PRG.L Regulatory News (PRG)

13 April 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Operational update, Motete Dyke project, Lesotho

Highlights:

·; Motete Dyke - comprehensive micro-diamond grades of 90 cpht at +0.85mm and 60 cpht +1.18mm

·; Independent confirmation of in-house tonnage estimates - 1.1 Mt to 2,350 m ASL

·; Provisional professional diamond value estimate - US$ 160 per carat for +0.85mm and US$ 200 per carat for +1.18mm diamonds

·; Road access complete - first bulk sample of 350 tonnes mined and transported to the process plant

·; Delineation drilling - scheduled to commence in early May

Paragon Diamonds, the African-focused diamond explorer and developer, announces an operational update on its Motete dyke project, Lesotho.

Micro-diamond Grade Modelling

The Company's consultants, MSA Group and Mr. Johannes Ferreira, have visited the Motete Dyke Project site and undertaken a grade modelling exercise across the entire dyke based on the 2,655 diamonds recovered from 1,355 kg of sample material processed to date. Their report "Preliminary Diamond Grade and Tonnage Model for the Motete Dyke" was submitted to the Company on April 10th. Calculated grades range from 84-90 cpht (weighted average 88 cpht) at a bottom size cut of +0.85mm (≈+1DTC) and 57-64 cpht (weighted average 62 cpht) at a bottom size cut of +1.18mm (≈+3DTC). Metallurgical test work on the planned bulk sample will in addition determine the process recovery factor, thus the recovered (commercial) grade is anticipated to be marginally lower, but with losses predominantly restricted to the smallest, least valuable diamond size fraction. The report also statistically estimates and independently confirms the previous in-house tonnage estimates, which it states as: 0.585 Mt above 2,450 m above sea level and 0.550 Mt between 2,350-2,450 m above sea level, or 1.135 Mt. These tonnage estimates do not represent a Resource Update, as defined by the AIM Rules in the Note for Mining and Oil & Gas Companies - June 2009.

The independent report by MSA Group & J. Ferreira and associates will be available along with other technical reports on the Company's website www.paragondiamonds.com shortly.

Diamond Valuation

The Company's diamond valuer, Radiant Diamond Consulting Ltd., has viewed the diamonds recovered by caustic fusion (including 130+ macro diamonds of +0.5mm) with a view to estimating the overall quality of diamonds from Motete. As such their estimates are based on extrapolation of the characteristics to a larger population of diamonds, and are dependent on completion of the bulk sampling and the acquisition of a substantial parcel of macro diamonds for verification.

Nonetheless, their most conservative estimate, as applied to the statistically predicted macro-diamond population established so far, suggests that for an initial parcel of 1,000 carats (predicted to include diamonds of up to 4 carats in size) an overall value of US$ 160 per carat for diamonds above a 0.85 mm bottom size, and $200 per carat for all diamonds above +1.18 mm bottom size is achievable at the present time. With the incorporation of larger diamonds predicted to be recovered in a production-scale operation, the overall value would also increase. The model values are considered to be 75% accurate and will be revised when a full diamond evaluation parcel from bulk sampling becomes available.

Bulk Sampling

As intended, road access was completed to the Motete Dyke by the end of March 2012, and extraction of samples and their transport to the Lemphane Project bulk sampling plant (25 km distance by road) has been ongoing since. As of 10th April, 15 truck loads representing circa 350 tonnes of kimberlite have been mined from the first sample location, hauled and stockpiled at Lemphane. It is intended to continue sampling at three further locations along the dyke for a total sample in the order of 1,500 tonnes. Additional equipment (conveyors, primary crushing circuit, reduced-size screen panels of 1 mm etc.) have been procured in order to upgrade the Lemphane bulk sampling plant to process hard kimberlite and recover smaller diamonds; the plant will be re-configured once sampling at Motete is completed. It is expected to then process the four bulk samples with the objective of recovering ±1,000 carats of +1 mm macro diamonds for grade estimation and valuation purposes.

Delineation Drilling

Drilling contractor Diabor Ltd. will commence drilling the first of four NQ drill holes designed to intersect the dyke at a depth of 200 m below surface, scheduled to commence on 2nd May 2012. The drilling is expected to be completed before the end of June. A combination of truck and helicopter mobilization will be used to reduce costs and access the more remote, elevated portions of the dyke. Each hole is intended to provide a number of intersections, by utilizing wedges and deviation drilling, to substantially reduce the overall cost of drilling for the number of sub-surface intersections achieved. The subsurface geometry will be integrated with re-mapping of the surface exposures to generate a detailed wire-frame model of the dyke and an accurate volumetric and density model.

The conclusions of this work, will provide comprehensive micro-diamond results from the surface and drill core; a parcel of macro-diamonds in the order of 1,000 carats from four surface sample locations together with a professional valuation; and a detailed sub-surface geometry of the dyke from drill core data will be used to generate a definitive resource to an appropriate standard (such as NI 43-101).

Paragon MD, Stephen Grimmer commented:

"In less than six months since commencing work on this project, we now stand on the brink of establishing an initial diamond resource. It is our intention to rapidly utilize any such forthcoming resource to generate a scoping study, which if favourable, will form the basis upon which we intend to fast-track the Motete Dyke Project into development and production in the shortest timeframe possible."

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 (83.7%)

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 (83.7%)

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.