Further operational update on Cempaka

26 Jun 2008

Gem Diamonds is an 80% shareholder, in partnership with PT Aneka Tambang, a company controlled by the Government of Indonesia, in the Cempaka alluvial diamond mine. The Cempaka mine comprises two paleo channel systems, the Danau Seran and the Cempaka channels, both located in a low lying coastal swamp area of the South Kalimantan Province of Indonesia.

Subsequent to issues raised by the regional Government of the South Kalimantan Province in April 2008 with regard to the waste water discharge from Cempaka and in line with the Company's commitment to best practice environmental issues management, Gem Diamonds elected to temporarily suspend mining.

Extended discussions with the regional Government ensued and Gem Diamonds is pleased to announce that agreement on an appropriate water treatment process was reached. These water treatment facilities were duly constructed at a capital cost of US$0.1 million and trials thereon were conducted. A site inspection has been conducted by the Environmental Monitoring Group of South Kalimantan and permission has been granted to continue pumping discharge water from the mining area on a trial basis. The ongoing treatment of water through these facilities is not expected to materially increase mining costs at the Cempaka mine.

The updated environmental impact assessment and management and monitoring plans for the mine as well as the updated feasibility study have all been submitted to the relevant authorities and are currently under review. Mining will recommence once all of these are approved, which is expected to be in Q308.

Cempaka has operated as an alluvial mine since 2004, subsequent to being awarded a Contract of Work by the President in 1998 that runs for 35 years. It is the first commercial mine in the area, where artisanal mining has been ongoing for hundreds of years.

A further update will be provided in due course.

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 producer 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$635 million. It is currently capitalised at approximately US$1.1 billion and had US$184 million of cash on its balance sheet at 2007 year end.