Gemfields : Response Circular

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you should immediately seek your own professional advice from your stockbroker, solicitor, accountant or other appropriately qualified independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended) if you are taking advice in the United Kingdom or, if you are taking advice in a territory outside of the United Kingdom, from an appropriately authorised independent financial adviser. This document does not constitute or form part of any invitation or offer to issue or sell or a solicitation of any offer to subscribe for or buy Gemfields Shares. All Gemfields Shareholders are advised to consult their professional advisers regarding their own tax position.

If you have sold or otherwise transferred all of your Gemfields Shares (other than pursuant to the Pallinghurst Offer), you should forward this document at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee. This document should not, however, be forwarded or transmitted into any jurisdiction in which such an act would constitute a breach of the relevant laws in such jurisdiction.If you have sold or transferred only part of your holding, you should retain this document and contact your stockbroker, bank or other agent through which the sale or transfer was effected immediately.

J.P. Morgan Limited, which conducts its UK investment banking business as J.P. Morgan Cazenove ('J.P. Morgan Cazenove'), is authorised and regulated in the United Kingdom by the Financial Conduct Authority. J.P. Morgan Cazenove is acting as financial adviser exclusively for Gemfields and no one else in connection with the matters referred to in this document and will not regard any other person as its client in relation to the Pallinghurst Offer or any other matter referred to in this document and will not be responsible to anyone other than Gemfields for providing the protections afforded to clients of J.P. Morgan Cazenove or its Affiliates, or for providing advice in relation to the Pallinghurst Offer or any matter referred to herein. Neither J.P. Morgan Cazenove nor any of its Affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of J.P. Morgan Cazenove in connection with the Pallinghurst Offer, any statement contained herein or otherwise.

Macquarie Capital (Europe) Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser exclusively for Gemfields and no one else in connection with the matters referred to in this document and will not regard any other person as its client in relation to the Pallinghurst Offer and will not be responsible to anyone other than Gemfields for providing the protections afforded to clients of Macquarie Capital (Europe) Limited or its Affiliates, or for providing advice in relation to the Pallinghurst Offer or any matter referred to herein. Neither Macquarie Capital (Europe) Limited nor any of its Affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Macquarie Capital (Europe) Limited in connection with the Pallinghurst Offer, any statement contained herein or otherwise.

BMO Capital Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser exclusively for Gemfields and no one else in connection with the matters referred to in this document and will not regard any other person as its client in relation to the Pallinghurst Offer and will not be responsible to anyone other than Gemfields for providing the protections afforded to clients of BMO Capital Markets Limited or its Affiliates, or for providing advice in relation to the Pallinghurst Offer or any matter referred to herein. Neither BMO Capital Markets Limited nor any of its Affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of BMO Capital Markets Limited in connection with the Pallinghurst Offer, any statement contained herein or otherwise.

Grant Thornton UK LLP is authorised and regulated in the United Kingdom by the Financial Conduct Authority and is acting as nominated adviser for Gemfields and no one else in connection with the matters referred to in this document and will not regard any other person as its client in relation to the Pallinghurst Offer and will not be responsible to anyone other than Gemfields for providing the protections afforded to clients of Grant Thornton UK LLP or for providing advice in relation to any matter referred to herein. Neither Grant Thornton UK LLP nor any of its Affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Grant Thornton UK LLP in connection with the Pallinghurst Offer, any statement contained herein or otherwise.

______________________________________________________________________________________________________________________

GEMFIELDS PLC

(Incorporated and registered in England and Wales with limited liability under registration number 05129023)

Response to the Unsolicited All-Share Offer from Pallinghurst Resources Limited

______________________________________________________________________________________________________________________

The release, publication or distribution of this document in or into jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this document comes who are not resident in the United Kingdom should inform themselves about, and observe, any applicable restrictions. Gemfields Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

This document has been prepared for the purposes of complying with the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws or regulatory requirements of jurisdictions outside the United Kingdom. The statements contained in this document are not to be construed as legal, business, financial or tax advice.

Forward Looking Statements

This document contains statements that are or may be forward-looking with respect to the Company and/or the Gemfields Group. All statements other than statements of historical fact included in this document may be forward-looking statements. Without limitation, these statements can be identified by the use of forward-looking terminology such as 'target', 'plan', 'believe', 'aim', 'intend', 'anticipate', 'expect', 'prospect', 'estimated', 'should', 'will', 'may', or the negative thereof, or other variations thereof, or comparable terminology indicating expectations or beliefs concerning future events. These forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and because they are based on certain key assumptions. There are many factors which could or may cause actual results, achievements or developments to differ materially from those expressed or implied by such forward-looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements. The Company assumes no obligation to update or correct the information contained in this document, whether as a result of new information, future events or otherwise, except to the extent required by law or regulation.

The statements contained in this document are made as at the date of this document, unless some other time is specified in relation to them, and publication of this document shall not give rise to any implication that there has been no change in the facts set out in this document since such date.

No Profit Forecasts or Estimates

No statement in this document is intended as a profit forecast or estimate for any period and no statement in this document should be interpreted to mean that earnings for the Company or earnings per Gemfields Share, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per Gemfields Share for the Company.

Rounding

Certain figures included in this document have been subject to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. For further details of the sources of information and the bases of calculation of certain of the numbers set out in this document, please refer to Part III of this document.

Publication on Website and availability of Hard Copies

A copy of this document is and will be available free of charge, subject to certain restrictions relating to persons in any jurisdiction where release, publication or distribution of this document would constitute a violation of the securities laws of such jurisdiction, for inspection on the Company's website at www.gemfields.co.uk until the end of the Offer Period. For the avoidance of doubt, the contents of this website are not incorporated into and do not form part of this document.

You may request a hard copy of this document and any information incorporated into this document by reference to another source by submitting a request in writing to the Company Secretary of Gemfields at Gemfields plc, 1 New Burlington Place, London, England, W1S 2HR or by contacting the Company Secretary of Gemfields during normal business hours on 020 7659 4965 (or, if calling from outside of the United Kingdom, +44 20 7659 4965). Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. A hard copy of this document and any other document referred to in this document will not be sent to you unless so requested. You may also request that all future documents, announcements and information to be sent to you in relation to the Pallinghurst Offer should be in hard copy form.

Electronic Communications

Please be aware that in accordance with the requirements under Section 4 of Appendix 4 of the Takeover Code, Gemfields will be required to provide certain information to Pallinghurst, including addresses, electronic addresses and certain other information provided by Gemfields Shareholders, persons with information rights and other relevant persons for the receipt of communications from the Company.

If you are a Gemfields Shareholder, by now you should have received the Offer Document from Pallinghurst containing details of the Pallinghurst Offer. Copies of certain announcements and documents relating to the Pallinghurst Offer (including the Offer Document) may be viewed at www.pallinghurst.com.

Disclosure Requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Date

The date of publication of this document is 27 June 2017.

