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Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources 4 December 2014 Paragon Diamonds Limited ("Paragon" or the "Company") Drilling Highlights Potential for Increase in Kimberlite Tonnage at Lemphane Pipe, Lesotho Paragon Diamonds Limited, the AIM quoted diamond development company, ispleased to announce a recently completed drilling programme at its flagshipLemphane Kimberlite Project in Lesotho (`Lemphane' or `the Project') hasdemonstrated the potential for a further increase in the Project's presenttonnage estimate of 48Mt of kimberlite. The results could have positiveimplications for the economics and life of mine at Lemphane, which is locatedamong a cluster of kimberlites known for producing large, high value diamondsand where Stage 1 production is due to commence in Q1 2015 (subject tofinancing). This will involve the extraction of 1 million tonnes of kimberliteover a two year period which, according to an independent report, is expectedto lead to the recovery of over 100 diamonds larger than 9 carats, includingstones over 100 carats in size. Between August and October 2014, Paragon's 80% owned subsidiary, Meso Diamonds,carried out the latest drilling programme at Lemphane which consisted of nineholes totalling 1,248m. Four of the holes were planned to intersect the outercontact of the kimberlite at depths between 150-200m below surface. All holesachieved their objective of delineating the shape of the upper kimberlite inmore detail, as well as better defining the boundary between the smaller,lower-grade northern portion, and the higher-grade, larger diamond sizesouthern portion, as well as demonstrating the continuation of the higher gradesatellite pipe to at least 150m in depth. In addition, two holes demonstratedthat the eastern contact of the kimberlite is vertical to at least 150m indepth, and that the Lemphane kimberlite therefore has the potential to host ahigher tonnage than previously believed. As such the geological modelling, which is ongoing, will be based on a detailedmapped surface perimeter of the kimberlite (300m x 250m or 6 hectares insurface area), on four wall rock contact intersections in the near surface(150-200m depth), on eight wall rock contact intersections at between 200-300mdepth and on four intersections below 300m. The drill results have been integrated into the in-house 3D geological model,and interrogation of that model demonstrates the maximum dimensions of thekimberlite at 100m depth (2,500m ASL level) are 295m x 215m, at 200m depth(2,400m ASL) are 275m x 195m and at 300m depth (2,300m ASL) are 260m x 150m.These intervals correspond to approximately the 5 year, 10 year and 15 yearopen pit envelope of circa 15Mt, 30Mt and 45Mt of kimberlite respectively. Thekimberlite maintains a planar sectional area in excess of circa 3 hectares at350m below surface (2,250m ASL) and is open at depth below that. Two outcomes from this latest drilling programme are that an improvement in theoverall kimberlite tonnage to a given depth can be expected, and a reduction inthe overall waste:ore (stripping) ratio to a given depth is anticipated,compared to the 2012 Scoping Study. Drilling was undertaken by Rodio Geotechnical Services which has previouslyundertaken drilling for the Company at Lemphane, and is the main drillingcontractor at the nearby Letšeng Diamond Mine. On completion of this latestround of drilling, Rodio has agreed, at no charge to Paragon, to station adrill rig at the Lemphane project site to cover future drilling needs in 2015.It is intended to drill a final series of eight holes for approximately 1,600mto confirm the dimensions of the kimberlite at between 200-300m depth belowsurface, as well as undertaking geotechnical drilling for the purposes oftailings storage facility and open pit construction at Lemphane. Paragon's Stephen Grimmer said, "The drilling results are entirely positive andbetter than previously anticipated by the Company. I am particularly pleasedthat they show the kimberlite at Lemphane is larger at depth than previouslyassumed which has positive implications for the overall tonnage and a reducedwaste:ore ratio and indeed the economics of Lemphane as a high value/ largestone diamond project. I look forward to seeing these results beingincorporated into the planned Pre-Feasibility study to be conducted in tandemwith Stage 1 production, which, subject to financing, is planned to commence inQ1 2015 as Lemphane's potential as the next world class kimberlite in Lesothocontinues to increase." In accordance with the AIM Rules for Companies, the information in thisannouncement has been reviewed by Stephen Grimmer PhD., MSc., a qualifiedgeologist with over 25 years diamond exploration experience. **ENDS** For further information please visit www.paragondiamonds.com or contact: Philip Falzon Sant Paragon Diamonds Limited +44 (0) 20 7182 1920ManducaSimon Retter Paragon Diamonds Limited +44 (0) 20 7182 1920 Edward Hutton/Gerry Northland Capital Partners +44 (0) 20 7382 1100Beaney Limited (Nominated Adviser)John Howes/Charles Northland Capital Partners +44 (0) 20 7382 1100Laughton Limited (Sales and broking) Felicity Winkles St Brides Media and Finance Ltd +44 (0) 20 7236 1177Frank 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 potentially economic 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,highlighting the potential for Lemphane to hold large and valuable diamonds.The first of a two stage production programme is currently expected to commenceQ1 2015 (subject to financing) which will further define the resource atLemphane. As increased tonnages of kimberlite are processed the proportion oflarger diamonds recovered is expected to improve, increasing the average valueof 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$930 per carat that is expected to generaterevenues in excess of US$9m 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. It is the intention of the Company to become a fully integrated diamond companymaximizing the margins gained from being exposed from the mining to selling ofdiamonds.