Interim Results

19 September 2013 Paragon Diamonds Limited ("Group" or the "Company") (AIM: PRG) Interim Results Paragon Diamonds Limited, the African-focused diamond development company,today announces its unaudited results for the six months ending 30 June 2013. A copy of the report will be available on the Company's website shortly -www.paragondiamonds.com For further information: Paragon Diamonds Limited +44 (0) 20 7099 1940Martin Doyle - ChairmanSimon Retter - Finance Directorwww.paragondiamonds.com Sanlam Securities UK (Nominated Adviser & +44 (0) 20 7628 2200Broker)Lindsay MairCatherine Miles Chairman's Statement I am pleased to present the interim financial statements for theGroup for the six month period to 30 June 2013 and report on the developmentswithin the Group. The Group has focused on the bulk sampling programme at itsflagship Lemphane Kimberlite in Lesotho within the period with the intent ofdelineating and estimating a resource of large high quality diamonds which canbe rapidly advanced to production. Lemphane - Lesotho The bulk sampling on the Lemphane Kimberlite initiated in 2012 wassignificantly accelerated in 2013 with the successful installation andcommissioning in January 2013 of a steady water supply from the nearbyperennial Malibamatso River. Having access to a year-round supply of water isa significant strategic advantage to the Company especially in anticipation offuture commercial production. Since commencement of the bulk sampling to 30 June 2013, a total ofover 18,000 tonnes of kimberlite (16,000 dry tonnes) has been processed,representing kimberlite excavated from all the seven major pit samplescollected across the surface of the Lemphane Kimberlite. As at 30 June 2013 atotal of 301.44 carats had been recovered to give an average grade of 1.87,in-line with estimates. 211.22 carats were exported under Kimberley Certificate protocolsin July 2013 and are currently undergoing valuation by WWW InternationalDiamond Consultants. The last export contained the 8.86 carat stone recoveredin April 2013, the largest stone recovered to date. A valuation completed inJanuary 2013 of the initial 90.22 carats exported, returned values for twoindividual diamonds in excess of $2,300 and $1,800 per carat with the largeststone weighing 6.3 carats. The results at Lemphane continue to demonstrate thecharacteristics of other Lesotho kimberlites of low grades but exceptionallylarge diamond sizes. In addition, the overall value is highly influenced bythe presence of large, high value stones which makes it imperative thatsufficiently large representative samples of the kimberlite are collected andprocessed effectively to guarantee 100% recovery of these large stones. Inline with this objective, the next stage at Lemphane will see the installationand commissioning of a greater capacity plant that will process over 500,000tonnes annually. This initial annual rate of production is anticipated torecover some 10,000 carats including a significant percentage of very largesized stones. Motete - Lesotho A resource statement was released by the consultants MSA Group ofSouth Africa in December 2012. The Mineral Resource was prepared by JohannFerriera (Pr.Sci.Nat) a world renowned specialist in the estimation of MineralResources for diamond projects and was based on data generated from both amicro-diamond and bulk sample program executed by Botle Diamonds personnelduring 2012. The resource statement defined a net attributable resource of1.56Mt at a grade of 65cpht for a net contained caratage of 1.015Mct on acut-off of 1.18mm. The average diamond value was $62/carat with values of $500per carats were noted in the +7 DTC sieve class. In order to confirm thehigher values in the larger diamond sizes and thereby improve the averagediamond values, additional bulk sampling will need to be undertaken whenorganisational resources permit. In the interim, Botle Diamonds, the Group's85% owned subsidiary, has applied for three further prospecting licences witha combined area of 74 km² on adjacent ground. Future