ACQUISITION OF CALIBRATED DIAMONDS

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23 Sep 2008

Highlights

  • Acquisition of Calibrated Diamonds for US$5.9 million (ZAR47.0 million)
  • Provides ability to cut and polish top quality diamonds to high and consistent standard
  • Acquisition compliments diamond beneficiation strategy
  • Allows for greater margin capture post the mine gate on small and medium size top quality diamonds
  • Complements existing diamond beneficiation technology

Gem Diamonds (LSE:GEMD), the FTSE250 diamond company, is pleased to announce the acquisition of Calibrated Diamonds Investment Holdings (Pty) Limited ("Calibrated Diamonds"), together with its state of the art diamond processing assets, intellectual property and management expertise from Petra Diamonds Limited ("Petra") for a total cash investment of US$5.9 million (ZAR 47.0 million) ( the "Transaction").

Calibrated Diamonds makes use of a proprietary high technology process and computer software to manufacture perfectly symmetrical polished diamonds to a high degree of accuracy that require minimal manual polishing. The process maximizes the polished yield and produces symmetrical polished diamonds to a very high and consistent standard.

The Company will establish a technically advanced facility in Mauritius which will use the Calibrated technology to beneficiate a portion of Gem Diamonds' top quality production.

As part of the Transaction, Gem Diamonds has agreed to provide Petra with access to its beneficiation technologies to cut and polish their high value diamonds. This arrangement is subject to agreed commercial terms and available capacity after processing Gem Diamonds' own rough diamonds. Gem Diamonds' beneficiation strategy was formalised after the Company undertook several successful diamond polishing and tender trials over the last twelve months on diamonds from its Letšeng and Ellendale mines, using both technologies.

Gem Diamonds recently announced the successful recruitment of the Antwerpbased executive team from Matrix Diamond Technology who will be establishing the Company's cutting and polishing facility in Dubai. This facility will beneficiate a portion of Gem Diamonds' largest, top quality rough diamond production using sophisticated rough diamond mapping and analysing technology. The addition of Calibrated Diamonds' advanced proprietary laser cutting technology and management expertise, will compliment this sophisticated rough diamond mapping and analyzing technology and merged technologies could ultimately be developed into a single end to end diamond beneficiation technology solution.

Gem Diamonds expects both these facilities to be in operation in Dubai and Mauritius within the first half of 2009.

For further information:
Gem Diamonds Limited

Richard Chetwode
Tel: +44 203 043 0290

Pelham PR

Candice Sgroi
Tel: +44 207 743 6376

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 and Indonesia.

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 and it had US$144 million of cash on its balance sheet at the end of June 2008.