Update on Operations and Exploration

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Update on Operations and Exploration Sierra Leone, Lesotho and Botswana.

Paragon Diamonds Limited, the AIM quoted African focused diamond development and production company, announces an update on its bulk sampling programme at its Lemphane kimberlite in Lesotho and alluvial operations in Sierra Leone.

Lesotho Bulk Sampling

At its Lemphane kimberlite project in Lesotho the Company is well advanced on its bulk sampling programme. Over 15,000 tonnes of kimberlite (of a planned 25,000t) have been mined from a series of pits and trenches and transported circa 1km to the plant stockpile area. The 30tph bulk sampling plant, now incorporating a newly sourced crushing plant, a 10tph DMS and modular x-ray and grease recovery units has been fully refurbished in South Africa and transported to site where assembly is nearing completion. A dam designed to provide water to the process, has been constructed in time for the onset of spring rains. Work has commenced on the slimes dam and other site infrastructure. Commissioning and sample treatment will commence as soon as adequate process water is available, provisionally in October.

Botswana Exploration

On its recently acquired Kopje licence in Botswana an initial sampling programme of 70 loam samples over the 15km2 licence has been completed under the supervision of company consultants and the first batch of samples are being processed at the MSA laboratory in South Africa. The licence is situated on a previously unexplained diamond indicator mineral loam anomaly detected by historic work carried out by De Beers and lies to the east of the Orapa diamond mine.

Sierra Leone Operations

A recent deterioration in the fiscal regulatory environment in Sierra Leone, which involves large increases in the annual cost of holding title from $50,000 to $500,000 per mining licence, has prompted the board to initiate a review of its operating strategy. The Company's four mining licences are hosted within the local Paramount Chiefdoms in the Kono District and Paragon is trying to create a positive outcome for both the local population and the Company. The preferred strategy is to bring in a conglomerate of local partners who, it is intended, will own 25% of the local operating entity, Sierra Leone Hard Rock. It is envisaged this will enable a modification of the mining licences held by the Group into small scale mining licences and provide an operating environment which attracts significantly less holding cost due to the local partnership and more in country co-operation in general. It is anticipated the annual costs of small scale mining licences will be in the region of $20,000 per licence. Production and operations have ceased in the interim, taking advantage of schedule shutdown during the wet season to conduct these negotiations.

Commenting today, Paragon Chairman Luc Huyghebaert stated: "Value creation in mining is very much dependent of operating certainty and regulatory stability. As regards to Sierra Leone operations, we believe that by creating a more inclusive partnership within the local administration, that we can overcome the current challenges. Whilst operations have ceased in Sierra Leone due to the rainy season, we are using this time to renegotiate. In Lesotho we are awaiting the arrival of rains to initiate the bulk sampling of the diamondiferous Lemphane kimberlite. Initial exploration work has commenced in Botswana and is planned for the near future in Zambia. Along with our African diamond projects we have in the pipe line, we are looking forward to a very active few months."

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