12 April 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Operational update, Sierra Leone

Paragon Diamonds, the African-focused diamond explorer and developer, announces an operational update on its alluvial diamond mine in Sierra Leone:

On 31st August 2011, the Company announced it was placing its Konoma Alluvial Diamond Mine on care and maintenance. Due to ongoing irregularities in the re-interpretation of current mining legislation by the Ministry of Mines of Sierra Leone, the operations currently still remain on a care and maintenance programme. Since the cessation of operations, the company has made no further investments in Sierra Leone, and has reduced its operating costs to the minimum necessary to safeguard its physical assets and the few remaining staff in-country.

The Company has recently been informed, per a series of letters from the Ministry of Mines of Sierra Leone, that a number of mining licences, some belonging to third parties but also four held by the Company's subsidiary, Sierra Leone Hard Rock Ltd, (SLHR) require re-application and/or re-issuance per Section 178 (5) of the current (2009) Mines & Minerals Act.

The Company has written to the Ministry to seek clarification on this matter, as the licences in question were issued on 4th April 2006 and were valid for an initial period of 10 (ten) years.  As such it is the Company's opinion that the licences in question are not in fact subject to, nor due for renewal until 2016. Paragon and SLHR continue to await clarification from the Ministry on this and on a number of related issues.

Paragon MD Stephen Grimmer commented:

"The Company will continue to seek clarification on the irregularities surrounding these issues - particularly as the licences under discussion were issued as valid until April 2016, and are not subject to any renewal at this time. In addition we continue to seek a response to previous requests to the Ministry to re-structure our mining licence holdings in Sierra Leone.

Elsewhere we continue to press ahead with our advanced kimberlite projects in the Kingdom of Lesotho, which are now the primary focus of the Company - with ongoing results from the Lemphane kimberlite, and in excess of one million tonnes at circa one carat per tonne at the Motete kimberlite, the potential exists in Lesotho to rapidly develop a diamond resource far exceeding the stated mineral assets in Sierra Leone".

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:

Paragon Diamonds Limited Francesco Scolaro - Chairman Simon Retter - Finance Director www.paragondiamonds.com	+44 (0) 20 7099 1940
Fox-Davies Capital Ltd (Nomad and Broker) Jonathan Evans Simon Leathers	+44 (0) 20 3463 5010
Newgate Threadneedle (Financial PR)	+44(0) 20 7653 9855
Josh Royston Richard Gotla

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.

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