RECOVERY OF 494 CARAT WHITE DIAMOND

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13 Sep 2007

Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds") is delighted to announce the recovery of a 494 carat diamond from its Letšeng Mine in Lesotho. This remarkable diamond, which is yet to be named, is believed to rank as the 18th largest rough diamond. The diamond is an excellent colour and has high clarity.

The Letšeng mine which is 70% owned by Gem Diamonds and 30% owned by the Government of the Kingdom of Lesotho has now produced three of the world's top twenty diamonds. Two of these have been recovered by Gem Diamonds in the last 13 months - the 603 carat Lesotho Promise recovered in August 2006 and the 494 carat diamond announced today. The Lesotho Promise, which was sold on tender in October 2006 for US$12.4 million, is the 15th largest rough diamond and the Lesotho Brown diamond recovered in 1961 the 16th. Letšeng Diamonds also produced a 215 carat D-colour flawless diamond in January 2007, which subsequently sold on tender for US$8.3 million.

The Letšeng Mine hosts two kimberlites; the Main and Satellite Pipes that have a combined diamond resource value of US$4.7 billion. It is renowned for producing some of the world's largest diamonds which attract the highest average price per carat of any kimberlite mine. As reported in Gem Diamonds' Interim Results to end June 2007 released today, the average price per carat achieved from the Letšeng Satellite Pipe was US$1 894 from and US$1 128 from Main Pipe. This compares with the world average price of approximately US$81 per carat.

Gem Diamonds' CEO Clifford Elphick commented:

"We are delighted to have recovered two of the world's largest diamonds ever in the last thirteen months. This diamond is another remarkable find for the Letšeng Mine, barely a year after the recovery of the Lesotho Promise and confirms the Letšeng Mine's reputation as the leading producer of large gem quality diamonds."

For further information:
Gem Diamonds Limited

Clifford Elphick
Tel: +44 203 043 0280

Gem Diamond Technical Services (Pty) Limited

Stephen Wetherall
Tel: +27 82 418 8735

Pelham PR

Candice Sgroi
Tel: +44 207 743 6376

About Gem Diamonds:

Gem Diamonds is a diamond mining company with a balanced portfolio of a producing kimberlite mine, two producing alluvial mines, development projects and long‐term prospects. Established in July 2005, Gem Diamonds is pursuing an accelerated growth strategy and aims to become one of the world's leading diamond companies. Gem Diamonds currently has one producing kimberlite mine, Letšeng, in Lesotho, two producing alluvial mines ‐ Cempaka in Indonesia and Mbelenge in the Democratic Republic of Congo (DRC), a kimberlite development project in Botswana, two development projects in the DRC, one in the Central African Republic and an option to develop the Chiri kimberlite concession in Angola.

The Company recently made an offer to Kimberley Diamond Company's shareholders to acquire their shares in this company, which owns the Ellendale Mine in north Western Australia, and which was approved by Gem Diamonds' shareholders at an Extraordinary General Meeting on 16 October 2007.

Gem Diamonds currently has a specific focus towards higher value diamonds, a segment of the market that its management believes will deliver superior long term returns.

For further information about Gem Diamonds visit www.gemdiamonds.com.