Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources     

     7 October 2015

                 Paragon Diamonds Limited ('Paragon' or the 'Company')             

                        Corporate and Mothae acquisition update                    

    Paragon Diamonds Limited, the AIM quoted diamond development company, announces
    an update and progress regarding the proposed acquisition from Lucara Diamond
    Corporation ('Lucara') of the Mothae Kimberlite Resource ('Mothae'), which is
    only 5 km from the world class Letšeng le Terai Diamond Mine in Lesotho, and
    the Company's nearby Lemphane Kimberlite Pipe Project ('Lemphane').

    Lucara has agreed to extend exclusivity based upon an appropriate timetable for
    Paragon to complete their US$15 million funding package with Acrux Resources
    Proprietary Limited ('Acrux'), announced on 2 October 2015, and Lucara reserves
    its rights to terminate exclusivity based upon any deviation from this
    schedule.  Upon completion of the financing Paragon will pay Lucara an initial
    US$2 million of the US$6.5 million due.

    In addition the Company has agreed an extension to the short term £500,000 loan
    facility to 18 November 2015 in order for the proposed Acrux funding package to
    be executed. If Paragon repays the loan after the 14 October 2015 then it will
    issue the provider a further 3,571,428 detachable call warrants with a strike
    price of 7 pence per share.

    These extensions place the Company in a good position to execute its strategy
    and complete the acquisition of Mothae on the terms previously announced. The
    Company will make further announcements regarding the Acrux funding package and
    the acquisition of Mothae as soon as practicable.

    Paragon Diamonds Finance Director Simon Retter said: "Both Acrux and Paragon
    are committed to concluding the funding arrangements which we announced on 2
    October 2015, subject to the conditions of the Term Sheet, as soon as
    practicable. The Company is progressing activity at both Lemphane and Mothae
    and there should be no delays in bringing plant and other equipment, including
    the use of two technologically advanced XRT machines to site. We currently have
    no plans to procure additional funding in order to commence production nor to
    cover existing overheads.

    "With the reduction in the purchase price for Mothae, revised terms of payment
    with Lucara, and other working capital and capital expenditure efficiencies
    identified, we are well placed to deliver on our strategy. Our mining plan at
    Mothae has been independently reviewed by MSA and indeed improved on our
    original estimation of the economics of the project.

    "We have also secured a letter of commitment for funding for the majority of
    stage two financing for both projects as announced on 30 September 2015. So,
    the Board believes that Paragon is now in an exceptionally strong position,
    looking forward to production in 2016 at both assets. I believe we have made a
    large amount of progress over the last 12 months and that significant value has
    been added to the Company over this time."

                                       **ENDS**                                    

    For further information please visit www.paragondiamonds.com or contact:

    Philip Falzon Sant           Paragon Diamonds          +44 (0) 20 7182 1920    
    Manduca                Limited                                                 
                                                                                   
    Simon Retter                 Paragon Diamonds          +44 (0) 20 7182 1920    
                           Limited                                                 
                                                                                   
    David Hignell                Northland Capital         +44 (0) 20 7382 1100    
    Gerry Beaney           Partners Limited                                        
                                 (Nominated Adviser)                               
                                                                                   
    John Howes                   Northland Capital         +44 (0) 20 7382 1100    
    Mark Treharne          Partners Limited                                        
                                 (Sales and broking)                               
                                                                                   
    Felicity Winkles             St Brides Partners        +44 (0) 20 7236 1177    
                           Limited                                                 
                                                                                   
    Frank Buhagiar               St Brides Partners        +44 (0) 20 7236 1177    
                           Limited                                                 

    Notes

    Paragon Diamonds has an 80% interest in the Lemphane Kimberlite Pipe project in
    Lesotho, located close to the world class Letšeng mine, Lesotho's largest
    diamond mine.  Lemphane is the last known kimberlite to be developed in
    Lesotho.  The first of a two stage production programme is expected to commence
    in 2015 which will further define the resource at Lemphane. As increased
    tonnages of kimberlite are processed the proportion of larger diamonds
    recovered will improve, increasing the average value of diamonds recovered at
    the project, as was the case at Letšeng. In addition to Lemphane, Paragon
    Diamonds has signed a Memorandum of Understanding with Lucara Diamond
    Corporation, a TSX quoted mining company, to acquire a 75% interest in and
    operate the defined Mothae Kimberlite Resource, which is located only 5 km from
    the world class Let?eng le Terai diamond mine in Lesotho.