Licence Award

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

IDC subsidiary awarded diamond exploration licence in Eastern Zambia

Paragon Diamonds Limited, the African focused diamond producer and explorer, today announces that Tamarisk Investments Pty Limited ("Tamarisk"), the Zambian subsidiary of International Diamond Consultants ("IDC"), in which Paragon holds a 44.3% interest, has been granted an exploration licence which covers 862km2 and contains a suite of diamondiferous olivine lamproites.

Highlights

·; Wholly owned subsidiary of IDC, Tamarisk Investments Pty Ltd awarded new KapLamp exploration licence in Eastern Zambia

·; Licence covers approximately 862.3km2 and is known to host 14 Lamproite pipes within a known diamondiferous region

·; The KapLamp Prospecting Licence ("KapLamp") compliments Tamarisk's existing portfolio in Zambia

·; Initial report produced by independent geologists

The prospecting licence for the "KapLamp" area has been granted for an initial two year period, expiring in November 2012. The prospecting licence can be automatically renewed by Tamarisk for two further two year periods (subject to appropriate submissions and relinquishment of 50 per cent of the licence area each time). Paragon believes that the KapLamp project is highly prospective due to the size of the license area, and historic exploration work undertaken by De Beers in the 1960's and early 1970's that reportedly recovered significant numbers of diamonds of up to 0.5 carats in weight from a 16.5 ha pipe ("Pipe 2"), with other diamonds recovered from four pipes with surface areas up to 45ha. Pipe 2 produced 184 diamonds up to 0.5 carats in weight including some yellow, orange and brown stones from a 234 m3 sample.

The structures at KapLamp were initially thought to be "Kimberlites" and only identified as olivine lamproites in 1986. Lamproites form from partially melted mantle at depths exceeding 150 km. The molten material is forced to the surface in volcanic pipes, bringing with it xenoliths and diamonds from the mantle regions where diamond formation is stabilised. The most renowned Lamproite hosted diamond mine is the Arglye mine in Western Australia. Argyle is a giant diamond deposit and is deemed unconventional as until its discovery in 1979 all diamond mines had been hosted by kimberlites.

Exploration Outlook

Of the five high priority olivine lamproite pipes currently targeted by Tamarisk, two targets are located outside the Luangwa National Park with the remaining three located within 3,000 metres of the western boundary of the park. Exploration work is permitted in national parks in Zambia. De Beers also located a set of 13 photo-anomalies 10 km north of the target lamproites, outside of the park, which may represent a new, hitherto untested lamproite field. These features are included with the diamondiferous lamproites in Tamrisks recently granted KapLamp licence.

Tamarisk is currently reviewing the data with a view to carrying out follow up work on the five high priority targets in due course. Tamarisk's current exploration targeting rational is based upon the delineation and evaluation of potentially economically significant diamond-bearing olivine lamproites in geological/structural settings of the "Argyle Type".

Commenting today Frank Scolaro, Chairman, said: "The award of the KapLamp licence will add to our growing asset base and has provided Paragon with prospective opportunities given the established presence of recovered diamonds in a previously little understood structure type. IDC is now prioritising targets within the licence area for further exploration utilising modern, exploration techniques."

In accordance with the AIM Rules, the information in this announcement has been reviewed by Simon Rollason, a qualified geologist with over 20 years' experience.

Background information:

History

The licence area covers an area that was originally held by Chartered Exploration Limited ("CEL") in the early 1960's, who identified features that were originally deemed "Kimberlites". CEL was subsequently taken over by De Beers who then expanded the discoveries to a total of 14 pipes in the late 1960's and early 1970's. De Beers relinquished their licence area in 1973. Only in a research paper presented in 1986, were these bodies identified as olivine lamproites, some 7 years after the discovery of the Argyle Diamond Mine in Western Australia. Argyle is a giant diamond deposit and is deemed unconventional as until its discovery in 1979 all diamond mines had been hosted by kimberlites - an allied but quite different rock type. Argyle is hosted by olivine lamproite, not kimberlite.

Previous work undertaken

De Beers discovered and evaluated the area in the 1960's, using techniques currently considered inappropriate for the conditions. De Beers recovered significant numbers of diamonds up to 0.5 carats in weight from a 16.5 ha pipe (Pipe 2) and other diamonds were recovered from 4 other pipes with surface areas up to 45ha. No work has been undertaken on this field since that time. Pipe 2 at 16.5 ha, produced 184 diamonds up to 0.5 carats in weight including some yellow, orange and brown stones from a 234 m3 sample. Given that the explorers were using diamond pans to produce the field concentrates which were then sent to Johannesburg for analysis, IDC consider that the results would be most unlikely to provide an accurate assessment of grade for this, or any of the other pipes tested. It is also very unlikely that at that time, the explorers knew how important it was to concentrate on the tuffaceous crater sediments where the best grades in all economic lamproites are known to be located.

Lamproites

Lamproites are ultrapotassic mantle-derived volcanic and subvolcanic rocks. They have low CaO, Al2O3, Na2O, high K2O/Al2O3, a relatively high MgOcontent and extreme enrichment in incompatible elements. Lamproites are geographically widespread. Unlike kimberlites which are found exclusively in Archaean cratons, lamproites are found in terrains of varying age, ranging from Archaean in Western Australia, to Palaeozoic and Mesozoic in southern Spain. They are also widely varied in age, from Proterozoic to Pleistocene, the youngest known example being 56,000 ± 5,000 years old.

Lamproites form from partially melted mantle at depths exceeding 150 km. The molten material is forced to the surface in volcanic pipes, bringing with it xenoliths and diamonds from the mantle regions where diamond formation is stabilised.

Arglye Diamond Mine

The most renowned Lamproite hosted diamond mine is the Arglye mine in Western Australia.

The Arglye Diamond Mine is a giant diamond deposit. It is an unconventional diamond host in that up until 1979, all diamond mines discovered previously had been hosted by kimberlites-an allied but quite different rock type. Arglye is hosted by Olivine Lamproite, not kimberlite. In terms of rough diamond production, no other diamond deposit has ever come close to producing the numbers that Argyle has been responsible for. In 1994, production at Argyle accounted for 38.5% (some 42.8 million carats) of the total world's rough diamonds. In 2009, the mine produced some 10.5 million carats, still 8.4% of the world's total. Since the discovery of Arglye, a second olivine lamproite-hosted diamond mine has come into production at Ellendale, also in Western Australia and a third, potentially very large high grade deposit at Bunder in northern India, is being evaluated by Rio Tinto.