PRG.L Regulatory News (PRG)

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Paragon Diamonds, the AIM quoted, African focused diamond production and development company, today announces its final results for the period ending 31 December 2010.

A copy of the Annual Report and Accounts and notice of AGM is being posted to shareholders shortly and will be available from the Company's website - www.paragondiamonds.co

Highlights

Financial

·; £349,000 revenues representing one sale of select rough diamonds

·; Loss after tax for period was £0.4 million, excluding one off costs associated with the IPO of £0.3 million and deprecation of £0.4 million

·; £3.8 million gross proceeds raised of as part of November IPO

Operations

·; Sierra Leone Alluvial production

o average of 34,000 tonnes of ore p/m mined and treated

o Q4 mining and processing of 33,400 tonnes of gravels per month resulting in production of 1,120 carats per month

o diamond production of nearly 5,400 carats for FY 2010

o largest stone recovered 34.02 carats

Strategic

·; Acquired 44.3% interest in International Diamond Consultants ("IDC")

o Lemphane kimberlite project Lesotho

- within cluster of major kimberlites all at advanced stage

o Kabale licence Zambia deemed prospective for kimberlites

Post Period

·; Successful placing of 8,500,000 new ordinary shares, raising gross proceeds of £2.9 million

·; River diversion underway for higher grade diamond recovery, Sierra Leone

·; Award of new 862km₂ licence through IDC, Zambia

o known diamond bearing lamproite pipes

Commenting today Frank Scolaro, Chairman, said: "We look forward to 2011 with growing optimism. With the ongoing recovery of international diamond markets, this is an exciting time to be evaluating and developing major kimberlites. Whilst our current sustained alluvial production is a fundamental support towards our growth and development, we see our future as firmly anchored in the development of substantial primary deposits, both those within our present portfolio of interests, and of any other similar projects which we may become involved in."

Chairman's Statement

I am pleased to present the first financial statements for Paragon Diamonds Limited (the "Company" or the "Group") for the period from incorporation to 31 December 2010 and report on both the successful initial public offering and subsequent developments of the Group.

The Company was incorporated on 27 April 2010 with the objective of becoming the holding company of a diamond and coloured gemstone production, development and exploration group with its primary focus on sub-Saharan Africa.

The Group was formed by the acquisition of its major subsidiaries, Sierra Leone Hard Rock Limited and African Rock Resources Limited, immediately prior to listing on AIM on 1 November 2010. The Company raised gross proceeds of £3.8million as part of the initial public offering by issuing approximately 18% of its share capital to a mix of new private and institutional investors.

Sierra Leone Hard Rock

The Company acquired the entire issued share capital of Sierra Leone Hard Rock Limited ("SLHR") immediately prior to admission to AIM. The consideration was satisfied by issuing 87,500,000 new ordinary shares in the Company at the listing price of 20p per share representing £17.5 million. This acquisition gives the Company access to four diamond mining licences covering an area of 162.4 km2 and a fully equipped and operating mining operation in the Konoma region of Sierra Leone. Some areas of the licences have an estimated resource of 119,000 carats of diamonds but large parts of the licences remain largely unexplored. The diamonds historically recovered from the area are of very high quality and command prices significantly higher than the world average.

African Rock Resources

On 21 December 2010 the Company completed the acquisition of the entire issued share capital of African Rock Resources Limited ("ARR") which increased and diversified the group's asset portfolio by giving it exclusive exploration rights to the Mabuki diamond licence in Tanzania. The consideration was satisfied by issuing 12,500,000 new ordinary shares in the company at the listing price of 20p per share, representing £2.5 million.

International Diamond Consultants

Since listing, the Company has successfully completed the acquisition of a 44.3% interest in International Diamond Consultants Limited ("IDC"), a private African focused diamond exploration group holding licences in both Lesotho and Zambia. Consideration for the acquisition was satisfied by issuing 23,397,894 new ordinary shares in Paragon equivalent to £5.7 million and was completed on 8 December 2010.

IDC holds the Lemphane Prospecting Licence which covers a known kimberlite pipe in the world renowned diamondiferous region of the Kingdom of Lesotho. The Lemphane Prospecting Licence lies within the Botha-Buthe district of northern Lesotho, 29 km west of the Letseng Diamond Mine and 5 km north west of the Liqhobong Deposit.

In addition, IDC holds the Kabale licence in Zambia which is deemed prospective for kimberlites.

