First Large Diamonds Recovered from Lemphane

16 February 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

First Large Diamonds Recovered From Lemphane Kimberlite, Lesotho

Highlights

·; Five large diamonds ranging from 2.00 carats to 6.30 carats recovered from first bulk sample

·; Large, high quality white diamonds recovered

·; Preliminary grade of 1.96 cpht (carats per hundred tonnes)

·; High average diamond size of 0.46 carats per stone

Paragon Diamonds Limited, the African-focused diamond explorer and developer, announces the first results from its Lemphane Kimberlite bulk sampling programme in Lesotho.

The company has recently completed the processing of the first bulk sample comprising 2,385 dry tonnes of volcaniclastic kimberlite taken from its 84% owned Lemphane Kimberlite pipe.

A total of 46.79 carats in 102 diamonds were recovered, at a recovered grade of 1.96 cpht and at an average stone size of 0.46 carats per stone.

* See chart below

Of particular note was the high number of larger diamonds: 14 diamonds over one carat in size and 5 diamonds over two carats in size were recovered. The largest diamonds were:

Images of these diamonds are available on the Company website, www.paragondiamonds.co

In addition to a high average stone size, the diamond population is heavily skewed towards the larger diamond sizes, with 62% of the total carats being present in diamonds of one carat or larger, and 39% of the total carats being present in diamonds of two carats or larger. A preliminary comment from MSA Group, the company's independent consultants is that: "circa 85% of the diamonds are white and clear dodecahedra, with the remainder showing attractive brown and yellow colours and some macle shapes. Stone size, quality and colour are all highly encouraging"

The results at Lemphane are significant as they correlate closely with the results seen at other prominent Lesotho kimberlites at the same exploration-development stage. Relatively low grades but exceptionally large diamond sizes are encountered at both Letšeng-la-Terae and Mothae diamond mines, where the overall value is highly influenced by the presence of large, high value stones.

Ongoing Bulk Sample Testing

Representing less the 10% of the entire planned sample tonnage, Paragon's 2,385 tonne samples gives only a preliminary indication of the overall grade and stone size at the Lemphane Kimberlite. The infrequent presence of larger diamonds typically leads to an under-estimation of both grade and average stone size in the initial stages where sample sizes are relatively small. A further circa 32,000 tonnes of sample material has been extracted from the Lemphane Kimberlite which is being tested as part of the bulk sampling programme.

With the processing of increased tonnages of samples taken across the entire kimberlite, the company anticipates higher statistical confidence and improved grades, stone sizes and a higher incidence of larger diamonds.

The results do not yet include diamonds from tailings re-crush/re-treatment, which will be recovered at the end of the programme.

Paragon Diamonds MD Dr. Stephen Grimmer commented: "The recovery of a number of relatively large diamonds from the initial small sample has very positive indications for the programme at Lemphane. We have every confidence we will be recovering greater numbers and larger diamonds in the near future. With a potentially coarse diamond size distribution established, completion of the sampling should help secure Lemphane's position as a world-class Lesotho kimberlite."

Paragon Diamonds Chairman Francesco Scolaro commented: "Recovering 5 significant diamonds at such an early stage from such a relatively small sample is a very positive start for the Lemphane project. The proximity to Mothae & Letšeng, known for being two of the world's most important sources of large diamond gemstones, would indicate we are certainly in the right place."

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.

For further information:

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. The 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 (84%)

Lemphane is one of five known diamond bearing kimberlite pipes within Lesotho, located 5km from the Liqhobong project. The Environmental assessment plan and access routes and exploration camp have been completed.DMS plant constructed and bulk sampling commenced with 35,000 tonnes of ore stockpiled awaiting processing. Extended bulk sampling of a further 25 - 40,000 tonnes is possible once initial sample completed.

Motete Dyke exploration, Lesotho (84%)

Motete is a substantial kimberlite dyke (fissure system) in close proximity to the Lemphane project. Known to be diamondiferous and currently undergoing initial exploration. Initial micro diamond analysis results in 2012 indicated that an in-situ grade of up to 1 carat per tonne is likely. 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 Argyle Diamond Mine in Western Australia is the 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' large producing 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 the 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 Mwanza, 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. The intention is to explore (detailed geophysics and sampling) and map-out, then establish drill targets and define a resource. Wardell Armstrong completed a competent persons report on Tanzania in September 2010.