Table of Contents

Page

Part ILetter from the Chairman of the Independent Committee........................................................ 4

Part IIIndependent Committee's View on the Effects of the Implementation of the Pallinghurst Offer on Gemfields' Management, Employees and Locations............................................................................................................ 10

Part IIIRegulatory Approvals....................................................................................................... 11

Part IVAdditional Information..................................................................................................... 12

Part VPresentation of Information, Bases and Sources................................................................ 24

Part VIDefinitions..................................................................................................................... 25

Appendix 1.................................................................................................................................. 30

Part ILetter from the Chairman of the Independent Committee

GEMFIELDS PLC(incorporated in England and Wales with registered number 05129023)

27 June 2017

To Gemfields Shareholders and, for information only, to participants in the Gemfields Share Scheme and persons with information rights

Dear Gemfields Shareholder,

Response of the Independent Committee of the Board of Gemfields plc to the unsolicited all-share Offer for Gemfields by Pallinghurst

Introduction

The Pallinghurst Offer

On 19 May 2017, Pallinghurst announced an unsolicited firm offer to acquire the entire issued and to be issued ordinary share capital of Gemfields plc ('Gemfields' or the 'Company') (other than the 208,502,556 Gemfields Shares already held by the Pallinghurst Group, representing 37.83 per cent. of Gemfields' issued ordinary share capital) (the 'Pallinghurst Offer'). Under the terms of the Pallinghurst Offer, Gemfields Shareholders would receive 1.91 Pallinghurst Shares (the 'Consideration Shares') for each Gemfields Share that they currently hold which, based on the closing exchange rate of ZAR16.36=£1.00 and the closing price of the Pallinghurst Shares of ZAR3.12 on 26 June 2017 (being the last Business Day prior to the date of this document), values each Gemfields Share at 36.42 pence (the 'PallinghurstOffer Value') and values the entire issued ordinary share capital of the Company at approximately £201 million.

The Pallinghurst Offer Value represents a discount of:

· 14.4 per cent. to the volume weighted average price of the Gemfields Shares of 42.56 pence for the three month period to 18 May 2017 (being the last Business Day prior to the commencement of the Offer Period);

· 31.3 per cent. to the highest Closing Price of the Gemfields Shares since 1 January 2017, such price being 53.00 pence as at 3 January 2017; and

· 55.5 per cent. to the consensus target price for Gemfields published by equity research analysts of 81.75 pence (published prior to the Pallinghurst Offer announcement on 19 May 2017).

The Pallinghurst Offer was announced with irrevocable undertakingsto accept the Pallinghurst Offer from Gemfields Shareholders in respect of interests of a total of 154,964,935 Gemfields Shares representing, in aggregate, approximately 28.18 per cent. of the issued ordinary share capital of Gemfields. Taken together, the irrevocable undertakings and the shares held or wholly controlled by Pallinghurst therefore constituted 75.27 per cent. of Gemfields' issued ordinary share capital.

On the same day as the announcement of the Pallinghurst Offer, the Independent Committee responded with a holding statement which noted that Pallinghurst had not engaged with the Company with respect to the Pallinghurst Offer and, as such, the Independent Committee would review the Pallinghurst Offer with its advisers. The Independent Committee strongly advised Gemfields Shareholders to take no action at that time.

On 31 May 2017, the Independent Committee announced that it had considered the Pallinghurst Offer with its advisers and unanimously concluded that the terms of the Pallinghurst Offer significantly undervalued the Company, its unique asset base and its leading position in the coloured gemstone sector. This conclusion was also reached by certain other Independent Shareholders who provided feedback to the Independent Committee. The Independent Committee therefore continued to strongly advise Gemfields Shareholders to take no action at that time.

Pallinghurst published its Offer Document on 13 June 2017. If you are a Gemfields Shareholder, by now you should have received the Offer Document from Pallinghurst containing details of the Pallinghurst Offer.

Pallinghurst is a private equity company with investments in the mining sector and was incorporated on 4 September 2007. Pallinghurst has a primary listing on the Johannesburg Stock Exchange and a secondary listing on the Bermuda Stock Exchange. Pallinghurst is registered with the Guernsey Financial Services Commission as an authorised closed-ended investment company.

The Fosun Offer

In response to the unsolicited Pallinghurst Offer, the Independent Committee has worked with its advisers to explore all possible avenues to maximise value and secure the best possible outcome for Gemfields Shareholders. Pursuant to these efforts, on 20 June 2017, Fosun Gold announced a firm offer for Gemfields, to be made by Fosun Gold (a subsidiary of Fosun International Limited), or a subsidiary of Fosun Gold, to acquire the entire issued and to be issued ordinary share capital of Gemfields (the 'Fosun Offer'). The Fosun Offer would provide Gemfields Shareholders with 45 pence per share in cash for each Gemfields Share that they hold (the 'Fosun Offer Price'), valuing Gemfields' entire issued ordinary share capital at approximately £248 million, and representing:

· a premium of 23.6 per cent. to the Pallinghurst Offer Value; and

· a premium of 18.1 per cent. to the Closing Price of the Gemfields Shares of 38.10 pence on 18 May 2017 (being the last Business Day prior to the commencement of the Offer Period).

On the same day as the announcement of the Fosun Offer, the Independent Committee, who had been so advised by J.P. Morgan Cazenove as to the financial terms of the Fosun Offer, responded with a statement that, although the financial terms of the Fosun Offer were not fair and reasonable, the Independent Committee were nevertheless of the belief that the certain cash exit on offer from Fosun Gold was materially more attractive than the Pallinghurst Offer. Moreover, given the challenges that the Pallinghurst Offer posed to the independent future of the Company, and given the derisory nature of the Pallinghurst Offer, the Independent Committee stated that they intended to recommend that Gemfields Shareholders accept the Fosun Offer so as to secure a relatively more attractive outcome for their investment, as the Independent Committee, Ian Harebottle and Janet Boyce had irrevocably undertaken to do in respect of their own Gemfields Shares, absent a higher offer for Gemfields emerging.

In order to align the interests of key executives with those of Gemfields and Fosun Gold, Ian Harebottle and Janet Boyce intended to co-invest with Fosun Gold on a 1:99 basis in the company to be established by Fosun Gold for the purposes of implementing the Fosun Offer (the 'Fosun Bidco'). To this end, Fosun Gold, Mr. Harebottle and Ms. Boyce entered into a letter of agreement dated 20 June 2017 which included certain customary terms and set out: (a) the terms of their investment in the form of a management co-investment term sheet; and (b) the basis on which the provisions of the management co-investment term sheet would be implemented upon completion of the Fosun Offer (the 'Fosun Management Co-Investment Arrangements').

Pallinghurst and Gemfields responses to the Fosun Offer

Following the announcement of the Fosun Offer and on the same day, Pallinghurst announced that it had lowered the acceptance condition of the Pallinghurst Offer from 75 per cent. to 60 per cent., and, given that the level of acceptances received and the Gemfields Shares held by Pallinghurst stood, in aggregate, at 61.25 per cent. of the issued ordinary share capital of Gemfields, declared the Pallinghurst Offer unconditional as to acceptances.

In response to Pallinghurst's declaration, on 21 June 2017, the Independent Committee reiterated their belief that the Pallinghurst Offer significantly undervalues the Company and noted to Gemfields Shareholders that the Pallinghurst Offer was still conditional on the passing of an ordinary resolution to approve the offer at the Pallinghurst general meeting, to be held at 11:00 a.m. (London time) on 26 June 2017.

Following the Pallinghurst General Meeting on 26 June 2017, the Independent Committee notes that the ordinary resolution required to approve the Pallinghurst Offer was passed by the requisite majority of Pallinghurst Shareholders, and, as such, that Pallinghurst has declared the Pallinghurst Offer to be wholly unconditional, withthe offer to remain open for acceptances until 1:00 p.m. (London time) on 18 July 2017. The Independent Committee also notes that the special resolution required to approve the Restructuring and the extension of Pallinghurst's life as a closed-ended company by 50 years, as set out in the Circular posted to Pallinghurst Shareholders on 2 June 2017, was also passed by the requisite majority at the Pallinghurst General Meeting.

