Operational Update

17 July 2013 Paragon Diamonds Limited ("Paragon" or the "Company") (AIM: PRG) Operational Update Highlights: • Export of diamonds • Completion of pit sample processing • Independent audit of bulk sampling • Completion of stage 1 drilling programme • Progress on mining lease application Paragon Diamonds Limited, the African-focused diamond development company, ispleased to announce an operational update in respect of its 85% owned LemphaneKimberlite project in Lesotho. The Company has exported a parcel of diamonds (211.22 carats), with theappropriate Kimberley Protocol certificate and Governmental approval, from itson-going evaluation programme on the Lemphane Kimberlite to the Company'sconsignee in Antwerp. The Company is awaiting a valuation on the parcel of211.22 carats, together with a valuation on the previous parcel of 90.22 caratsexported in September 2012. The total number of carats produced and exportedfrom the Lemphane Kimberlite to date, is 301.44 carats (the "301 CaratParcel"). The most recent parcel includes the 8.86 carat stone recovered inMay, 2013. The Company has also completed the processing of all the major pit samplestaken across the Lemphane Kimberlite. These samples comprised six 25x25m pitsof between two and three thousand tonnes each (P1,2,3,3A,4,5), as well as two25x10m pits in the wall-rock contact zone (P6,7) and a 15x15m pit in thesatellite pipe (Sat-P). All samples were excavated from sub-surface kimberliteto a depth of approximately 2.5m. In total, 18,387.70 tonnes (16,116.90 drytonnes) were processed, producing the aforementioned parcels of 301.44 caratsfor an average grade of 1.87 cpht (the 301 Carat Parcel includes approximately11 carats of diamonds produced from clean-up and plant sterilization which willbe allocated to samples pro-rata). The Company's geological consultants, The MSA Group, have undertaken a sitevisit and audit of the processing, recording and, Quality Assurance / QualityControl processes in place for the bulk sampling. An independent report is inpreparation, a further announcement on the findings of the report will be madein due course. The Company has also completed the planned stage one drilling (deepdelineation) on the Lemphane Kimberlite, with four holes to an average depth of343m (total 1,373.16m) having been drilled. The first three holes drilledthrough kimberlite and intersected the kimberlite/wall rock contact at between2,355m and 2,270m above sea level (mean surface is 2,615m above sea level) i.e.between 260m and 345m below surface. The final hole approached, but did notintersect, the contact, bottoming out at 372.5m whilst still in kimberlite.Preliminary in-house calculations indicate that the kimberlite/wall rockcontact angle varies between 85° and 87° and thus at 350m below mean surfacethe pipe still maintains a planar area greater than 3 Ha. These results exceedthe provisional estimates made for the scoping study in February, 2013. Allcore samples have been logged by our consultants AMEC and are being integratedinto the geological model. An independent report and a volumetric and tonnageestimate is expected from AMEC in due course. In June 2013, the Lesotho Minister of Mines, requested additional informationon the submitted environmental base line audit. This audit has recently beencompleted by the Company's environmental consultants, LOCI Environmental, andon submission to the Ministry of Mines the approval process for the mininglease application is expected to be concluded without further delay. In accordance with the AIM Rules for Companies, the information in thisannouncement has been reviewed by Stephen Grimmer PhD., MSc., a qualifiedgeologist with over 25 years diamond exploration experience. Martin Doyle, Chairman of Paragon, commented: "I remain very pleased with the steady progress that we are making on theground at our flagship project, Lemphane. There is currently strong demand forthe type of stones that are being produced from Lemphane and with currentglobal market supply constraints this positions the company well to continue tothe evaluation programme. I look forward to updating the market with therevised tonnage and volumetric report, in addition to progress on the mininglicence application, which should be awarded shortly" For further information: Paragon Diamonds Limited +44 (0) 20 7099 1940 Martin Doyle - Chairman Simon Retter - Finance Director Sanlam Securities UK (Nominated Adviser & +44 (0) 20 7628 2200Broker) Lindsay Mair Catherine Miles