discoveries on theapplications will contribute additional tonnage and life of mine to thecurrent established resource and thereby improve the project economics. Thediamond parcel from the kimberlite dyke valued in January 2013 will bereassessed during the valuation of the Lemphane diamond parcel currently beingvalued at our consignee in Antwerp. Financial Results The Group reported a loss of £0.5 million for the period (2012restated: loss of £1.4 million) which comprised mainly administration costs.The net assets of the Group were £32.6 million at the period end (2012restated: £35.8 million) which included £3.4 million attributable to minorityinterests (2012: £3.5 million). The exploration portfolio is £43.7million(2012 restated: £41.3 million) and fixed assets, comprising the plant andequipment, of £0.7 million (2012: £0.8 million). The Group completed afundraising of £1.55 million during the period by issuing 31,000,000 newordinary shares at a price of 5 pence per share. The Group held cash balancesof £1.2 million at the period end (2012: £1.6 million) of which £1.0 millionhad been pledged as collateral for an equity swap which the Group entered intoover its own shares. Outlook As previously reported an application for a Mining Licence forLemphane was lodged in February 2013 at the Lesotho Ministry of Mines. Insubsequent consultations with the Ministry, the Mining Licence application hasbeen revised to initiate `Stage 1' production at a rate of over 500,000 tonnesannually instead of the original 200,000 tonnes annually, thereby shorteningthe development path by one year. This positive revision in concert with otherrecent clarifications on the application gives us confidence to believe thegranting of the Mining Licence is imminent. Upon agreement and granting of theMining Licence the Group will have an updated work program at Lemphane whichit is keen to accelerate as much as possible. Martin Doyle Chairman 18 September 2013 Condensed consolidated statement of comprehensive income Six Months Six Months to to Year to 31 30 June 30 June December 2013 2012 2012 Notes (Unaudited) (Unaudited) (Audited)Continuing operations £000 £000 £000 Administration costs (388) (852) (1,073) Loss on investment (125) - - Finance costs (25) (21) (41) LOSS BEFORE TAXATION (538) (873) (1,114) Taxation - - - LOSS FOR THE PERIOD FROM CONTINUING (538) (873) (1,144)OPERATIONS Discontinued operations Loss for the year from discontinued - (479) (3,954)operations LOSS FOR THE PERIOD/YEAR (538) (1,352) (5,068) Attributable to: Owners of the parent (538) (1,352) (4,881) Non-controlling interest - - (187) (538) (1,352) (5,068) Other comprehensive income: Exchange differences on translationof foreign operations 1,353 (317) (2,031) TOTAL COMPREHENSIVE INCOME FOR THEPERIOD 815 (1,669) (7,099) Attributable to: Owners of the parent 600 (1,621) (6,763) Non-controlling interest 215 (48) (336) 815 (1,669) (7,099) LOSS PER SHAREFrom continuing and discontinuingoperations Basic and diluted (pence) (0.27) (0.70) (2.61) From continuing operations Basic and diluted (pence) 4 (0.27) (0.45) (0.57) Condensed consolidated statement of changes in equity Share Foreign based Non- Share Share exchange payment Retained controlling Total capital premium reserve reserve deficit Total Interests equity £000 £000 £000 £000 £000 £000 £000 £000 At 1 JANUARY 2012 1,882 42,944 1,651 316 (15,088) 31,705 3,867 35,572 Loss for the period - - - - (1,352) (1,352) - (1,352) Exchange differences ontranslation of foreignoperations - - (269) - - (269) (49) (318) Total comprehensiveincome for the period - - (269) - - (1,621) (49) (1,670) Issue of shares 69 1,938 - - - 2,007 - 2,007 Share based payment - - - 163 - 163 - 163 Acquisition of minorityinterest - - - - 81 81 (354) (273) Transfer of share basedpayment charge oncancelled options - - - (13) 13 - - - At 30 june 2012 1,951 44,882 1,382 466 (16,346) 32,335 3,464 35,799 Loss for the period - - - - (3,529) (3,529) (187) (3,716) Exchange differences ontranslation of foreignoperations - - (1,613) - - (1,613) (100) (1,713) Total