Pallinghurst also announced on 26 June 2017 that it had received valid acceptances pursuant to the Pallinghurst Offer from Gemfields Shareholders in respect of 205,853,201 Gemfields Shares (representing approximately 37.35 per cent. of the issued ordinary share capital of Gemfields). Together with the 208,502,556 Gemfields Shares (representing approximately 37.83 per cent. of the issued ordinary share capital of Gemfields) already held by the Pallinghurst Group, this represents, in aggregate, 414,355,757 Gemfields Shares (approximately 75.18 per cent. of the issued ordinary share capital of Gemfields).

In response to the Pallinghurst Offer going wholly unconditional, Fosun Gold announced on 26 June 2017 that the Fosun Offer had lapsed in accordance with its terms.

The Independent Committee's Further Views on the Pallinghurst Offer

Following the announcement of the Pallinghurst Offer the Independent Committee has conducted a detailed assessment of the value of the respective businesses of both Gemfields and Pallinghurst, using a variety of valuation methodologies customary for companies such as Gemfields and Pallinghurst, as well as a commercial assessment for the rationale of a combination of the two businesses. On the basis of this assessment, and as previously communicated to Gemfields Shareholders, the Independent Committee has unanimously concluded that the Pallinghurst Offer significantly undervalues Gemfields and its prospects. The Independent Committee would note the following factors in supporting their views:

· On the basis of the significant discount that the Pallinghurst Offer Value represents to Gemfields' recent share price levels, the consensus target price ascribed to Gemfields by equity research analysts, and the fundamental valuation of the business as derived from an assessment of the Company's business plan, the Independent Committee's conclusion is that the Pallinghurst Offer is highly opportunistic and has been timed, in the Independent committee's view, to take advantage of the recently depressed Gemfields' share price. The Independent Directors therefore believe that the Pallinghurst Offer Value represents a significant undervaluation of the fundamental value of Gemfields' unique asset portfolio.

· Pallinghurst have stated that Pallinghurst may be converted to an operating mining company as part of the Restructuring. If this conversion were to be completed, Gemfields Shareholders accepting the Pallinghurst Offer will exchange their investment in a gemstone company for an investment in a mining investment holding company that holds only minority interests (other than its holdings in Gemfields) in two minority companies with operations in South Africa.

· The Gemfields business comprises a portfolio of highly attractive assets and is led by an exceptional management team with a clear strategy to deliver significant incremental shareholder value. The Pallinghurst Offer denies Gemfields Shareholders the ability to participate in this future upside potential on a standalone basis and dilutes Gemfields Shareholders with inferior assets that offer exposure to more volatile commodities.

Notwithstanding the above, given that the Pallinghurst Offer has now been declared wholly unconditional and the level of acceptances received from Gemfields Shareholders in respect of the Pallinghurst Offer and the Gemfields Shares held by Pallinghurst, together, constitute greater than 75 per cent. of the issued ordinary share capital of Gemfields, there may be reasons for Independent Shareholders to seriously consider the Pallinghurst Offer despite the Pallinghurst Offer significantly undervaluing Gemfields, which include:

· As the Pallinghurst Offer has now gone wholly unconditional there are no further Conditions to be satisfied and the Pallinghurst Offer is only expected to remain open for acceptances until 18 July 2017. Beyond this date, Gemfields Shareholders will no longer be able to accept the Pallinghurst Offer.

· As the level of acceptances received from Gemfields Shareholders in respect of the Pallinghurst Offer and the Gemfields Shares held by Pallinghurst, together, constitute greater than 75 per cent. of the issued ordinary share capital of Gemfields, Pallinghurst's stated intention is to procure the making of an application by Gemfields to cancel the admission of Gemfields Shares to trading on AIM. If the admission of Gemfields' Shares to trading on AIM is cancelled, Independent Shareholders who have not accepted the Pallinghurst Offer will own shares in an unquoted company which Pallinghurst intends to re-register as a private company under the relevant provisions of the Companies Act and, as minority shareholders, would not be afforded the same level of protection as was afforded to them while Gemfields remained a quoted public company. Consequently, the liquidity, marketability and value of the Gemfields Shares could be adversely affected and Independent Shareholders' ability to dispose of their Gemfields Shares is likely to be materially reduced.

· If Pallinghurst receives acceptances under the Pallinghurst Offer in respect of, and/or otherwise acquires, 90 per cent. or more of the Gemfields Shares by nominal value and voting rights attaching to such shares to which the Pallinghurst Offer relates, Pallinghurst's stated intention is to exercise its rights pursuant to the provisions of Chapter 3 of Part 28 of the Companies Act to acquire compulsorily the remaining Gemfields Shares in respect of which the Pallinghurst Offer has not been accepted on the same terms as the Pallinghurst Offer. Accordingly, if Pallinghurst receives sufficient acceptances in respect of, and/or otherwise acquires, the necessary amount of Gemfields Shares to acquire compulsorily all remaining Gemfields Shares, Independent Shareholders who do not accept the Pallinghurst Offer would receive their Consideration Shares at a later date than those Independent Shareholders who accepted the Pallinghurst Offer.

· Following completion of the Pallinghurst Offer, it is anticipated that Pallinghurst will procure the termination of the Relationship Agreement, thus removing certain protections currently in place for Independent Shareholders (see Appendix 1 for a summary of the Relationship Agreement).

· The Pallinghurst Offer Consideration is comprised solely of Consideration Shares, the value of which may increase or decrease. Independent Shareholders should assess the value of the Consideration Shares in accordance with their own individual investment requirements and objectives, particularly given that the Consideration Shares will be listed on the Johannesburg Stock Exchange and will be denominated in Rand. Certain Independent Shareholders may not wish to hold such shares, and there may be unintended tax consequences for Independent Shareholders in holding Consideration Shares. Given that the Pallinghurst Resolution relating to the Extension has been passed at the Pallinghurst General Meeting, Pallinghurst has stated that it will consider moving its secondary listing on the Bermuda Stock Exchange to the premium segment of the Main Market of the London Stock Exchange. However, as Pallinghurst has itself highlighted in its Offer Document, there are no certainties around this consideration and there is no guarantee that if an application is ultimately made to the UK Listing Authority, it will be successful.

· The Pallinghurst Offer requires certain regulatory approvals and notifications to be made in jurisdictions that are key to Gemfields' ongoing business operations, including Mozambique and Zambia. Failure to comply with such requirements may impact the value of Gemfields assets in these locations. See Part III of this document for further details. In addition, the Independent Committee understands from its legal counsel in Mozambique and Ethiopia that capital gains tax may in certain prescribed circumstances be payable pursuant to the Transaction in each of those jurisdictions.

Conclusion

Based on the above considerations and the Independent Directors' views on the superior outlook for Gemfields' business and its strategy, the Independent Committee believes the Pallinghurst Offer significantly undervalues Gemfields and its prospects as a leading player in the coloured gemstone sector and denies Gemfields Shareholders the ability to realise the material future upside potential of the Company on a standalone basis.

The Independent Committee, which has been so advised by J.P. Morgan Cazenove as to the financial terms of the Pallinghurst Offer, therefore continues to believe that the financial terms of the Pallinghurst Offer are not fair and reasonable. In providing its advice to the Independent Committee, J.P. Morgan Cazenove has taken into account the commercial assessments of the Independent Committee. J.P. Morgan Cazenove is providing independent financial advice to the Independent Committee for the purposes of Rule 3 of the Code.

