ELLENDALE MINE TURNAROUND ON TRACK

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17 Jul 2008

Gem Diamonds (LSE: GEMD), the FTSE 250 diamond company, which acquired Australia's Kimberley Diamond Company in 2007, is pleased to announce that its turnaround strategy for the Ellendale mine in Western Australia is on track, with a number of production records having been broken in the last month.

In June 2008, the mine's monthly production record was broken. Plants at Ellendale 9 and Ellendale 4 processed a record 697 000 tonnes of ore for the month to produce a record 57 814 carats. By comparison, when Gem Diamonds announced its bid for Kimberley Diamond Company a year ago, the mine had just processed 557 091 tonnes of ore and recovered 36 565 carats in June 2007.

In July 2008, Ellendale broke two daily production records successively. On 7 July plants at Ellendale 9 and Ellendale 4 processed 29 237 tonnes and recovered 2 566 carats. This record was subsequently broken the following day with 31 575 tonnes processed and 3 130 carats recovered.

The increased level of productivity is predominantly achievable as a result of improvements in plant processing capacity achieved with the recapitalisation program and enhances management's confidence in reaching Ellendale's 2008 target of 8.5 million tonnes of ore processed with 600 000 carats recovered. Ongoing capacity adjustments are underway and ramp ups continue with Ellendale expected to process 10.5 million tonnes and recover circa 730 000 carats in 2009.

After completing the acquisition of Kimberley Diamond Company, Gem Diamonds appointed a new Managing Director, Alistair Croll to oversee the operations.

Marketing and sales techniques were also improved resulting in a 39% increase per carat of rough diamonds from US$152 per carat to US$216 per carat in Q108. Ellendale is renowned for its production of fancy and vivid yellow diamonds, the value of which is thought to have increased 500% over the last 12 years.

Gem Diamonds CEO Clifford Elphick commented:

"Recent record beaking production levels at Eendale confim the success of the turnaround strategy being implemented at the mine. We look forward to exceeding these new records aswe develop thisasset to its full potential over the next 18 months. "

For further information:
Gem Diamond Technical Services

Angela Parr
Tel: +27 11 560 9600

Pelham PR

Candice Sgroi
Tel: +44 207 743 6376

James Henderson
Tel: +44 207 743 6673

About Gem Diamonds:

Gem Diamonds Limited (LSE: GEMD) is a global leading diamond company that is pursuing an accelerated growth strategy through targeted acquisitions and the development of existing assets. Gem Diamonds portfolio comprises producing kimberlite, lamproite and alluvial mines, development projects and exploration assets. Operations are situated in Angola, Australia, Botswana, the Central African Republic, the Democratic Republic of Congo, Lesotho and Indonesia. Gem Diamonds 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$636 million. It is currently capitalised at approximately US$1.3 billion and had US$184 million of cash on its balance sheet at 2007 year end.