales agreement with VL which enables us to benefit further from downstream diamond sales."

Board of Directors

The Company is led by Directors who have experience of operating both producing and exploration resource companies in Africa and comprises:

Francesco ("Frank") Scolaro - Executive Chairman, Aged 46

Frank is an active investor in publicly quoted companies in the resource, leisure and property sectors. Frank was a director of Regal Petroleum plc from October 2006 to March 2008 and was non-executive Chairman of Kopane Diamond Developments plc until September 2010 when it was acquired by Firestone Diamonds plc. Frank is also Executive Chairman of Obtala.

Simon Retter - Finance Director, Aged 28

Simon qualified as an accountant with Deloitte LLP. Simon has specialised in resources focused corporate finance transactions including numerous LSE market flotations, extractive industries accounting, finance and internal controls assurance.

Rudi Saaiman, Operations Director, Aged 38

Rudi is a Mine Manager with 10 years in alluvial mining operating experience in western and southern Africa. Rudi has been leading the day to day operation of the DMS plant at Konomo since January 2010.

Nicholas Lee, Non-Executive Director, Aged 47

Nicholas qualified as a chartered accountant with Coopers & Lybrand following which he joined the corporate finance department of Dresdner Kleinwort. Nicholas also works with a merchant banking group, Webb Capital which focuses on fund management, advising and providing capital to small and mid cap companies.

James Ede-Golightly, Non-Executive Director, Aged 31

James commenced his career as an investment analyst with Merrill Lynch Investment Managers and then subsequently, Commerzbank. In 2006 James helped found ORA Capital Partners Ltd, serving as an executive director until October 2009, and remains as a non-executive director of the company. James is also a non-executive director of Obtala.

Buddy Doyle, Non-Executive Director, Aged 49

Buddy Doyle has 29 years experience in the mining and exploration business, predominantly with Rio Tinto Plc. Buddy led the team that discovered and evaluated the Diavik Diamond Mine and was the project geologist during the discovery and evaluation phase at the Lihir multi-million ounce gold mine. He left Rio Tinto in March 2004 to further his career in the junior mining sector.

Website

Further information about the Company, including the Admission Document and all of the information required to be disclosed pursuant to AIM Rule 26 is available on the Company's website, www.paragondiamonds.co

Defined terms in this announcement have the same meaning as the Admission document.