Paragon Diamonds : Positive Technical Study for Mothae Kimberlite

15 September 2015

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

Positive Technical Study for Mothae Kimberlite Project

Paragon Diamonds Limited, the AIM quoted diamond development company, is pleased to announce the results of two independent studies carried out by The MSA Group on the Mothae Kimberlite Project ('Mothae'), located in Lesotho, that Paragon is in the process of acquiring.

T he conclusions exceed management's initial expectations, as detailed in the announcement of 5 May 2015, that Mothae represents a low cost opportunity for Paragon to generate significant value for shareholders through the potential recovery of large high value diamonds. Mothae is only 5 km from the world class Letšeng diamond mine in Lesotho which is located within a cluster of kimberlites, including Paragon's Lemphane Kimberlite Pipe Project ('Lemphane').

These technical reports are intended as components of a future Preliminary Economic Assessment (PEA) and Pre-feasibility Study (PFS) and review multiple mining scenarios and simulated progressive cutting of processing costs, which will now be explored during final plant and open pit design work.

Highlights of the studies include:

· Potential to significantly increase the Mothae's NPV from management's original estimates.

· Improved strip ratio has been identified at

· Potential for average diamond values up to US$2,000/ct..

· Several Mining Scenarios exceeding 20Mt at US$40+/t ore value in a low operating cost mine exceeding 2Mt and 40,000 carats per year.

These studies focussed on determining both the trade-off between maximum diamond value recovery against processing costs (using a range of bottom cut-off screen sizes-BCOS), as well as optimum opencast mining scenarios at the Mothae Kimberlite based on the mining of the Main Pipe only, which comprises the South-West (SW), South-East (SE) and South-Central (SC) domains of the kimberlite. The basis for both studies was the NI 43-101 Technical Report completed by Lucara Diamond Corporation in February 2013.

Mothae Revised Diamond Revenue Models

The revenue scenarios compiled by The MSA Group come from a sample of 23,738 cts that were used to model the average diamond value per size class for each of the four kimberlite domains. Average diamond values were calculated for three bottom cut-off screens (+2 mm; +3 mm; +4 mm) using three revenue models. Key findings are summarised below:

· The resource of Main Pipe (Southern Lobe) comprising SW+SC+SE Domains is estimated at 32.41 million tonnes at an average diamond value of US$1,352/ct and a grade of 2.2 cpht at a 3 mm bottom cut-off screen (BCOS). The +20 ct diamond values were capped at US$6,492/ct for study purposes.

· Upside potential of the planned mining area, SW+SC+SE Domains at US$1,971 per carat and a grade of 2.2 cpht at 3 mm BCOS with +20 ct diamond value capped at US$11,057/ct, has been estimated.

· A worst-case "Downside" model, which is based on modelled revenue of US$1,024/ct at 3 mm BCOS for SW+SC+SE, still yields US$22.53/t ore value, i.e. above anticipated break-even. The "Downside" model at 3 mm BCOS also assumes overall diamond values circa 20% lower than those achieved in the actual 2012/13 valuation and sale of diamonds recovered during trial mining.

· Modelled ore values at 3 mm BCOS of between US$29.75 and US$43.36/t would increase to US$32.77/t and US$48.07/t respectively by excluding the 6.8 Mt SE Domain.

Summary of Indicated/Inferred Resource Tonnes and Average Grades & Values