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

    7 August 2015

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

                     Government approval for acquisition of Mothae                 

    Paragon Diamonds Limited, the AIM quoted diamond development company, is
    pleased to announce that further to the announcement of 14 July 2015, the
    Company has now obtained the necessary formal approval from the Government of
    Lesotho to complete the acquisition of a 75% interest in, and operatorship of,
    the defined Mothae Kimberlite Resource ('Mothae') from Lucara Diamond
    Corporation, a TSX quoted mining company (the "Acquisition").  Mothae is only 5
    km from the world class Letseng diamond mine in Lesotho which is located within
    a cluster of kimberlites, including Paragon's Lemphane Kimberlite Pipe Project
    ('Lemphane').

    Mothae represents a low cost opportunity to fast track Paragon's strategy to
    build a leading vertically integrated diamond house and to generate significant
    value for shareholders through the recovery of large high value diamonds. With
    Government approval received, the Company will now proceed with the
    finalisation and subsequent completion of the Acquisition.  Once completed, the
    Company will develop and commence production at both Mothae and Lemphane
    simultaneously to take advantage of economies of scale, thereby minimising
    costs.  In the first full year of production, Paragon is targeting combined
    revenues of approximately US$36 million from both Mothae and Lemphane.

    Paragon's Executive Chairman, Philip Falzon Sant Manduca said "The process to
    obtain formal approval to acquire Mothae took longer than all parties
    anticipated, having received verbal approval from the Minister at my meeting
    with him on the 22 June 2015. In any event, with the approval now to hand, we
    can now progress the acquisition and development of Mothae.

    "We have to conclude the funding for both mines promptly, which indeed, is one
    of the conditions for the Ministry's approval.  We have several serious level
    discussions occurring simultaneously, in addition to the original MOU signed
    with ITGT in Dubai. We will be updating shareholders as soon as we conclude one
    of these funding discussions as soon as practicable as we look to secure the
    optimal investment partner for Paragon, not just over the next 18-24 months,
    but also thereafter as we transition into full production at both assets.

    "There is clear and present evidence to hand that our strategy of focusing on
    the investment grade diamond sector as an alternative to paper money is
    correct. I am so bullish about our prospects as a company and I look forward to
    updating shareholders in due course.

    "I believe that analysts are focusing more and more on our vertically
    integrated strategy for the diamond industry, as the wholesale market gets
    squeezed into having to occupy a smaller role, allowing producers such as
    Paragon to capture the additional profit margin by transacting directly with
    investors and consumers. Indeed, I think a valid analogy is that Paragon could
    be viewed, by those seeking to invest in the currency of diamonds,  like a
    central bank, producing a financial currency, whilst our distribution approach
    downstream is akin to a commercial banking system through which real wealth can
    be acquired and stored in that currency. Investment grade diamonds are a
    better, more mobile currency and store of wealth than financial paper, real
    estate, art, cars or gold.  Paragon is in the right place at the right time and
    remains deeply undervalued to its asset base."

                                       **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