Accordingly, the Independent Committee have determined that the Pallinghurst Offer is not capable of being recommended from a value perspective.

Gemfields Shareholders who anticipate greater value in their Gemfields Shares whilst recognising and being willing to accept the risks associated with remaining as an investor in an unquoted company controlled by Pallinghurst may wish to remain as shareholders in Gemfields. However, given the risks and uncertainties outlined above, the Independent Committee has concluded that Independent Shareholders should seriously consider whether to accept the Pallinghurst Offer despite the Independent Committee's firm view that it significantly undervalues Gemfields.

Other Matters

The Independent Directors, Ian Harebottle and Janet Boyce, who beneficially hold 425,000 Gemfields Shares representing 0.08 per cent. of Gemfields' issued ordinary share capital, and option awards in respect of 9,345,000 Gemfields Shares representing 1.70 per cent. of Gemfields' issued ordinary share capital, reluctantly intend to accept the Pallinghurst Offer in respect of the Gemfields Shares that they currently hold in light of the circumstances set out above. The Independent Directors, Ian Harebottle and Janet Boyce, intend to exercise their existing in the money option awards in respect of Gemfields Shares and either sell certain of these Gemfields Shares into the market, subject to the prevailing market conditions at the time, and/or reluctantly accept the Pallinghurst Offer in respect of certain of these Gemfields Shares.

Further information regarding the Board's view on the effect of the implementation of the Pallinghurst Offer on the Company's interests, employees and locations is set out in Part II of this document.

Yours faithfully,

Graham Mascall

Chairman of the Board and of the Independent Committee

Gemfields plc

Part IIIndependent Committee's View on the Effects of the Implementation of the Pallinghurst Offer on Gemfields' Management, Employees and Locations

In addition to the matters set out in Part Iof this document, the Independent Directors are required under the Takeover Code to provide their views on certain matters regarding the effects of the implementation of the Pallinghurst Offer on Gemfields's interests, including, specifically, employment and their views on Pallinghurst's strategic plans for Gemfields and their likely repercussions on employment and the location of Gemfields's places of business.

In fulfilling their obligations under the Takeover Code to give their views on these matters, the Independent Directors can only comment on the details of the Pallinghurst Offer provided in the Offer Document (specific details of which are contained in paragraph 11 on page 17 of the Offer Document).

The Independent Committee notes that, although Pallinghurst has no plans to change the location of Gemfields's places of business or redeploy fixed assets, Pallinghurst intends to make the combined Pallinghurst Group and Gemfields Group more efficient by realising cost savings through eliminating overlapping functions. However, because at this stage Pallinghurst has not undertaken a detailed analysis of specific headcount reductions, which it will do following completion of the Pallinghurst Offer in light of the ongoing requirements of Gemfields as part of the Pallinghurst Group, there is insufficient information in the Offer Document about Pallinghurst's plans in relation to headcount reduction for the Independent Committee to comment further. That having been said, and subject to the outcome of the strategic review of the combined Pallinghurst Group and Gemfields Group, Pallinghurst does not expect the Pallinghurst Offer to have any direct impact on Gemfields employees in the operating businesses, which, if borne out, the Independent Committee welcomes.

Nonetheless, the Independent Committee notes Pallinghurst's plan to implement cost savings in the corporate and support functions (including certain functions related to Gemfields' status as a quoted company) including where there is duplication across Gemfields and Pallinghurst or the ability to streamline specific functions if the admission of Gemfields Shares to trading on AIM is cancelled.

The Independent Committee welcomes Pallinghurst's confirmation that the existing contractual and statutory employment rights, including pension rights (including in respect of the accrual benefit of the existing members of Gemfields's participation in a defined contribution pension scheme and the continued admission of new members to such pension scheme), of all employees of Gemfields will be fully observed following completion of the Pallinghurst Offer, and that there will be no material changes to the conditions of employment of such employees.

Part IIIRegulatory Approvals

The Independent Committee notes the following risks and uncertainties relating to certain regulatory approvals required for the development of Gemfields's business in its key jurisdictions of Mozambique and Zambia which have been considered in light of the Pallinghurst Offer.

Mozambique

The Gemfields Group operates the Montepuez Ruby Mining Lda ('MRM') producing ruby deposit in Mozambique. The Gemfields Group is also involved with other Mozambican ruby mining projects through Megaruma Mining, Lda ('MML') and Eastern Ruby Mining, Lda ('ERM'). Each of MRM, MML and ERM hold mining concessions granted by the Government of Mozambique necessary to run Gemfields's operations in that jurisdiction (the 'Mozambique Mining Licences').

The Independent Committee has received a written legal opinion from its counsel in Mozambique that if the Pallinghurst Offer is completed without first obtaining prior approval from the Ministry of Mineral Resources and Energy ('MIREME') in Mozambique, which includes obtaining clearance from the relevant tax authority, the Transaction may be void in Mozambique. Approval, the Independent Committee has been informed by its legal counsel in Mozambique, can take up to 180 days following submission of a formal request to MIREME. The Independent Committee has been advised by its legal counsel in Mozambique that if prior approval is not obtained from MIREME, Gemfields may also be subject to, depending on the circumstances, a range of possible sanctions, namely: (i) censure; (ii) a fine; (iii) seizure of mineral products; (iv) impounding of mining equipment; (v) suspension of mining activity; and/or (vi) revocation of the Mozambique Mining Licences.

Zambia

The Gemfields Group also operates the Kagem Mining Limited ('Kagem') emerald mine and Kariba Minerals Limited ('Kariba') amethyst mine in Zambia. As well as holding gemstone mining licences in connection with Kagem and Kariba, the Gemfields Group also holds a number of other gemstone mining and prospecting licences in Zambia.

The Independent Committee has received a written legal opinion from its counsel in Zambia advising that if the Pallinghurst Offer is completed without first obtaining prior approval from the Zambian Competition and Consumer Protection Commission (the 'Competition Commission'), the Transaction may be void in Zambia and a fine payable. The Independent Committee has been informed by its legal counsel in Zambia that approval from the Competition Commission can take up to 90 days.

Part IVAdditional Information

1. THE COMPANY

The Company, which is the subject of the Pallinghurst Offer, is incorporated and registered in England and Wales as a public limited company (registration number 05129023) with its registered office and principal place of business at 1 New Burlington Place, London, England, W1S 2HR.

2. RESPONSIBILITY

2.1 The Independent Directors, Ian Harebottle and Janet Boyce accept responsibility for the information contained in this document (including any expressions of opinion), except that the only responsibility accepted by them in respect of the information contained in this document relating to the Pallinghurst Group, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. To the best of the knowledge and belief of the Independent Directors, Ian Harebottle and Janet Boyce (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

2.2 Pallinghurst currently holds approximately 37.83 per cent directly, plus a further 9.15 per cent. indirectly through Fabergé Conduit Limited, of the issued ordinary share capital of Gemfields and Sean Gilbertson serves as the representative director of Pallinghurst on the Board of Gemfields. However, since Pallinghurst is the offeror for the purposes of the Takeover Code, and Sean Gilbertson serves as a director of Pallinghurst, Sean Gilbertson is not considered to be independent in relation to the Pallinghurst Offer. Accordingly, Sean Gilbertson has not been, and will not be, involved in the Independent Directors' consideration of the Pallinghurst Offer and does not take responsibility for the information contained in this document on the basis described in paragraph 2.1above.

