GEM DIAMONDS ANNOUNCES US$45 M CAPITAL INVESTMENT IN LETŠENG

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07 Nov 2006

  • New treatment plant to double capacity of the mine
  • Associated investment in infrastructure, mining fleet and final recovery
  • Treatment enhancements and extension of slimes and tailings facilities
  • Commissioning expected by end 2007, full production planned for Q2 2008

Gem Diamond Mining Company of Africa Limited (Gem Diamonds) in partnership with the Government of the Kingdom of Lesotho is pleased to announce their commitment to invest US$45 million into the Letšeng Diamond Mine in Lesotho (Letšeng).

Letšeng is the highest diamond mine in the world, located in the Maluti Mountains of Lesotho and famous for the quality of its diamonds; most recently the production of the 603 carat Lesotho Promise. Gem Diamonds and the Government of Lesotho are 70% and 30% shareholders respectively in the mine's holding company Letšeng Diamonds (Pty) Ltd.

The investment will primarily finance the construction of a new treatment plant at the mine, which will double the mine's current production capacity to 5,2 million tonnes per annum. The new plant, which will enable mining of the main pipe to commence, will be structurally similar to the current plant, including three stages of crushing linked to scrubbing, screening and dense media separation sections. The existing primary crusher has been designed to crush sufficient ore to feed both plants. Simultaneous to the plant construction, the mining fleet will be significantly enlarged to handle increased tonnes mined and the existing x-ray recovery plant will be doubled in capacity to handle the higher throughput along with the installation of a back up grease based recovery system.

Bateman Engineering has been appointed to design, procure and construct the new plant. Construction of the new plant will begin before the end of the calendar year and commissioning is expected in late 2007.

Commenting, Clifford Elphick, CEO of Gem Diamonds said:

"I am pleased to announce this first major decision on the part of the Letšeng Diamonds Board since our investment in the company. A doubling up of production has always been our intention and it is particularly gratifying that the impressive production since we took over management control in July has confirmed the rationale for this investment."

Dr Khaketla, Lesotho's Minister for Natural Resources said:

"The Lesotho Government supports this considerable investment in one of our nation's greatest assets. A sustainable approach to growing this asset for the benefit of the country and the people of Lesotho is a priority for this ministry and I am pleased to see this in action at Letšeng Diamonds."

For further information:
Angela Parr

Tel: +27 11 325 7652

Merlin

Bridget Fury / Lachlan Johnston
Tel: +44 20 7653 6620

Note to Editors:

Gem Diamond Mining Company of Africa Ltd

Gem Diamonds is a specialist diamond mining group with assets concentrated in Africa. The Group was founded in July 2005 by Clifford Elphick, a highly experienced diamond mining executive, who was previously Managing Director of E Oppenheimer & Son. Gem Diamonds has a balanced portfolio of assets, including early stage exploration projects right through to Letšeng, a producing diamond mine with strong, positive cash flow. In addition to its interests in Lesotho, Gem Diamonds has interests in exploration projects in the Longtshimo and Tshumbe-Lubembe regions of the Democratic Republic of Congo and the Mambere River region in the Central African Republic.Gem Diamonds has assembled an experienced team, with combined experience of over 150 years in the mining industry. The directorate comprises Clifford Elphick as Chief Executive Officer, Terry Stewart as Chief Operating Officer, Kevin Burford as Chief Financial Officer and Glenn Turner as Commercial and Legal Director. Senior executives include Peter Heap, Nick Selby and Graham Wheelock.

Letšeng Diamonds

Letšeng Diamonds was incorporated in Lesotho in 1995 with the intention of seeking a mining lease from the Government of Lesotho to re-open the Letšeng Diamond Mine on the high plateaux of the Maluti Mountains.

The mine was previously operated by De Beers from 1977 to 1982 and was closed with less than 10% of the open pit's mineable ore having been treated. An initial application to mine Letšeng by JCI Ltd was made in September of 1996 followed by a second revised application in 1998 which subsequently led to the signing of the Concession Agreement and the granting of the Mining Lease in November 1999 to JCI.

Mining operations commenced in April 2004. Since this date it has achieved an excellent production track record, with 90% of diamonds recovered being of gem quality and a significant number graded as D, the top colour for a white diamond. JCI's stake in Letšeng Diamonds was sold to Gem Diamonds in September 2006. Letšeng achieved world prominence in September this year, with the discovery of the 603 carat Lesotho Promise, the largest reported diamond find this century. Its revenue per carat is currently unsurpassed in kimberlite diamond mining.