comprehensiveincome for the period - - (1,613) - (3,529) (5,142) (287) (5,429) Issue of shares - - - - - - - - Share based payment - - - 18 - 18 - 18 At 31 december 2012 1,951 44,882 (231) 484 (19,875) 27,211 3,177 30,388 Loss for the period - - - - (538) (538) - (538) Exchange differences ontranslation of foreignoperations - - 1,138 - 1,138 215 1,353 Total comprehensiveincome for the period - - 1,138 (538) 600 215 815 Issue of shares 282 1,128 - - - 1,410 - 1,410 Share based payment - - - 16 - 16 - 16 At 30 june 2013 2,233 46,010 907 500 (20,413) 29,237 3,392 32,629 Condensed consolidated statement of financial position 31 30 June 30 June December 2013 2012 2012 (Unaudited) (Unaudited) (Audited) Notes £000 £000 £000ASSETS Non-current assets Intangible exploration andevaluation assets 5 43,681 41,256 41,151 Property, plant and equipment 6 669 4,903 760 Total non-current assets 44,350 46,159 41,920 Current assets Trade and other receivables 175 14 177 Inventory - 66 - Cash and cash equivalents 1,150 1,586 492 Total current assets 1,325 1,666 669 TOTAL ASSETS 45,675 47,825 42,589 LIABILITIES Current liabilitiesTrade and other payables (241) (173) (310) Investment liabilities (125) - - TOTAL CURRENT LIABILITIES (366) (173) (310) NON-CURRENT LIABILITIES Site restoration provision (135) (461) (148) Loans (2,847) (1,944) (2,616) Deferred tax liability (9,698) (9,448) (9,127) Total non-current liabilities (12,680) (11,853) (11,891) TOTAL LIABILITIES (13,046) (12,026) (12,201) NET ASSETS 32,629 35,799 30,388 EQUITY Share capital 7 2,233 1,951 1,951 Share premium 8 46,010 44,882 44,882 Foreign exchange reserve 907 1,382 (231) Share based payment reserve 500 466 484 Retained deficit (20,413) (16,346) (19,875) Equity attributable to the ownersof the parent 29,237 32,335 27,211 Non-controlling interests 3,392 3,464 3,177 TOTAL EQUITY 32,629 35,799 30,388 Approved by the board and authorised for issue on 18 September 2013 Martin Doyle Simon Retter Executive Chairman Finance Director Condensed consolidated statement of cash flows Six month Six months Year to June to June ended 2013 2012 December Unaudited Unaudited 2012 £000 £000 £000OPERATING ACTIVITIES Loss before taxation (538) (873) (1,114) Adjustment for:Investment losses 125 - - Interest expense 25 21 41 Foreign exchange losses (102) 23 5 Share based payment charge 16 163 181 Decrease in trade and other receivables 2 16 (11) Decrease in inventory - 1 - (Decrease)/Increase in trade and otherpayables (69) (9) 227 NET CASH OUTFLOW FROM CONTINUINGOPERATIONS (541) (658) (671) NET CASH OUTFLOW FROM DISCONTINUINGOPERATIONS - (216) (281) NET CASH OUTFLOW FROM OPERATIONS (541) (874) (952) INVESTING ACTIVITIES Purchases of property, plant andequipment (101) (35) (272) Expenditure on mining licences (382) (354) (1,805) Net cash outflow from investingactivities (483) (389) (2,077) FINANCING ACTIVITIES Proceeds from issue of share capital 1,410 1,725 1,725 Expenses of issue of share capital - - - Proceeds from/(repayment) of loan fromparent 274 (114) 558 Net cash inflow from financing activities 1,684 1,611 2,283 INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS 660 348 (746) Cash and cash equivalents at beginning ofperiod 492 1,238 1,238 Effects of foreign exchange (2) - - CASH AND CASH EQUIVALENTS AT END OFPERIOD 1,150 1,586 492 Notes to the interim financial statements 1. BASIS OF PREPARATION The interim financial statements of Paragon Diamonds Limited areunaudited condensed consolidated financial statements for the six months to 30June 2013. These include unaudited comparatives for the six month period to 30June 2012 and those audited for the year ended 31 December 2012. 2. significant accounting policies The condensed consolidated financial statements have been preparedunder the historic cost convention except for the revaluation of certainfinancial investments and financial assets and liabilities which are includedat fair value. The accounting policies adopted are consistent with those found inthe preparation of the Group's annual financial statements for the year ended31 December 2012. The condensed consolidated financial statements do not constitutestatutory accounts. The statutory accounts for the period to 31 December 2012have been reported on by the Company's auditors and included an emphasis ofmatter regarding going concern. 