2.3 In view of the Fosun Management Co-Investment Arrangements, Ian Harebottle and Janet Boyce are not considered to be independent in relation to the Pallinghurst Offer and the Fosun Offer. Accordingly, Ian Harebottle and Janet Boyce have not been, and will not be, involved in the Independent Directors' consideration of the Pallinghurst Offer.

3. DIRECTORS

4. DISCLOSURE OF INTERESTS AND DEALINGS

Interests and dealings in relevant securities of the Company

4.1 As at the last day of the Disclosure Period, the interests of the Directors and their immediate families, related trusts and close relatives, all of which are beneficial unless otherwise stated, in relevant securities of the Company were (with the exception of interests held under the Gemfields Share Scheme which are set out in paragraph 4.2below) as follows:

*Sean Gilbertson holds an interest in Pallinghurst (Cayman) Founder L.P. which in turn holds 5,391,081 Gemfields Shares via Fabergé Conduit Limited

4.2 As at the last day of the Disclosure Period, the following option awards in respect of Gemfields Shares had been granted to Directors and remained outstanding under the Gemfields Share Scheme:

4.3 As at the last day of the Disclosure Period, the interests of Sean Gilbertson's immediate family, related trusts and close relatives, all of which are beneficial unless otherwise stated, in relevant securities of Gemfields were as follows:

*Brian Gilbertson holds: (1) an interest in Pallinghurst (Cayman) Founder L.P. which in turn holds 5,391,081 Gemfields Shares via Fabergé Conduit Limited; (2) an interest in Autumn Holdings Asset Inc. which in turn holds 988,079 Gemfields Shares; and (3) a 25 per cent. interest in Pallinghurst Resources Management L.P. which in turn holds 1,586,729 Gemfields Shares

Interests in relevant securities of Pallinghurst

4.4 As at the last day of the Disclosure Period and as far as Gemfields is aware, the interests of Sean Gilbertson, a Director of Gemfields, all of which are beneficial unless otherwise stated, in relevant securities of Pallinghurst were as follows:

4.5 As at the last day of the Disclosure Period and as far as Gemfields is aware, the interests of Sean Gilbertson's immediate family, related trusts and close relatives, all of which are beneficial unless otherwise stated, in relevant securities of Pallinghurst were as follows:

*Brian Gilbertson holds his interests through Affinity Trust Limited as trustee of The Brian Gilbertson Discretionary Settlement

General

4.6 As at the last day of the Disclosure Period, save as disclosed in this document:

(A) Gemfields did not have any interest in, right to subscribe for, or any short position in respect of, or any delivery obligation or any right to require another person to purchase or take delivery of, relevant securities of Pallinghurst , nor has Gemfields dealt in any relevant securities of Pallinghurst during the Disclosure Period;

(B) none of the Independent Directors of Gemfields (including members of their immediate families, close relatives and related trusts) had any interest in, right to subscribe for, or any short position in respect of, or had any delivery obligation or any right to require another person to purchase or take delivery of, relevant securities of the Company or relevant securities of Pallinghurst, nor has any such person dealt in any relevant securities of the Company or relevant securities of Pallinghurst during the Disclosure Period;

(C) no person acting in concert with Gemfields had any interest in, right to subscribe for, or any short position in respect of, or had any delivery obligation or any right to require another person to purchase or take delivery of, relevant securities of the Company or relevant securities of Pallinghurst, nor has any such person dealt in any relevant securities of the Company or relevant securities of Pallinghurst during the Disclosure Period; and

(D) no person who is party to an arrangement with Gemfields had any interest in, right to subscribe for, or any short position in respect of, or had any delivery obligation or any right to require another person to purchase or take delivery of, relevant securities of the Company or relevant securities of Pallinghurst, nor has any such person dealt in any relevant securities of the Company or relevant securities of Pallinghurst during the Disclosure Period.

4.7 As at the last day of the Disclosure Period, save as disclosed in this document, neither the Company nor any person acting in concert with the Company had borrowed or lent any relevant securities of the Company or relevant securities of Pallinghurst (including in each case for these purposes any financial collateral arrangements of the kind referred to in Note 4 on Rule 4.6 of the Takeover Code).

4.8 As at the last day of the Disclosure Period, save as disclosed in this document, there were no arrangements between the Company, or any person acting in concert with the Company, and any other person.

4.9 The Company has not redeemed or purchased any Gemfields Shares or any securities convertible into, rights to subscribe for or options in respect of, or derivatives referenced to Gemfields Shares during the Disclosure Period.

Definitions

4.10 For the purposes of this Part IV:

(A) 'acting in concert' has the meaning set out in the Takeover Code;

(B) 'arrangement' includes any indemnity or option arrangement and any agreement or understanding, formal or informal, of whatever nature, relating to the relevant securities of the Company or to the relevant securities of Pallinghurst which may be an inducement to deal or refrain from dealing;

(C) 'dealing' or 'dealt' has the meaning given to it in the Takeover Code and includes the following:

(i) the acquisition or disposal of securities;

(ii) the taking, granting, acquisition, disposal, entering into, closing out, termination, exercise (by either party) or variation of an option (including a traded option contract) in respect of any relevant securities;

(iii) subscribing or agreeing to subscribe for relevant securities;

(iv) the exercise or conversion, whether in respect of new or existing relevant securities, of any relevant securities carrying conversion or subscription rights;

(v) the acquisition of, disposal of, entering into, closing out, exercise (by either party) of any rights under, or variation of, a derivative referenced, directly or indirectly, to relevant securities;

(vi) entering into, terminating or varying the terms of any agreement to purchase or sell relevant securities; and

(vii) any other action resulting, or which may result, in an increase or decrease in the number of relevant securities in which a person is interested or in respect of which he has a short position;

(D) 'derivative' includes any financial product whose value, in whole or in part, is determined directly or indirectly by reference to the price of an underlying security;

(E) 'Disclosure Period' means the period commencing on 19 May 2016 (being the date 12 months prior to the commencement of the Offer Period) and ending on 26 June 2017 (being the latest practicable date prior to the publication of this document);

(F) 'relevant securities' has the meaning given to it in the Takeover Code and includes equity share capital and securities convertible into, or rights to subscribe for, options (including traded options) in respect thereof and derivatives referenced thereto;

(G) a person is treated as having an 'interest in securities' in the circumstances prescribed in the Takeover Code, including if he has long economic exposure, whether absolute or conditional, to changes in the price of those securities (and a person who only has a short position in securities is not treated as interested in those securities). In particular, a person is treated as 'interested' in securities if:

(i) he owns them;

(ii) he has the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to them or has general control of them;

(iii) by virtue of any agreement to purchase, option or derivative, he;

(a) has the right or option to acquire them or call for their delivery; or

(b) is under an obligation to take delivery of them,

whether the right, option or obligation is conditional or absolute and whether it is in the money or otherwise; or

(iv) he is a party to any derivative:

(a) whose value is determined by reference to their price; and

(b) which results, or may result, in his having a long position in them.

5. DETAILS OF IRREVOCABLE UNDERTAKINGS

5.1 Sean Gilbertson, a Director of Gemfields, has given an Irrevocable Undertaking to accept the Pallinghurst Offer and to accept the Consideration Shares in exchange for his Gemfields Shares:

5.2 The Irrevocable Undertaking from Sean Gilbertson ceases to be binding if: (i) the Pallinghurst Offer lapses or is withdrawn before becoming unconditional in all respects; or (ii) a third party announces a firm intention to acquire the share capital of Gemfields and such proposal provides for consideration of more than 10 per cent. premium to the price per Gemfields Share being offered by Pallinghurst and Pallinghurst does not increase the consideration to be paid for Gemfields Shares pursuant to the Pallinghurst Offer to an amount equivalent per Gemfields Share within seven days of the competing offer.

