GEM DIAMONDS ACQUIRES GOPE EXPLORATION COMPANY FROM DE BEERS AND XSTRATA

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29 May 2007

  • 100% of Gope Exploration Company acquired for US$34 million
  • Opportunity to develop a long life mine with resource indicated at 79mt
  • Estimated diamond value of US$121/carat
  • Feasibility study to be updated as first step

Gem Diamonds Limited (Gem Diamonds or the Company), which joined the Main Board of the London Stock Exchange in February of 2007 (LSE: GEMD) today announces the acquisition of 100% of Gope Exploration Company (Pty) Ltd (Gope) for a total cash consideration of US$34 million.

Gope was set up as a joint venture by De Beers Prospecting (Pty) Ltd (De Beers) and Falconbridge Exploration Botswana (Pty) Ltd (Falconbridge, a subsidiary of Xstrata plc) to explore a known kimberlite deposit in the Gope region of central Botswana.

The kimberlite deposit at Gope represents a significant ore body with an indicated resource of 79 million tonnes down to 400m below surface at a grade of 19cpht. With the resource at an indicated level, Gem Diamonds' management perceive the resource related risk to be low. The relatively high value of the diamonds (a parcel of 3400 carats recovered during sampling was recently valued at US$121/ carat) is strategically attractive to Gem Diamonds.

Gem Diamonds will shortly begin work on updating the existing feasibility study which was completed in 1998. This updated feasibility study will include a revised environmental impact assessment and environmental management plan. Should the findings of this updated feasibility study prove positive an application for a Mining License will be made. As part of this application process Gem Diamonds will enter into negotiations with the Government of Botswana as to their equity participation in the potential mine. Simultaneously the Company will continue its consultation process with the relevant communities and other stakeholders. The results of all these processes will determine the development strategy for the Gope deposit.

Gem Diamonds has policies in place that govern its relationships with the communities living in the areas in which it operates. These policies are in practice throughout its operations in other parts of Africa. To this end Gem Diamonds has already initiated a consultation process with all interested parties on how to implement these policies to the sustained benefit of the communities in the wider Gope area. In addition, an Environmental Impact Assessment (EIA) for Gope was completed in 1998, and Gem Diamonds has engaged independent advisors to update this so as to ensure that the Company follows environmental best practice as is its custom at its other operations.

Clifford Elphick, CEO of Gem Diamonds said:

"The acquisition of Gope fits our strategy of growing our portfolio of assets that have known but undeveloped kimberlites and where our management team, which has extensive experience in Botswana, can add value. Gem Diamonds recognizes the imperative of finding a sustainable resolution to the environmental and community related issues in the Central Kalahari and embraces the opportunity to work with the people of Botswana and other interested parties in achieving this aim."

For further information:
Gem Diamonds Limited

Clifford Elphick / Angela Parr
Tel: +27 11 325 7652

Merlin

David Simonson / Bridget Fury
Tel: +44 20 7653 6620

About Gem Diamonds

Gem Diamonds is a diamond mining company with a balanced portfolio of a producing kimberlite mine, a producing alluvial mine, 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 producers. Gem Diamonds currently has one producing kimberlite mine, Letšeng, in Lesotho, a producing alluvial mine Cempaka in Indonesia, four development projects in the Democratic Republic of Congo, one in the Central African Republic and an option to develop the Chiri kimberlite concession in Angola. Gem Diamonds has a specific focus towards higher value diamonds, a segment of the market that its management believes will deliver superior long term returns.

In February 2007, Gem Diamonds listed on the London Stock Exchange and raised US$600 million (net of expenses) to fund development of its existing assets as well as to pursue acquisitive growth opportunities. Gem Diamonds trades under the code GEMD. At the time of this announcement the market capitalization of the company is £690 million.

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

About Gope

Gope was formed in 1985 when exploration work over the area first commenced. Work on Gope was subsequently suspended until the mid 1990's when a pre feasibility study was undertaken. A feasibility study was concluded thereafter. Gope currently holds a suspended Retention License over the concession area which is located in the Central Kalahari Game Reserve (CKGR) in central Botswana. The Gope license area is 35km2 relative to the size of the reserve which is 55, 000km2.The Government of the Republic of Botswana have indicated their intention to allow mining in the CKGR.

A recent ruling by the Botswana High Court in favour of the San applicants has confirmed their right to live in the CKGR. Gem Diamonds is committed to engaging with the representatives of the San people in relation to the development of the Gope mine.