3. SEGMENTAL REPORTING Segmental information is presented on the basis of the informationprovided to the chief operating decision maker ("CODM"), which is the Board ofDirectors. The operations of the Group are located in South and East Africa.Head office costs are incurred in Guernsey. The Group's primary reporting segments are geographical segments,being South and East Africa. The following tables show the segment analysis of the Group's lossbefore tax for the period, net assets at 30 June 2013 and other segmentinformation: Six months ended 30 June 2013 Discontinued Exploration operations - South and -West Africa East Africa Total £000 £000 £000Income statement Revenue - - Administration expenses - - Operating expenses - - Depreciation - - Segmental result - - Head office administration costs (388) Interest income (25) Investment losses - (125) Loss after tax (539) NET ASSETS Assets - 44,488 44,488 Liabilities - (10,693) (10,693) Segment net assets - 33,795 33,795 Unallocated assets 1,188 Unallocated liabilities (2,355) Net assets 32,628 Other segment information Capital expenditure:Property, plant and equipment - 101 101 Intangible exploration and evaluation assets - 504 504 Six months ended 30 June 2012 Discontinued Exploration operations - South and -West Africa East Africa Total £000 £000 £000Income statement Revenue - - - Administration expenses - (25) (25) Operating expenses (216) - (216) Depreciation (263) - (263) Segmental result (479) (25) (525) Head office administration costs (826) Interest income (21) Loss after tax (1,352) NET ASSETS Assets 4,305 41,972 46,277 Liabilities (1,986) (9,995) (11,981) Segment net assets 2,319 31,977 34,297 Unallocated assets 1,548 Unallocated liabilities (45) Net assets 35,800 Other segment information Capital expenditure:Property, plant and equipment - 35 35 Intangible exploration and evaluation assets - 470 470 Year ended 31 December 2012 Discontinued Exploration operations - South and -West Africa East Africa Total £000 £000 £000Income statement Revenue - - - Administration expenses - (878) (878) Operating expenses - - - Loss from discontinued operations (3,954) - (3,954) Depreciation - - - Segmental result (3,954) (878) (4,832) Head office administration costs (195) Interest expense (41) Interest income - Loss after tax (5,068) NET ASSETS Assets - 42,062 42,062 Liabilities - (10,300) (10,300) Segment net assets 31,762 31,762 Unallocated assets 529 Unallocated liabilities (1,903) Net assets 30,388 Other Segment information Capital expenditure: Property, plant and equipment - 272 272 Intangible exploration and evaluation assets - 2,041 2,041 4. LOSS PER SHARE Basic loss per share is based on the net lossfor the period of £538,000 (2012: £1,352,000) attributable to equity holdersof the parent divided by the weighted average number of ordinary shares inissue during the period of 199,192,006 (2012: 193,462,871). 5. INTANGIBLE EXPLORATION AND EVALUATION ASSETS Exploration licences £000 Cost and book value at 1 Deecember 2012 41,147 Exploration costs capitalised 470 Foreign exchange differences (361) Cost and book value at 30 june 2012 41,256 Exploration costs capitalised 1,571 Foreign exchange differences (1,676) Cost and book value at 31 DECEMBER 2012 41,151 Exploration costs capitalised 504 Foreign exchange differences 2,026 Cost and book value at 30 june 2013 43,681 The above value of intangible assets represents the cash andnon-cash consideration paid by the Group at the time of acquisition. Impairment The Directors have considered the following factors whenundertaking their impairment review of the intangible assets: a) Geology and lithology on each licence as outlined in the mostrecent CPRs (independent Competent Person's Reports) b) The expected useful lives of the licenses and the ability toretain the license interests at renewal c) Comparable information for large mining and explorationcompanies in the vicinity of each of the licences d) History of exploration success in the regions being explored e) Local infrastructure f) Climatic and logistical issues g) Geopolitical environment After considering these factors, the Directors have not made anyimpairment for the period to 30 June 2013. 