PRG.L Regulatory News (PRG)

24 July 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Further Bulk Sample Results, Motete Dyke project, Lesotho

Paragon Diamonds Limited is pleased to announce further results on its recently commenced Motete Dyke bulk sampling and drilling programme.

Highlights

·; A second Motete Dyke 200t bulk sample processed and 97 carats recovered

·; Recovered grade of 56 carats per hundred tonnes in line with previous results

·; Recovered grade excludes smaller stones due to plant limitations

·; Two further drill intersections of kimberlite at 200m below surface

·; Scoping study commenced - application for a mining licence in preparation

Material from trench T1, at the eastern end of the dyke has been processed and yielded 97 carats of diamonds and 1,404 individual stones. The largest stone recovered was 0.91 carats.

A further sample of 336.92 tonnes of mixed kimberlite with basalt contamination was processed over ten days, and the DMS tailings were re-crushed and re-treated twice. After excluding for over-size, removal of basalt contaminant, and un-crushed material, 217.14 tonnes of pure kimberlite, at 19.88 % moisture content, for 172.37 dry tonnes were processed to -1 mm and the diamonds recovered. In total 96.87 carats were recovered as 1,404 diamonds. Results are per the table below:

The recovered grade calculates at 56.2 carats per hundred tonnes (cpht). This recovered grade from the bulk sample plant is as expected when compared to the micro-diamond model, with quasi-100% correspondence for diamonds above 2 mm in size. Below 2 mm down to 0.85 mm (this range would include all stone that could be considered commercial), the plant recoveries fall well below model, with only 48% of predicted carats below 2 mm and just 3% of predicted carats from 1.18 mm down to 0.85 mm recovered, using the model as a reference. This is as expected because our bulk sample plant is set up with a bottom cut-off of 1+ mm and a 4 mm re-crush limit. The company intends to reprocess the tails in due course to recover some of these smaller stones, which should increase the grade, as it is important to get a view of their value to aid in the design of any proposed commercial plant in the future. The appropriate design of a main production plant would then permit the recovery of a significant proportion of these smaller diamonds.

The quality of the diamonds was again generally high, with abundant clear white dodecahedra encountered in the majority of size fractions, as is also the case in the micro-diamond population. Whilst the average stone size of the Motete diamonds is smaller than those from the Lemphane Kimberlite, the current demand for smaller good-quality stones is high, riding on the back of the buoyant watch and accessory jewellery market.

Images of the diamonds can be viewed on the company website at:

www.paragondiamonds.com/image_gallery.html 

Delineation drilling on the Motete Dyke continues. Kimberlite has been intersected in all three holes drilled from a helicopter-accessible pad at an altitude of 2,700 m at the western end of the dyke. Kimberlite was intersected at true vertical depths of between 203.4 m and 197.4 m (average 199.5 m) and at true horizontal widths of between 1.45 m and 1.10 m (average 1.23 m). Both drill rigs have now been successfully moved on, are now drilling a series of six intersections in the lower, central portion of the dyke. Drilling is scheduled for completion in early August, weather permitting.

Mining consultancy group Paradigm Project Management visited the project site on a preliminary technical visit in early July and have now commenced work on the scoping study. Paragon has also held discussions with the Commissioner of Mines' office regarding a pending application for a mining licence to develop the Motete Kimberlite Dyke, subject to a favourable scoping study outcome. In particular, the Company has submitted proposed co-ordinates for a mining licence and declared an intended project area for mining and processing infrastructure.

Paragon MD Stephen Grimmer commented: "Motete continues to produce results as anticipated. A second bulk sample result, taken circa 600 meters to the east of the first result, shows the uniform consistency in terms of grade and stone size. The further drilling also shows a consistent width in excess of one metre, at over 200 metres below surface and supports the initial calculation of at least 1Mt of kimberlite to this depth. We are rapidly generating the data for declaring a maiden resource on this kimberlite and are confident that a viable economic development strategy will be delivered in due course."

In accordance with the AIM Rules, the information in this announcement has been reviewed by Stephen Grimmer PhD., MSc., a qualified geologist with over 20 years' diamond exploration experience.

For further information:

Notes to editors

Paragon Diamonds is looking to rapidly develop producing and exploration diamond properties into a portfolio of high value assets located within Africa. To date it has secured a series of alluvial and hard rock assets which its exploration and development teams are working on to progress. The core focus at present are the companies hard rock licences located in Lesotho, a major producing diamond region. The Projects include:

Lemphane Kimberlite project Lesotho (85%)

Lemphane is one of five known diamond bearing kimberlite pipes within Lesotho, located 5km from the Liqhobong project. The Environmental assessment plan and access routes and exploration camp have been completed.DMS plant constructed and bulk sampling commenced with 35,000 tonnes of ore stockpiled awaiting processing. Extended bulk sampling of a further 25 - 40,000 tonnes is possible once initial sample completed.

Motete Dyke exploration, Lesotho (85%)

Motete is a substantial kimberlite dyke (fissure system) in close proximity to the Lemphane project. Known to be diamondiferous and currently undergoing initial exploration. Initial micro diamond analysis results in 2012 indicated that an in-situ grade of up to 1 carat per tonne is likely. The licence was awarded in December 2011.

Kaplamp diamond hosting Lamproite', Zambia

Kaplamp is a large prospecting licence known to host 14 Lamproite pipes within a known diamondiferous region and with five high profile targets identified for initial evaluation. The area is highly prospective as De Beers recovered significant amount of stones in 60's and 70's but relinquished area as Lamproites were not yet recognised as viable. The Argyle Diamond Mine in Western Australia is the most renowned Lamproite hosted mine - in 1994 produced 39% of worlds diamond production.

Kopje kimberlite exploration, Botswana

This newly awarded prospecting licence covering 15 km sq in highly prospective area 35 km east of DeBeers' large producing Orapa Mine. Initial exploration work planned for Q1 2012.

Konomo Alluvial Mine, Sierra Leone

This Alluvial diamond project covers 162km2 and has an indicated and inferred resource of 119,000 carats with large tracts of the river remaining unexplored. Circa 3,000 carats recovered by Paragon since operations commenced, with a parcel that includes c.34.18 carat "special" stone and 10.18, 10.46 and 9.96 carat gem quality stones.

Mabuki, Tanzania

Located 81km south of Mwanza, Tanzania with good infrastructure nearby (roads, power, water, transport) the licence sits within a known Kimberlite Field. Artisanal activity occurs to the west of licence with diamond bearing gravels identified off the edge of the licence. The intention is to explore (detailed geophysics and sampling) and map-out, then establish drill targets and define a resource. Wardell Armstrong completed a competent persons report on Tanzania in September 2010.