5.3 Sean Gilbertson, a Director of Gemfields, has given an irrevocable undertaking in relation to the Pallinghurst Shares to vote in favour of the Pallinghurst Resolutions:

5.4 The above irrevocable undertaking from Sean Gilbertson ceases to be binding upon the earlier of: (i) the date on which the Conditions lapse as a result of the failure or non-fulfilment of any of the Conditions; or (ii) the date on which the Pallinghurst Offer is implemented.

6. DIRECTORS' SERVICE CONTRACTS AND LETTERS OF APPOINTMENT

6.1 Ian Harebottle and Janet Boyce have service agreements with the Company. The key terms of these service agreements are set out below:

(A) Ian Harebottle

Ian Harebottle is the Chief Executive Officer of the Company and entered into his current service contract on 11 February 2009.

Ian Harebottle receives a base salary of £400,000 per annum. In the 2016 financial year (1 July 2015 to 30 June 2016) he received total remuneration of £760,000, including a bonus of £320,000 (80 per cent. of his base salary) and £40,000 (10 per cent. of his base salary) in lieu of benefits (private medical, private dental and pension). Mr. Harebottle's normal maximum bonus opportunity in respect of any financial year is 150 per cent. of his base salary. Mr. Harebottle receives a pension allowance which is included in the 10 per cent. of his base salary by way of a salary supplement. He is entitled to life cover. Mr. Harebottle is a participant in the Gemfields Share Scheme and in 2016 received a grant of 600,000 options over Gemfields Shares.

Ian Harebottle's employment shall continue unless terminated by the Company upon not less than three months' written notice, or by Ian Harebottle upon not less than six months' written notice.

(B) Janet Boyce

Janet Boyce is the Chief Financial Officer of the Company and entered into her current service contract on 28 June 2013, with effect from 5 August 2013, and was appointed to the Board on 1 November 2016.

Janet Boyce receives a base salary of £220,000per annum. In the 2016 financial year (1 July 2015 to 30 June 2016) Ms. Boyce received total remuneration of £380,000, including a salary of £200,000 and a bonus of £160,000(80 per cent. of her base salary) and £20,000 (10 per cent. of her base salary) in lieu of benefits (private medical, private dental and pension). Ms. Boyce also receives a pension allowance which is included in the 10 per cent. of base salary by way of a salary supplement. Ms. Boyce is entitled to life cover. Ms. Boyce is also a participant in the Gemfields Share Scheme and in 2016 received a grant of 320,000options over Gemfields Shares.

Janet Boyce's employment shall continue unless terminated by the Company or Janet Boyce on not less than three months' notice.

Representative Director

6.2 Sean Gilbertson serves as the representative director of Pallinghurst on the Board of Gemfields and has held this position since 13 May 2008. He has not entered into a service contract with the Company. His appointment is subject to approval by the Company's shareholders on a rolling three-year basis. Sean Gilbertson does not receive a salary or any other benefits from the Company and he is not a member of the Gemfields Share Scheme.

The Chairman and the non-executive Directors

6.3 The following table summarises the dates and notice periods for the letters of appointment of the Chairman and each non-executive Director of the Company:

6.4 Graham Mascall entered into a letter of appointment with the Company dated 14 September 2005 in respect of the provision of services by him to the Company as non-executive director with effect from 14 September 2005. Either party may terminate the provision of services under the letter of appointment by providing three months' written notice.

6.5 Clive Newall entered into a letter of appointment with the Company dated 19 April 2005 in respect of the provision of services by him to the Company as non-executive director with effect from 25 April 2005. The letter of appointment is silent in respect of notice periods.

6.6 Finn Behnken entered into a letter of appointment with the Company effective on or around 13 May 2008 in respect of the provision of services by him to the Company as non-executive director. The letter of appointment is silent in respect of notice periods.

6.7 Save as disclosed above, neither the service contracts nor the terms of appointment summarised in this paragraph 6have been entered into or amended during the six months prior to the date of this document.

6.8 Save as disclosed above, there are no other contracts of service between the Directors and the Company or any of its subsidiaries.

6.9 Save as disclosed above:

(A) no Director is entitled to commission or profit sharing arrangements; and

(B) other than statutory compensation and payment in lieu of notice, no compensation is payable by the Company to any Director upon early termination of their appointment.

7. MATERIAL CONTRACTS

The following is a summary of each contract that has been entered into by any member of the Gemfields Group otherwise than in the ordinary course of business, which is, or may be, material, in the two years immediately preceding 19 May 2017 (the date of commencement of the Offer Period):

(A) Break Payment Agreement entered into with Fosun Gold

Fosun Gold and Gemfields have entered into a break payment agreement dated 20 June 2017 pursuant to which Gemfields has undertaken to pay to Fosun Gold or to any subsidiary of Fosun (at Fosun's sole written election) a sum that is equal to US$2,000,000, or such lesser amount as is determined in accordance with the terms of the agreement, by way of compensation, if following the release of the announcement of the Fosun Offer a competing offer for Gemfields (which will include the Pallinghurst Offer) becomes or is declared wholly unconditional. In addition, Gemfields will provide Fosun Gold with all relevant information and assistance reasonably necessary or requested to identify and/or satisfy any regulatory or competition conditions to the Fosun Offer.

(B) Confidentiality Agreement with Fosun Gold

Fosun Gold and Gemfields have entered into a confidentiality agreement dated 30 May 2017 pursuant to which each of Fosun Gold and Gemfields has undertaken, among other things, to: (a) keep confidentialinformation relating to the Fosun Offer and the other party and not to disclose it to third parties (other than certain permitted parties) unless required by law or regulation; and (b) use the confidential information for the sole purpose of evaluating, negotiating, advising on or implementing the Fosun Offer.

(C) Facility Agreement entered into with Gordon Brothers Finance Company, LLC

On 30 May2017, Faberge (UK) Limited as borrower, Gemfields, Faberge Limited and Faberge Suisse S.A. as guarantors entered into a US$25,000,000 asset backed debt facility agreement with Gordon Brothers Finance Company, LLC as lender and GB Europe Management Services Limited as lender (the 'Lenders') and security trustee (the 'Facility Agreement') with an interest rate of 3 month LIBOR plus 6.10 per cent. per annum to refinance existing debt facilities and for working capital purposes of the Gemfields Group.

The term of the loan is three years with an extension option. Such option may be exercised by the borrower on no more than two occasions, extending the term of the loan by one year each time.

It is anticipated that two US obligors, Faberge Inc. and Gemfields USA Inc. will accede to the Facility Agreement as guarantors in the coming months.

The security package granted in favour of the security trustee comprises: (i) an English law governed all assets debenture over the assets of Gemfields, Faberge (UK) Limited and Faberge Limited; (ii) a Cayman law governed all assets debenture over the assets of Gemfields and Faberge Limited; and (iii) a Swiss law governed share pledge granted by Faberge Limited over its ownership interest in Faberge Suisse S.A. In addition, an English Law governed subordination deed was entered into by Gemfields as subordinated creditor in favour of the Lenders as senior creditors in respect of the claims of Gemfields vis-à-vis Faberge Limited, Faberge (UK) Limited and Faberge Suisse S.A.

