PRG.L Regulatory News (PRG)

04 July 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Preliminary Bulk Sample Results, Motete Dyke project, Lesotho

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

Highlights

·; 360 tonnes processed from a total of 1,600 tonnes extracted from the Motete Dyke

·; Results in line with previously announced modelled grade of 90 cpht

·; All diamonds recovered of very high quality

·; Drilling underway, 1.25 m wide kimberlite dyke intersected at 200 m vertical depth

·; Drilling results so far in line with in house estimate of c. 1.1 Mt

·; Paradigm Project Management commissioned to undertake scoping study

Sampling on the Motete Dyke has recently been completed and circa 1,600 tonnes of fresh and weathered surface kimberlite has been extracted in four samples and safely transported to the Lemphane process plant site.

The first sample of 359.08 tonnes of kimberlite, with minor basalt contamination, was processed over four days, and the tailings re-crushed and re-treated twice. After excluding for over-size, removal of basalt contaminant, un-crushed material and water content, 208.66 tons of pure kimberlite were processed to minus 1 mm and the diamonds recovered. In total 95.01 carats were recovered as 1,333 diamonds. Results are as per the table below:

The recovered grade calculates as 45.5 carats per hundred tonnes, however it should be noted, when compared to previous grades modelled on micro-diamonds, that the grade of 90 cpht at +1DTC is not an appropriate comparison. Only 4% of the expected carats in the +1-2DTC size range were recovered due to process plant limitations, whereas 77% of the predicted carats at +3DTC and 93% of predicted carats at +5DTC were recovered. As such, the achieved grade for the +5DTC of 38 cpht is 93% of the modelled grade of 41 cpht for a sample of this size.

The quality of the diamonds was generally very high, with the majority of size fractions dominated by clear, white dodecahedra, as also encountered in the micro-diamond population. Images of the diamonds can be viewed on the company website at:

www.paragondiamonds.com/image_gallery.html 

Following commencement of the advised drilling programme in May, the upper-most drill hole located at the western end of the Motete dyke intersected kimberlite at 190.3 metres (approximately 200 m below surface) and 2.90 metres of kimberlite core were recovered. As this was an inclined hole drilled through the mountain-side, this represents a true width of 1.25 m, compared to 1.50 metres at the overlying surface. Drilling is ongoing, a second drill rig has been mobilized to site to accelerate progress and a total of twelve intersections are planned.

Paragon has also appointed the Johannesburg-based consultancy group Paradigm Project Management to oversee and prepare a scoping study of the Motete Dyke Project. Paradigm has extensive experience in this area, including in mining engineering and metallurgy, and has undertaken similar studies for several distinguished diamond-miner clients, including on several projects in Lesotho. Paragon's subsidiary Botle Diamonds, the licence holder, has also entered into preliminary discussions with the Lesotho Ministry of Natural Resources regarding the issuing of a mining licence for the Motete Dyke.

Paragon MD Stephen Grimmer commented: "we are very pleased with these initial results, which correspond very closely to those from earlier modelled work. In particular, the close correlation in terms of size, number and quality of the larger diamonds recovered, and the confirmed presence of the dyke at over 1 metre in width, some 200 metres below the surface, gives us confidence to commence a scoping study for the project at this stage."

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.