PRG.L Regulatory News (PRG)

6 June 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Award of Lemphane exploration licence extension

Highlights:

·; One year extension of Lemphane exploration licence awarded

·; Will provide sufficient time for Paragon to continue its exploration programme

Paragon Diamonds, the African-focussed diamond explorer and developer, is pleased to announce that it has been granted a one year extension to its key Lemphane kimberlite exploration licence which covers 6.33 km2 in Lesotho. The licence is owed by the Group's 85% controlled subsidiary Meso Diamonds and will now expire in June 2013.

The Company obtained control of the Lemphane licence in May 2011 and immediately commenced a rapid exploration programme to evaluate the kimberlite. When obtained by Paragon the licence had just over a year left until its expiry and minimal work had been undertaken.

This extension will enable the Group to continue its work programme by effectively giving the Company a full two year period to conclude the necessary work since taking control in May 2011. It is the group's intention to use this additional year to complete the bulk sampling programme that is currently underway, increase the kimberlite tonnage taken from specific sample locations in the kimberlite and conclude on the evaluation work before embarking on a scoping study and aiming towards obtaining a trial mining licence thereafter.

Paragon Chairman, Francesco Scolaro commented:

"this is very good news for the Group and highlights the willingness for us to continue our work as well as good co-operation within the mining industry of the Kingdom of Lesotho. This extension will enable Paragon to continue its rapid exploration of the kimberlite with a view to completing the bulk sampling and moving towards a scoping study as quickly as possible. Along with our rapid development of the Motete Dyke system this gives us a great platform to develop into a Lesotho focused diamond producer"

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.