If following completion of the Transaction, Pallinghurst ceases directly or indirectly to: (A) have the power to (i) cast, or control the casting of, more than 50 per cent. of the maximum number of votes that might be cast at a general meeting of Gemfields, (ii) appoint or remove all, or the majority, of the directors or equivalent officers of Gemfields or (iii) give directions with respect to the operating and the financial policies of Gemfields; or (B) hold beneficially more than 50 per cent. of the issued share capital of Gemfields, then the facility will be cancelled and all amounts due thereunder will become immediately due and payable.

If Gemfields ceases directly or indirectly to: (A) have the power to (i) cast, or control the casting of, 100 per cent. of the maximum number of votes that might be cast at a general meeting of Faberge Limited, (ii) appoint or remove all, or the majority, of the directors or equivalent officers of Faberge Limited or (iii) give directions with respect to the operating and the financial policies of Faberge Limited; or (B) hold beneficially 100 per cent. of the issued share capital of Faberge Limited, then the facility will be cancelled and all amounts due thereunder will become immediately due and payable.

(D) Loan Agreement with Pallinghurst Resources Fund L.P.

On 7 December 2016, Gemfields, as borrower, entered into a US$5,000,000 loan agreement with Pallinghurst Resources Fund L.P., as lender, with an interest rate of 3 month LIBOR plus 5 per cent. per annum to provide Gemfields with working capital, inventory investment and for general business purposes.

The termination date of the loan is 30 June 2017. The payment obligations under the loan agreement will rank senior to all of Gemfields's other present and future unsecured payment obligations, except for the US$25,000,000 senior secured fixed term loan facility with Macquarie Corporate Holdings Limited, as lender.

There is a negative pledge which provides that no further encumbrances (including, without limitation, any mortgage, charge, pledge or lien) will exist over Gemfields's assets except for those already existing in the ordinary course of business.

(E) Revolving Credit Facility with Barclays Bank Mauritius Limited

On 7 March 2017, Kagem, as borrower, entered into a US$15,000,000 revolving credit facility with Barclays Bank Mauritius Limited ('Barclays Mauritius'), as lender, with an interest rate of 3 month LIBOR plus 5.5 per cent. per annum for the purpose of financing capital expenditure and working capital and the repayment of outstanding sums under the existing revolving credit facility with Barclays Mauritius. The facility is available to Kagem for a period of up to and including 33 months after the first drawdown date.

The security package granted in favour of Barclays Mauritius comprises a fixed and floating debenture over all of Kagem's assets registered to cover US$5,000,000. Kagem must also pay a non-utilisation fee of 1.1 per cent. per annum of the unutilised facility amount.

Kagem must notify Barclays Mauritius in advance of any plan to change its shareholding, equity structure and/or management control.

(F) Revolving Credit Facility with Barclays Bank Zambia plc

On 3 March 2017, Kagem, as borrower, entered into a US$20,000,000 revolving credit facility with Barclays Bank Zambia plc ('Barclays Zambia'), as lender, with an interest rate of 3 month LIBOR plus 5.5 per cent. per annum for the financing of capital expenditure and working capital purposes.

The facility is available to Kagem for a period up to and including 1 month after the date of the facility. The final repayment date is 36 months after the date of first drawdown of the facility.

The security package granted in favour of Barclays Zambia comprises a corporate guarantee for US$20,000,000 from Gemfields. Kagem must also pay a non-utilisation fee of 1.1 per cent. per annum of the unutilised facility amount which will be charged annually on 31 December.

Kagem must notify Barclays Zambia in advance of any plan to change its shareholding, equity structure and/or management control.

(G) Overdraft Facility Agreement with Barclays Bank Mozambique, S.A.

On or around 1 April 2016, MRM, as borrower, entered into a US$15,000,000 overdraft facility agreement (the 'Overdraft Facility') with Barclays Bank Mozambique, S.A ('Barclays Mozambique'), as lender, with an interest rate of 3 month LIBOR plus 4 per cent. for working capital purposes.

The security package granted in favour of Barclays Mozambique comprises a US$15,000,000 guarantee provided by Gemfields.

The special conditions of the Overdraft Facility require: (i) MRM to route at least 50 per cent. of its annual proceeds through Barclays Mozambique; and (ii) the Overdraft Facility to be in credit at least once per annum.

(H) Leasing Contract with Banco Comercial E De Investimentos, S.A.

On 24 June 2016, MRM, as borrower, entered into a US$15,000,000 leasing contract (the 'Leasing Contract') with Banco Comercial E De Investimentos, S.A. ('Banco'), as lender, with an interest rate of 3 month LIBOR plus 3.75 per cent. for the purposes of leasing for diverse equipment acquisition.

The term of the Leasing Contract is up to 18 months which is renewable.

The security package granted in favour of Banco comprises: (i) a promissory note subscribed for by MRM and guaranteed by Mwiriti, Limitada and Gemfields Mauritius, Ltd, on the terms set out in the conditions to the Leasing Contract; (ii) a guarantee, in favour of Banco, provided by Gemfields Mauritius, Ltd; and (iii) a personal guarantee from Mwiriti, Limitada and Gemfields Mauritius, Ltd.

(I) Financing Contract with Banco Comercial E De Investimentos, S.A.

On 24 June 2016, MRM, as borrower, entered into a US$15,000,000 financing contract (the 'Financing Contract') with Banco Comercial E De Investimentos, S.A. ('Banco'), as lender, with an interest rate of 3 month LIBOR plus 3.75 per cent. for financial liquidity support.

The term of the Financing Contract is up to 18 months which is renewable.

The security package granted in favour of Banco comprises: (i) a promissory note subscribed for by MRM and guaranteed by Mwiriti, Limitada and Gemfields Mauritius, Ltd, on the terms set out in the conditions to the Financing Contract; (ii) a guarantee, in favour of Banco, provided by Gemfields Mauritius, Ltd; and (iii) a personal guarantee from Mwiriti, Limitada and Gemfields Mauritius, Ltd.

8. SIGNIFICANT CHANGE

There has been no significant change in the financial or trading position of the Company since 31 December 2016 (the date to which the latest consolidated interim report and financial statements of the Company were prepared).

9. FEES AND EXPENSES

The aggregate amount of estimated fees and expenses expected to be incurred by the Company in connection with the Pallinghurst Offer (excluding any applicable VAT) is:

10. RATINGS

10.1 There are no ratings or outlooks publicly accorded to Gemfields.

10.2 There are no ratings or outlooks publicly accorded to Pallinghurst.

11. MISCELLANEOUS

11.1 J.P. Morgan Cazenove has given and has not withdrawn its written consent to the inclusion in this document of the references to its name and the form and context in which it appears.

11.2 Macquarie has given and has not withdrawn its written consent to the inclusion in this document of the references to its name and the form and context in which it appears.

11.3 BMO has given and has not withdrawn its written consent to the inclusion in this document of the references to its name and the form and context in which it appears.

11.4 Grant Thornton has given and has not withdrawn its written consent to the inclusion in this document of the references to its name and the form and context in which it appears.

11.5 As connectedadvisers to Gemfields, J.P. Morgan Cazenove, Macquarie, BMO and Grant Thornton are all, for the purposes of the Takeover Code, acting in concert with Gemfields

12. DOCUMENTS AVAILABLE ON THE COMPANY'S WEBSITE

12.1 Copies of the following documents will be available free of charge at the Company's website at www.Gemfields.co.uk until the end of the Offer Period. The contents of that website are not incorporated into, and do not form part of, this document:

(A) the articles of association of the Company;

(B) the annual report and accounts of the Company for the year ended 30 June 2016;

(C) the interim report and financial statements for the six months ended 31 December 2016;

(D) copies of the non-executive Directors' letters of appointment;

(E) the consent letters referred to in paragraph 11above; and

(F) this document.