Meso Diamond Limited

The Company entered into an agreement to acquire a 10% interest in Meso Diamond Limited, the Lesotho based subsidiary of IDC which holds the Lemphane licence for a staggered consideration of $2 million over twelve months from December 2010.

Financial Results

The results for the Group include the period since incorporation for the Company and the periods since acquisition for its subsidiaries, Sierra Leone Hard Rock Limited and African Rock Resources Limited. Due to the small period of operations incorporated in these results, the Group managed one sale of diamonds totalling 2,837 carats. This was conducted under tough market conditions towards the end of 2010 and generated revenues of $190/carat. I am confident a better overall price will be generated in the coming months on the back of a more favourable diamond market. At an operating level the Sierra Leone operations made a loss of £196,000 before depreciation and interest charges for the two months since acquisition to 31 December 2010. The Group loss after tax for the period was £1,138,000 which includes one off costs associated with the IPO of £335,000 and depreciation of £354,000.

The Group held £2.0 million of cash as at 31 December 2010 which along with a successful placing of 8,500,000 ordinary shares since the year end raising gross cash proceeds of £2.9 million, places the Group in a strong position to fund the ongoing operations and potential expansion of the asset portfolio.

The Group has a strong balance sheet with net equity attributable to its shareholders of £28.9 million. The mine in Sierra Leone is carried at a value of £18.5 million along with plant and equipment on site of £2.0 million. Intangible assets of £2.5 million comprise the exploration licences held by the Group and investments of £6m comprise the Groups 44.3% interest in IDC as well as its contributions under an agreement with IDC's subsidiary Meso Diamonds Pty.

A loan facility of £2.3 million bearing interest at 2% above Bank of England base rate and repayable at 10% of operating profit from the Sierra Leone operations was acquired with SLHR and the balance as at 31 December 2010 amounted to £2.0 million. Since listing the net draw down under this facility was £96,000 and as at 31 December 2010 amounts undrawn totalled £241,000.

The Board

The Company's board has been strengthened since admission to AIM with the appointment of Dr Stephen Grimmer as Managing Director. Stephen is a highly experienced diamond exploration and mining professional with over 22 years of practical experience working extensively in Africa. Stephen holds a PhD in geology from Keele University and an MSc from the Royal School of Mines. He has worked in senior management roles in the diamond industry in Angola, Southern and West Africa, South America, Scandinavia and Russia. In his career he has planned and/or built a number of diamond mines, both alluvial and kimberlite, and managed several advanced kimberlite evaluation projects. He also has extensive exploration, mining and production experience gained working for a number of major private producers and London/Toronto listed companies.

Nicholas Lee resigned from the board on 31 January 2011 in order to focus on other interests. The Board of Paragon wishes to thank Nicholas for his valuable contribution to the development of the Company in its early stages and the initial public offering.

Outlook and events subsequent to the period end

The successful placing of 8,500,000 new ordinary shares was completed on 27 January 2011, raising gross cash proceeds of £2.9m to fund the ongoing operations and potential expansion of the Group's asset portfolio.

In January 2011, Tamarisk Investments Pty Limited, the Zambian subsidiary of IDC, in which Paragon holds a 44.3% interest, was granted an exploration licence covering 862km2 over an area known to contain a suite of diamondiferous olivine lamproites. This is known as the KapLamp licence and provides a very exciting addition to the Group's exploration assets in a very promising region. Paragon believes that the KapLamp project is highly prospective due to the size of the licence area. Historic exploration work undertaken by De Beers in the 1960s and early 1970s reportedly recovered significant numbers of diamonds of up to 0.5 carats in weight from a 16.5 ha pipe ("Pipe 2"), with other diamonds recovered from four pipes with surface areas up to 45 ha.

I am confident that the Group will make considerable progress in its development of existing operations in Sierra Leone as well as its exploration in other areas of operation. We may use a number of strategies to enhance shareholder value such as developing mineral assets using our own team, development in partnership with other groups, acquisitions or disposals of assets, or other corporate transactions should suitable opportunities arise.

I would like to thank my colleagues and employees for all their hard work throughout the period and particularly in completing the successful listing on AIM. I look forward to the next year which should see the Group continue to grow into a diversified and value enhancing Group.

Francesco Scolaro

Executive Chairman

24 March 2011

Consolidated statement of comprehensive income

The loss arises from the Group's continuing operations.

Consolidated statement of changes in equity

Consolidated statement of financial position