PROPOSED PLACING

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01 Apr 2009

THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY NEW SHARES OR NEW DEPOSITARY INTERESTS REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY THE COMPANY IN DUE COURSE IN CONNECTION WITH THE PLACING (THE "PROSPECTUS"). COPIES OF THE PROSPECTUS WILL BE AVAILABLE, FOLLOWING PUBLICATION, FROM THE COMPANY'S REGISTERED OFFICE AND FROM 2 EATON GATE, LONDON, SW1W 9BJ, BEING THE COMPANY'S PRINCIPAL PLACE OF BUSINESS IN THE UK.

Gem Diamonds today announces a placing of up to 75 million New Shares at the Issue Price of 100 pence per New Share to raise gross proceeds of £75 million (approximately U.S.$107 million).

  • 68 million New Shares have already been firmly placed with existing Shareholders and new investors.
  • The remaining 7 million New Shares are available to be firmly placed during the course of today with existing Shareholders only who are invited to participate in the Placing by JPMC as sole bookrunner. Books are expected to close during the course of the day.
  • The Issue Price represents a discount of 33% to the Closing Price of 149 pence per existing Ordinary Share on 31 March 2009.
  • The New Shares are expected to represent approximately 54% of Gem Diamonds' issued Ordinary Shares immediately following Admission of the New Shares.
  • The New Shares are being placed subject to Shareholder approval at a meeting of Shareholders to be convened for on or around 20 April 2009.

The first quarter of 2009 has seen the trading conditions experienced in late 2008 persist. Management has taken action to respond to these current challenging operating conditions, including placing the Group's operations at Cempaka and the Ellendale 4 pipe on care and maintenance, and is continuing with initiatives to reduce operating and central costs. Against the background of the current difficult trading conditions, the Group will require additional funds in order to meet the obligations of Kimberley to repay its Société Générale loan of approximately A$30 million (approximately U.S.$21 million), and finance the posting of the associated substitute Kimberley environmental bonds of approximately A$6.4 million (approximately U.S.$4.5 million) and to repay the outstanding Convertible Bonds which become due in October 2009 as well as repaying Kimberley trade creditors. It is against this background that the Directors are proposing to raise equity capital by way of the Placing to meet those obligations and create a suitable capital structure. The Directors believe that the reduction in financial indebtedness will also create a stronger position from which to develop future strategic options. The balance of the net proceeds will be used to fund the Group's working capital requirements.

Clifford Elphick, Chief Executive Gem Diamonds commented:

"The Group, along with the diamond industry as a whole, has experienced unprecedented trading conditions in recent months. Gem Diamonds' Board took decisive action by cutting non-essential expenditure and focusing on its core producing assets.

This rapid response to the market conditions is expected to save the company approximately US$129 million this year. Additionally, we have today announced a capital raising of up to US$107 million (of which $97m has already been placed). These funds will help to ensure that we are well placed to survive this economic downturn and emerge ready to exploit the opportunities when the upturn arrives.

Against the backdrop of the current economic climate, the success of this capital raising is testament to the quality of our assets, which produce some of the highest quality diamonds in the world. Our key fundamentals are robust and the Board believes the long term outlook for diamond prices remains positive."

Shareholders and investors are also referred to the announcement of the Group's audited annual results for the year ended 31 December 2008 released on RNS today, Wednesday 1 April 2009.

View the complete proposed placing (122 Kb PDF)

ENQUIRIES
Gem Diamonds Limited

Clifford Elphick, Chief Executive Officer
Glenn Turner, Chief Legal and Commercial Officer
Tel: +44 (0) 203 043 0280

Investor Relations Enquiries

Richard Chetwode, Investor Relations Manager
Mob: +44 (0) 759 0064 883

Media Enquiries

Angela Parr, Corporate Affairs Manager
Mob: +27 (0) 83 578 3885

J.P. Morgan Cazenove

Ian Hannam
Patrick Magee
Neil Passmore
Tel: +44 (0) 20 7588 2828

Media Enquiries:
Pelham PR

James Henderson
Candice Sgroi
Tel: +44 (0) 20 7337 1533

About Gem Diamonds:

Gem Diamonds is a global diamond mining business comprising a portfolio of producing kimberlite and lamproite mines, development projects and long-term prospects located across central and southern Africa, Australia and Indonesia. The Group focuses on the higher value gem quality segment of the rough diamond market. The Group currently has two producing mines, Letseng, in Lesotho and Ellendale, in Western Australia.