12.2 Any Gemfields Shareholder, person with information rights or other person to whom this document is sent may request a copy of each of the documents set out above, or a copy of this document, in hard copy form. Hard copies will be sent only where valid requests are received from such persons. Requests for hard copies may be made by submitting a request in writing to the Company Secretary, Gemfields plc, 1 New Burlington Place, London, England, W1S 2HR or by contacting the Company Secretary during normal business hours on 020 7659 4965 (or, if calling from outside of the United Kingdom, +44 20 7659 4965). Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. A hard copy of this document and any other document referred to in this document will not be sent to you unless so requested. You may also request that all future documents, announcements and information to be sent to you in relation to the Pallinghurst Offer should be in hard copy form.

Part VPresentation of Information, Bases and Sources

1. Presentation of financial information

Unless otherwise stated in this document:

(A) financial information relating to Gemfields has been extracted from the audited consolidated annual report and accounts of the Gemfields Group for the year ended 30 June 2016 and the interim results of Gemfields for the six months ended 31 December 2016, prepared in accordance with International Financial Reporting Standards unless otherwise stated; and

(B) financial information relating to Pallinghurst has been extracted from the audited consolidated annual report and accounts of the Pallinghurst Group for the year ended 31 December 2016, prepared in accordance with International Financial Reporting Standards unless otherwise stated.

2. Rounding

The Company confirms that the information in this document has been rounded and accordingly may not add up to 100 per cent. Certain financial data has also been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

3. Sources and bases

Unless otherwise stated:

(A) the value of the share capital of Gemfields is based upon 551,113,142 Gemfields Shares in issue on 26 June 2017 (being the latest practicable date prior to the date of this document);

(B) the value of the share capital of Pallinghurst is based upon 760,452,631 Pallinghurst Shares in issue on 26 June 2017 (being the latest practicable date prior to the date of this document);

(C) ZAR has been converted into pounds Sterling at the rate of 16.36 to one pound Sterling, being the exchange rate quoted by Bloomberg as at 4.30 p.m. in London on 26 June 2017 (being the being the last Business Day prior to the date of this document);

(D) the consensus target price for Gemfields ordinary shares is sourced from Bloomberg and the equity research reports referred to below. The consensus target price for Gemfields is as published by equity research analysts between 20 February 2017 (being the date of publication of Gemfields' half-yearly financial report for the period ending 31 December 2016) and 12 May 2017 (being the date of the latest available equity research report) and excludes J.P. Morgan Cazenove (12 May 2017), BMO (12 May 2017) and Macquarie (15 May 2017) due to each firms' involvement as a financial adviser to Gemfields. The consensus target price is an average of the following analyst estimates: Finncap (95 pence as at 12 May 2017); Peel Hunt (83 pence as at 25 April 2017); Investec (69 pence as at 20 April 2017); and Numis (80 pence as at 21 February 2017). These analyst estimates are not endorsed by Gemfields and have not been reviewed or reported on in accordance with the requirements of Rule 28.1(a);

(E) information regarding the Pallinghurst Offer is sourced from the Offer Document and other material made publicly available by Pallinghurst or any other person mentioned in the Offer Document;

(F) all Closing Prices relating to Gemfields Shares and Pallinghurst Shares are the Closing Prices derived from Bloomberg; and

(G) the volume weighted average price is derived from data provided by Factset.

Part VIDefinitions

The following definitions apply throughout this document unless the context otherwise requires:

For the purposes of this document, 'parent undertaking', 'subsidiary' and 'subsidiary undertaking' have the respective meanings given to them by the Companies Act.

All references to 'GBP', 'pounds', 'pounds Sterling', 'Sterling', '£', 'pence', 'penny' and 'p' are to the lawful currency of the United Kingdom.

All references to 'US$', '$' and 'US dollars' are to the lawful currency of the United States.

References to 'ZAR' and 'Rand' are to the lawful currency of South Africa.

All the times referred to in this document are London times unless otherwise stated.

References to singular include plural and vice versa.

Appendix 1

Summary of Relationship Agreement between Gemfields and Pallinghurst

Gemfields and PRF are party to a relationship agreement dated 15 August 2013 which governs the relationship between the Gemfields Group and The Pallinghurst Resources Fund L.P. ('PRF') (the 'Relationship Agreement'). The PRF is a 99.99 per cent. subsidiary of Pallinghurst (with Pallinghurst (Cayman) GP L.P. holding the remaining 0.01 per cent. interest).

A key requirement of the Relationship Agreement is that at least 50 per cent. of the Directors serving on the Board are independent of PRF. A Director is defined as 'independent' under the Relationship Agreement if they are not also a director, officer or employee of PRF, Pallinghurst (PRF's parent company) or of any other entities affiliated to either PRF or Pallinghurst.

The Relationship Agreement provides that Pallinghurst shall exercise all its powers and procure that any non-independent Directors and Related Parties exercise their powers to ensure that, among other things: (i) the Company has its own dedicated management which shall operate and take decisions independently of Pallinghurst; (ii) the business and affairs of the Company shall be carried out in accordance with its constitution and for the benefit of Gemfields Shareholder as a whole; (iii) independent Directors shall constitute at least 50 per cent. of the Board and all committees (save for the audit committee to which different rules apply); (iv) the Company shall comply with the principles of best practice adopted by UK AIM companies and any relevant market rules or regulatory requirements; (v) no agreement shall be entered into between the Company and Pallinghurst or any of its associates unless approved by the Board including the non-independent Directors; (vi) all transactions between the Company and Pallinghurst and its associates shall be carried out on arm's length terms; and (vii) Pallinghurst shall not sell, transfer or agree to sell, transfer or otherwise dispose of its Gemfields Shares which would reduce its aggregate holding to a level below 30 per cent. of the voting rights without giving the Company at least two business days' notice.

In addition, Pallinghurst and its associates are also bound by certain non-compete provisions to prevent them from, among other things, competing, or holding interests of more than 10 per cent. in companies that compete, with the Company's business (subject to certain exceptions). Pallinghurst and its associates must also not solicit for employment any group employee or induce or attempt to induce any group employee to terminate its employment relationship. The parties are bound by certain confidentiality obligations.

The Relationship Agreement shall remain in force until such time as PRF and its associates hold, in aggregate, less than 30 per cent. of the aggregate voting rights of the Company, at which time the Relationship Agreement shall immediately terminate. 'Associate' for the purposes of the Relationship Agreement means, in relation to PRF: (i) a company which is a subsidiary undertaking or parent undertaking of PRF or subsidiary undertaking of any such parent undertaking; (ii) any company whose directors act in accordance with PRF's directions or instructions; and (iii) any company in the capital of which PRF and the company or person under (i) or (ii) is (or would on the fulfilment of a condition or the occurrence of contingency) be able to: (a) exercise or control the exercise of (directly or indirectly) more than 30 per cent. of the votes able to be cast at a general meeting on all, or substantially all matters; and (b) appoint or remove directors holding a majority of voting rights at board meetings on all, or substantially all, matters; and (iv) Related Parties (as defined in the AIM Rules) of PRF and any company under (i), (ii) or (iii).