6. PROPERTY, plant and equipment Camp Motor Mining buildings vehicles equipment Mine TotalCost £000 £000 £000 £000 £000 AT 1 January 2012 200 45 2,396 18,720 21,361 Additions in period 35 - - - 35 Foreign exchange differences (7) - (45) (38) (90) AT 30 JUNE 2012 228 45 2,351 18,682 21,306 Additions in period (3) 62 178 - 237 Foreign exchange differences (4) - (82) (131) (217) Disposal (73) (45) (1,652) (18,551) (20,321) AT 31 december 2012 148 62 795 - 1,005 Additions in period 49 52 - 101 Foreign exchange differences (15) (5) (59) - (79) AT 30 JUNE 2013 182 57 788 - 1,027 DepreciationAT 1 january 2012 (19) (22) (819) (15,164) (16,024) Charge for the period (53) (10) (316) - (379) Impairment - - - - - Disposals - - - - - AT 30 JUNE 2012 (72) (32) (1,135) (15,164) (16,403) Charge for the period (20) 1 162 - 143 Disposal 19 22 819 15,164 16,024 AT 31 december 2012 (73) (9) (154) - (236) Charge in period (36) (10) (76) - (122) Foreign exchange differences - - - - - AT 30 JUNE 2013 (109) (19) (230) - (358) Net book valueAt 1 JANUARY 2012 181 23 1,577 3,556 5,337 At 30 June 2012 156 13 1,216 3,518 4,903 at 31 december 2012 75 53 641 - 769 at 30 june 2013 73 38 558 - 669 Impairment The Directors have considered the following factors whenundertaking their impairment review of the tangible mining assets: a) Geology and lithology on each licence as outlined in the mostrecent CPRs (independent Competent Person's Reports) b) The expected useful lives of the licenses and the ability toretain the license interests at renewal c) Comparable information for large mining and explorationcompanies in the vicinity of each of the licences d) History of exploration success in the regions being explored e) Local infrastructure f) Climatic and logistical issues g) Geopolitical environment After considering these factors, the Directors have not made anyimpairment for the period to 30 June 2013. 7. SHARE CAPITAL Number £000Authorised:Ordinary shares of £0.01each Unlimited Unlimited Allotted, issued and fullypaid ordinary shares of£0.01 each: AT 1 JANUARY 2012 188,177,054 1,882 Issued in the period 6,918,863 69 AT 30 JUNE 2012 195,095,917 1,951 Issued in the period AT 31 DECEMBER 2012 195,095,917 1,951 Issued in the period 28,200,000 282 AT 30 JUNE 2013 223,295,917 2,233 Fully paid ordinary shares carry one vote pershare and carry rights to dividends. On 28 May 2013 the Company conditionally raised £1.55 million(before expenses) by way of issuing 31,000,000 new ordinary shares of 1p at aprice of 5p per share. On 4 June 2013 the Company issued 28,200,000 new ordinary shares ofthe total 31,000,000, with the remaining 2,800,000 due to be issued aftershareholder approval was sought at the Company's AGM to be held in July 2013after the reporting period. On 4 June 2013 the Company entered into an Equity Swap Agreementwhich allows the Company to retain much of the economic interest in 25,000,000of the newly issued shares. £1 million has been pledged as credit support forthe equity swap agreement. On 17 July 2013 the Company issued a further 5,300,000 new ordinaryshares of 1p per share to complete the subscriptions announced on 28 May 2013and to issue 2,500,000 as payment to one of the subscribers as the premium forentering into an equity swap agreement in respect of shares in the Company. 8. SHARE PREMIUM ACCOUNT £000 AT 1 JANUARY 2012 42,944 Premium on issue of shares 1,938 Expenses on issue of shares - AT 30 JUNE 2012 44,882 Premium on issue of shares - Expenses on issue of shares - AT 31 December 2012 44,882 Premium on issue of shares (see note 7) 1,128 Expenses on issue of shares -

AT 30 JUNE 2013 46,010