New Exploration Targets Identified in Lesotho

24 February 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

New diamond exploration targets identified, licence applications submitted and additional dyke system identified in Motete Dyke licence area, Lesotho

Highlights

·; Three further Prospecting Licence applications submitted in Lesotho

·; Further dyke system identified in the Motete Licence area

·; Road access construction commences at Motete

·; Comprehensive grade modelling exercise for Motete commences

Paragon Diamonds Limited is pleased to report that the recent positive sampling results at the diamondiferous Motete Dyke, coupled with extensive field work by Company geologists, have allowed the Company to identify additional highly prospective diamond exploration areas in the Lemphane-Roberts kimberlite field in Northern Lesotho.

The Company has applied for three new Prospecting Licences, which cover a total area of 74 km², over ground deemed highly prospective for diamondiferous kimberlites. The applications were submitted to the Department of Mines and Geology of the Lesotho Ministry of Natural Resources on 16th February 2012. Applications were prepared in accordance with the terms of the Mines & Minerals Act of 2005. The new licence applications were made on behalf of Paragon's 83.75% owned Lesotho subsidiary Botle Diamonds (Pty) Ltd.

In addition, recent fieldwork has identified a further kimberlite dyke at a single outcrop, in excess of 1 metre wide, near to the original Motete dyke discovery within the original licence area. Mapping and sampling of this feature will be expedited to better understand the relationship between this newly-discovered dyke and the known diamondiferous system.

Road construction has commenced to gain vehicular access to the Motete Dyke. This will allow extraction of a 1,000+ tonne bulk sample to obtain an evaluation parcel containing a minimum of 1,000 carats. The earthmoving contractor has indicated that access should be complete in 3-4 weeks, at which point sampling can commence. Samples will be transported to the nearby Lemphane project site, processed through the Company's bulk sampling plant and results reported as soon as available.

All micro-diamond results acquired to date have been submitted for a comprehensive grade modelling exercise. The programme is being managed by the Company's consultants MSA Group, and will be undertaken by their Associate Consultant Mr. Johan Ferreira, a diamond geostatistician with over 30 years industry and research experience. Results are expected within 30 days.

Paragon Diamonds MD Dr. Stephen Grimmer commented: "We are confident that, given our track record in Lesotho to date, our applications will be considered most seriously, and will ultimately be successful. Very little diamond exploration work has been carried out in Lesotho since the 1970's - we see a tremendous opportunity to apply modern diamond exploration techniques to the area and are confident that this will generate additional positive results. Furthermore, we look forward to developing an initial diamond resource to international standards at Motete in the coming months."

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. This news release has been prepared in accordance with the Canadian Institute of Mining - Guidelines for the Reporting of Diamond Exploration Results.

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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. 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 (83.75%)

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 (83.75%)

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.