GEM DIAMONDS AWARDED MINING LICENCE FOR GOPE DIAMOND DEPOSIT IN BOTSWANA

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18 Jan 2011

Gem Diamonds Limited (LSE: GEMD) (Gem Diamonds) (the Company) is pleased to announce that its wholly owned subsidiary, Gope Exploration Company, has been awarded a mining licence for the Gope diamond deposit by the Government of the Republic of Botswana.

The mining licence has been granted for a period of 25 years, during which time the Company envisages a phased approach to the construction of the mine, with an underground mine planned to improve the Company's knowledge of the ore body, diamond valuation and metallurgical characteristics. After an initial period of mining, the production capacity will be scaled up to a higher steady state. The life of mine at Gope is currently estimated to be in excess of 30 years. Details of the mine plan and the relevant staged capital expenditure will be released at the time of the announcement of the Company's 2010 results on 15 March 2011.

Integral to the mining licence approval process was the approval of the Environmental Impact Assessment (EIA) by the Government of Botswana which was obtained in late 2008. The Company remains committed to continue working closely with the project's affected communities and other interested parties.

Gem Diamonds' CEO, Clifford Elphick commented:

"I am pleased to be able to announce that Gem Diamonds has been awarded a mining licence from the Government of the Republic of Botswana for the Gope diamond deposit. This is the first step towards the development of the Gope deposit into a viable producing mine and is in line with Gem Diamonds' stated strategy of providing a platform for sustainable growth for the Group through the development of its existing assets. The Gem Diamonds Board will shortly be looking to approve construction of the initial phase at Gope which aims to start production in 2013 in order begin to take advantage of the rising rough diamond market.

Botswana is a politically stable country with a strong history of diamond mining and is therefore an ideal country for Gem Diamonds to be investing into. Gem Diamonds remains committed to implementing sustainable solutions to the environmental and community related issues in the Central Kalahari Game Reserve and we embrace the opportunity to continue our work with the project's affected communities and other interested parties to ensure that the benefits of the Gope asset are realised for the community as a whole."

For further information:
Gem Diamonds Limited

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

Richard Chetwode, Investor Relations
Tel: +44 (0) 203 043 0280
Mob: +44 (0) 759 0064 883

Gope Exploration Company

Haile Mphusu, Managing Director
Tel: +267 (0)318 2796

Gem Diamond Technical Services (Pty) Ltd

Sherryn Tedder, Media
Tel: +27 (0) 11 560 9618
Mob: +27 (0) 83 943 4505

Pelham Bell Pottinger

James MacFarlane
Tel: +44 (0) 207 861 3864 / +44 (0) 7841 672 831

James Henderson
Tel: +44 (0) 207 861 3160 / +44 (0) 7774 444 163

Charles Vivian
Tel: +44 (0) 207 861 3126 / +44 (0) 7977 297 903

About Gem Diamonds:

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

The Company's portfolio comprises producing kimberlite and lamproite mines and development projects. The Company also owns a diamond cutting technology company. Operations and projects are situated in Angola, Australia, Botswana, and Lesotho.

With Letšeng's production of the world's most remarkable white diamonds and Ellendale's production of rare fancy yellow diamonds, Gem Diamonds is focused towards higher value diamonds. This segment of the market is expected to deliver attractive returns.