PRG.L Regulatory News (PRG)

Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources 9 June 2014 Paragon Diamonds Limited ("Paragon Diamonds" or "the Company") Update on Interest in Meso Diamonds (Pty) Ltd Issue of Equity On 12 May 2014, Paragon Diamonds announced that it had conditionally increasedits interest in its Lesotho subsidiary, Meso Diamonds (Pty) Ltd ("MesoDiamonds"), from 85 per cent. to 100 per cent. by acquiring the 15 per cent.interest held by its local partner, Mr. Martin Matekane of Matekane Mining. Meso Diamonds was recently granted Mining Lease 009/2013 over the LemphaneKimberlite Project (`Lemphane Project') in the Kingdom of Lesotho. Its netassets at 31 December 2013 were £15.7m, principally capitalised explorationcosts, and in the year ended 31 December 2013 it made a profit of nil (havingcapitalised all exploration costs). The consideration for the 15 per cent. interest in Meso Diamonds is the issueof 35,471,510 new ordinary shares in the Company (`Consideration Shares') toMr. Matekane, which is equivalent to 12 per cent. of the Company's currentissued ordinary share capital. The acquisition was conditional on admission ofthe new ordinary shares to AIM and application has now been made to the LondonStock Exchange for the Consideration Shares to be admitted with admissionexpected to become effective on 12 June 2014. Martin Matekane is the son of Sam Matekane, who is a director of Meso Diamondsand is therefore a related party under the AIM Rules. The directors of Paragon,having consulted with the Company's nominated adviser, consider the terms ofthe transaction to be fair and reasonable insofar as the Company's shareholdersare concerned. Also further to its announcement on 12 May 2014, the 20 per cent. interest inMeso Diamonds has now been granted to the Government of Lesotho. As a result of the above transactions, Paragon Diamonds now has an 80% interestin Meso Diamonds. Following admission of the Consideration Shares, Mr. Martin Matekane will hold35,471,510 ordinary shares of 1p each in the Company ("Ordinary Shares"), equalto 10.71 per cent. of the enlarged share capita and the Company will have331,067,427 Ordinary Shares in issue. This figure may be used by shareholdersas the denominator for the calculations by which they will determine if theyare required to notify their interest in, or a change to their interest in, theCompany, under the Disclosure and Transparency Rules. All definitions used herein are as defined in the Company's announcement of 12May 2014. **ENDS** For further information please visit www.paragondiamonds.com or contact: Martin Doyle Paragon Diamonds Limited +44 (0) 20 7099 1940 Simon Retter Paragon Diamonds Limited +44 (0) 20 7099 1940 Lindsay Mair Sanlam Securities UK +44 (0) 20 7628 2200 Catherine Miles Sanlam Securities UK +44 (0) 20 7628 2200 Felicity Edwards St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Frank Buhagiar St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Notes Paragon Diamonds has a pipeline of projects in Lesotho, Botswana and Zambia,the most advanced of which is its Lemphane Kimberlite Pipe Project in Lesotho,located close to the world class Letšeng mine, Lesotho's largest diamond mine.Lemphane is the last known world-class sized kimberlite to be developed inLesotho. Among the stones recovered in the Company's 2013 bulk samplingprogramme were several large high value stones of up 8.9 carats in size andindividual diamond values in excess of US$2,400/ct have been achieved,demonstrating the potential for Lemphane to hold large and valuable diamonds.The first of a two stage production programme is currently expected to commencein the near to mid-term (subject to financing) which will further define theresource at Lemphane. As increased tonnages of kimberlite are processed theproportion of larger diamonds recovered will improve, increasing the averagevalue of diamonds recovered at the project, as was the case at Letšeng. Stage 1 production will cover a two year period during which approximately 1 Mtof kimberlite will be mined and processed out of the currently estimated 48.6Mtof kimberlite (to 350m depth) at the site, using a 75 tonne per hour processingplant. The Company is targeting 20,000 carats during Stage 1 production with anestimated minimum value of US$750 per carat that is expected to generaterevenues in excess of US$8m per annum. Cash flow will be reinvested to furtherdevelop Lemphane and complete a bankable feasibility study, a 3D geologicalmodel and a substantial inferred resource ahead of commencing the Stage 2production phase. Stage 2 will see production ramped up to 3Mt/year with peakproduction expected to hit 65,000 carats per year of high value diamonds.