RECOVERY OF HISTORIC 478 CARAT WHITE DIAMOND

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29 Sep 2008

Gem Diamonds, the FTSE 250 listed diamond company, in partnership with the Government of the Kingdom of Lesotho, is delighted to announce the recovery on Monday 8 September of a historic diamond from the Letšeng Mine in Lesotho.

Subsequent to its recovery, the diamond was transferred to Antwerp where it underwent acidisation and provisional analysis. Weighing 478 carats, it was determined to be a type II D colour diamond, the highest colour grading available for a white diamond. Furthermore the diamond is of outstanding clarity with no inclusions visible in its rough form. It has the potential to yield one of the largest flawless D colour round polished diamonds in history.

The diamond, which is yet to be named, ranks as the 20th largest rough diamond ever to be recovered. It is the third significant recovery from the Letšeng Mine in as many years, following the 603 carat Lesotho Promise and the 493 carat Letšeng Legacy recovered in 2006 and 2007 respectively. Including the 601 carat Lesotho Brown, recovered in 1960, the Letšeng Mine has now produced four of the world's 20 largest rough diamonds and the three largest diamonds recovered this century.

Commenting on the recovery, Minister Monyane Moleleki, the Minister of Natural Resources for Lesotho said:

"Once again Letšeng has proved its ability to produce extraordinary diamonds and continues to place Lesotho at the forefront of diamond producing countries. We will continue to proudly develop this asset and the rare diamonds that it produces to their maximum value for the benefit of the people of Lesotho."

Clifford Elphick, Chief Executive Officer of Gem Diamonds, added:

"Preliminary examination of this remarkable diamond indicates that it will yield a record breaking polished stone of the very best colour and clarity. Letšeng continues to reward its shareholders with the production of these significant diamonds and to confirm its position as one of the great mines in the diamond industry. With a further 45 years of life remaining, we expect Letšeng to make history for many years to come."

For further information:
Gem Diamonds Limited

Richard Chetwode
Tel: +44 203 043 0290

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 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.