Operational Update

11 December 2013 Paragon Diamonds Limited ("Paragon Diamonds" or "the Company") * Formal conclusion of the Lemphane Kimberlite bulk sampling and results * Independent audit of the bulk sampling program complete * Grades of up to 4.5 cpht and the main "southern" domain (comprising 65% of the pipe at surface) reporting an average grade of approximately 2.2 cpht * Work to date complies with international standards for the reporting of exploration results (JORC, SAMREC, CIM) * Recommendation for trial mining of at least one million tonnes as part of the overall development strategy Paragon Diamonds Ltd. announces an operational update on its developmentactivities on the Lemphane Kimberlite in Lesotho. The Company announces the formal conclusion of the bulk sampling programfollowing an independent audit and sign-off of the program procedures by theCompany's consultants, The MSA Group (MSA). Sample processing was concluded inJune 2013 and preliminary results (pending a full review and verification ofall data) were contained in the Company's Operational Update announcement dated17 July 2013. The final signed-off report has now been received and the finalresults are summarised below: Sample Domain Dry Stones Carats Largest Grade Tonnes (cts) Stone (cpht) P1 North 1,940.95 106 21.38 1.28 1.10 P2 North 1,395.76 50 9.89 3.71 0.70 P3 South 2,191.05 154 64.22 6.30 2.93 P3A South 2,352.12 284 40.56 1.90 1.72 P4 South 2,505.35 335 75.92 3.29 3.03 P5 South 2,857.74 135 35.96 8.86 1.25 P6 North 1,012.44 53 9.90 0.78 0.97 P7 South 679.86 57 12.41 1.20 1.82 SatP Satellite 413.18 74 18.49 1.56 4.47 Total 15,348.45 1,248 288.73 8.86 1.88 An additional 12.73 cts (for a total of 301.46 cts) were recovered in thecourse of the program from material consisting of plant spillage and clean-upmaterial. These additional carats have not been factored into the gradecalculations. A total of 12 diamonds above 2 carats in size weighing 45.56carats form 16% of the parcel by weight. The largest three diamonds recoveredwere 8.86 carats, 6.30 carats and 4.22 carats. * The South Domain comprises approximately 65% of the area of the pipe and reported a sample grade of close to 2.2 cpht based on a total bulk sample of 10,586 dry tonnes of kimberlite from four sample pits (1.5 mm bottom size cut-off). * The North Domain comprises approximately 34% of the area of the pipe and reported a sample grade of close to 1 cpht based on a total bulk sample of 4,349 dry tonnes of kimberlite from three sample pits (1.5 mm bottom size cut-off). * The Satellite Pipe (an apophysis) is volumetrically insignificant and reported a sample grade of close to 4.5 cpht based on a bulk sample of 413 dry tonnes of kimberlite from one sample pit (1.5 mm bottom size cut-off). Due to the nature of the Lemphane Kimberlite, samples of less thanapproximately 2,000 tonnes are considered too small to be representative. Themajority of samples in the combined bulk sample came from large sample pits ofbetween 2,000-3,000 tonnes, distributed across the kimberlite. A further circa10,000 tonnes of trench sample, collected as 20 individual sub-samples ofbetween 400-550 tonnes distributed across the kimberlite were determined to betoo small to provide statistically significant grade data and, in discussionwith MSA, it was decided not to process these samples. This sample materialwill instead be amalgamated and processed during the commissioning stage of theprocess plant for the proposed Stage I trial mining of the kimberlite. MSA has recently completed reporting on the independent audit program conductedduring the entire bulk sampling period. The audit program involved periodicindependent site visits to monitor and review all sample extraction, handlingand processing procedures, as well as making recommendations for improvementwhere appropriate. MSA note that: "In MSA's opinion, the work carried out and the results produced meet thestandards required by the major international reporting Codes (JORC, SAMREC,CIM) for the reporting of diamond exploration results." Whilst surface grades have been established, it is not possible at this stageto define a mineral resource. In fact MSA note that: "The low grade nature of the Lemphane Kimberlite suggests that it is unlikelyto be possible to determine a Mineral Resource classification beyond theInferred level, because bulk sampling at depth is likely to be unfeasible.Therefore, the grade and revenue model for the pipe at depth will be basedsolely on geological continuity and with results from a comprehensive and largescale trial mining programme at surface. The principal of establishing aMineral Resource estimate (grade and value at depth) from the extrapolation ofstatistically robust surface production or trial mining results has beensuccessfully applied at both Letšeng Mine (Gem Diamonds Limited) and at theMothae Project (Lucara Diamond Corp.)" MSA recommend a trial mining stage of at least 1Mt i.e. to recover in excess of20,000 cts in order to achieve this target. This strategy is in alignment withthe objectives of the recently awarded Mining Lease announced on 14 October2013, and the Company will provide an operational update on progress regardingits intention to commence mining in due course. Martin Doyle, Chairman of Paragon, commented: "The results of the bulk samplingprogram have confirmed the potential for Lemphane to contain large valuablediamonds. It has also demonstrated that the processing of larger volumes ofkimberlite will improve proportionally the recovery of additional largerdiamonds. These recoveries can then be used to determine representative gradeand value estimations for Lemphane. The proposed Stage I production of 1Mtover 2 years has been designed with this objective in mind and I look forwardto reporting on larger diamond recoveries going forward." 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. 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