Diamond grade and volumetric estimate at Motete

16 January 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Initial modelled diamond grade and volumetric estimate, Motete Dyke Licence, Lesotho

Highlights

·; 1.3 cts/tonne at 1-DTC diamond screen size

·; 1 million tonnes of kimberlite initial in house estimate

·; Plan to advance to scoping study of low cost mining operation

Paragon Diamonds Limited, the African-focused diamond explorer and developer, announces a provisional modelled grade and in house tonnage estimate for its recently awarded Motete Dyke Licence in Lesotho.

The Company has submitted results from the first 200kg sample for initial grade modelling by specialist consultants. These provisional results show that the dyke is likely to be diamondiferous with a grade of between 1.27 cts/tonne at 1-DTC (1.09 mm Ø) and 0.64 cts/tonne at 5-DTC (1.83 mm Ø) predicted at an average stone size of 0.1 cts/stone in the latter case. The analytical programme and results are managed by the company's consultants, MSA Group.

In addition to the anticipated recovery of average stone sizes for Motete, there is a statistical probability of larger stones, including #3 in the +60-100 ct/stone, #20 in the +30-60 ct/stone and #300 in the +10-30 ct/stone size ranges, per million tonnes.

In addition the company has undertaken detailed mapping and measurement of the surface expression of the dyke, confirming the exposed strike as exceeding 1,400 m and the average (weighted) width of 1.40 m, with local expansions up to 2.90 m in width. A provisional (in-house) volume estimate of diamond bearing material above the valley floor anticipates circa 215,000 m³ and the initial 100 m below the valley floor (to 2,350 m above sea level) a further 190,000 m³, at a measured density of 2.50t/m³ hosting in excess of 1 million tonnes.

Further comprehensive grade modelling will be undertaken once all outstanding micro-diamond analyses are available for study. It is the strategy of Paragon to rapidly advance to a scoping study based on a low cost mining model for the dyke, which is expected to be a typical overhead fissure mining operation with a restricted amount of low cost infrastructure. Topography and width are particularly favourable in this instance. The significant average width and vertical alignment can be expected to minimize mining dilution. Work at the Company's other operations in Lesotho is expected to continue in tandem to the Motete project and is on schedule.

Commenting today, Paragon Chairman Luc Huyghebaert said: "I am delighted by the initial grade modelling and volumetric analysis which show the great potential of the Motete Dyke to the Company. I look forward to the results from the remaining micro diamond samples expected over the coming weeks and continuing the rapid exploration and development of this potentially significant project."

In accordance with the AIM Rules, the information in this announcement has been reviewed by Stephen Grimmer PhD., MSc., a qualified geologist with over 20 years' diamond exploration experience.

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Notes to editors

Paragon Diamonds is looking to rapidly develop producing and exploration diamond properties into a portfolio of high value assets located within Africa. To date it has secured a series of alluvial and hard rock assets which its exploration and development teams are working on to progress. A core focus at present are the companies hard rock licences located in Lesotho, a major producing diamond region. The Projects include:

Lemphane Kimberlite project Lesotho (85%)

Lemphane is one of five known diamond bearing kimberlite pipes within Lesotho, located 5km from the Liqhobong project . An NS43-101 report carried at Lemphane indicates pipes may contain 30 million tones of kimberlite with white colour diamonds already recovered (19 recovered). The Environmental assessment plan and access routes and exploration camp have been completed.DMS plant constructed and bulk sampling commenced with 25,000 tonnes of ore stockpiled awaiting processing. Extended bulk sampling of a further 25,000 tonnes once initial sample completed

Motete Dyke exploration, Lesotho (85%)

Motete is a substantial kimberlite dyke (fissure system) in close proximity to the Lemphane project. Known to be diamondiferous and currently undergoing initial exploration & micro diamond analysis with results expected Q1 2012. The licence was awarded in December 2011.

Kaplamp diamond hosting Lamproite', Zambia

Kaplamp is a large prospecting licence known to host 14 Lamproite pipes within a known diamondiferous region and with five high profile targets identified for initial evaluation. The area is highly prospective as De Beers recovered significant amount of stones in 60's and 70's but relinquished area as Lamproites were not yet recognised as viable. The Arglye Diamond Mine in Western Australia is most renowned Lamproite hosted mine - in 1994 produced 39% of worlds diamond production.

Kopje kimberlite exploration, Botswana

This newly awarded prospecting licence covering 15 km sq in highly prospective area 35 km east of DeBeers' largest produce Orapa Mine. Initial exploration work planned for Q1 2012.

Konomo Alluvial Mine, Sierra Leone

This Alluvial diamond project covers 162km2 and has an indicated and inferred resource of 119,000 carats with large tracts of Bafi river remaining unexplored. Circa 3,000 carats recovered by Paragon since operations commenced, with a parcel that includes c.34.18 carat "special" stone and 10.18, 10.46 and 9.96 carat gem quality stones

Mabuki, Tanzania

Located 81km south of Mzanza, Tanzania with Good infrastructure nearby (roads, power, water, transport) the licence sits within a known Kimberlite Field. Artisanal activity occurs to the west of licence with diamond bearing gravels identified off the edge of the licence. Intention to explore (detailed geophysics and sampling) and map-out, then establish drill targets and define resource. Wardell Armstrong completed a competent persons report on Tanzania in September 2010