INVESTMENT BY GRAFF DIAMONDS

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12 Nov 2008

Gem Diamonds Limited (LSE: GEMD) welcomes the announcement of Graff Diamonds' acquisition of 4.5% of the Company which Graff alerted the Company to on November the 11th, 2008.

The two companies have enjoyed a strong relationship over the two years since Gem Diamonds acquired its majority stake in Letšeng Diamonds. Over this time Graff has grown to be one of Letšeng's key clients, having acquired both the Lesotho Promise and the Letšeng Legacy diamonds, amongst other important diamonds.

Gem Diamonds and Graff share a focus on the top end of the diamond market, a sector of the market that has shown itself to be relatively resilient in times of economic downturn.

Commenting on the announcement, Clifford Elphick CEO of Gem Diamonds said:

"Gem Diamonds looks forward to further developing its relationship with Graff, now as a shareholder as well as key client, and acknowledges the vote of confidence that this investment in Gem Diamonds represents."

For further information:
Gem Diamond Technical Services (Pty) Limited

Angela Parr
Tel: +27 83 578 3885

Pelham PR

Candice Sgroi
Tel: +44 207 743 6376
Mob: +44 7894462114

About Gem Diamonds:

Gem Diamonds Limited (LSE: GEMD) is a global diamond company that is pursuing an accelerated growth strategy through targeted acquisitions and the development of existing assets.

The Company's portfolio comprises producing kimberlite, lamproite and alluvial mines, development projects, exploration assets as well as a diamond beneficiation centre. Operations are situated in Angola, Australia, Botswana, the Central African Republic, the Democratic Republic of Congo, Dubai, Lesotho, Mauritius and Indonesia.

Gem Diamonds was formed with the aim of becoming a leading supplier of high quality diamonds. Principally through Letšeng and Ellendale, Gem Diamonds has moved a long way to realising that vision for rough diamonds. With the acquisition of polishing technologies and expertise, Gem Diamonds intends to achieve the same in relation to selected polished diamonds.

Gem Diamonds has a specific focus towards higher value diamonds, a segment of the market expected to deliver superior long term returns. The Company produces some of the world's most remarkable white diamonds from its Letšeng mine and rare fancy yellow diamonds from its Ellendale mine and an array of coloured diamonds from its Cempaka mine.

Established in July 2005, Gem Diamonds listed on the main board of the London Stock Exchange in February 2007 raising US$635 million. It is currently capitalised at approximately US$431 million and had US$144 million of cash on its balance sheet at the end of June 2008.