FIRST ORE TREATED THROUGH LETŠENG MINE SECOND PLANT

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31 Mar 2008

Gem Diamonds (LSE: GEMD) is pleased to announce that the construction of Letšeng Mine's second plant is now in its final stages of completion and that commissioning has progressed well with the first ore treated through the plant on 23 March 2008.

Final commissioning is continuing and full production from this gravity fed DMS plant is expected to be reached during the second quarter of 2008. The existing Recovery Plant will now service both treatment plants. The successful conclusion of the commissioning will see the doubling of Letšeng Mine's hard rock processing capacity from 2.6mtpa to 5.2mtpa and making it the world's seventh largest diamond mine by throughput.

The decision was taken to build the second plant in October 2006 halving the life of the open pit kimberlite mine from 70 to 35 years and thereby significantly enhancing its net asset value. In 2007, 76,873 carats were sold from Letšeng Mine, a 45% increase on the 52,998 carats sold the year before. In 2008, the mine is expected to produce approximately 100 000 carats.

Letšeng Mine is operated by Letšeng Diamonds, which is 70% owned by Gem Diamonds, a FTSE 250 listed company, and 30% owned by the Government of the Kingdom of Lesotho. The Letšeng Mine has produced three of the world's largest diamonds. Two of these diamonds were recovered in the last 18 months - the 603 carat Lesotho Promise in August 2006 which sold for US$12.4 million and the 493 carat Letšeng Legacy in September 2007 which sold for US$10.4 million.

The Letšeng Mine is powered by electricity provided by the Lesotho Electrical Corporation (LEC) which in turn sources the majority of this power from the South African parastatal ESKOM. Once the second plant is at full production the mine's demand for power will increase to eight megawatts. Letšeng has permission to increase its power demand from one of the LEC's key supply lines to nine megawatts. To date, Letšeng has experienced limited power outages on this line as a result of the power supply problems with ESKOM in South Africa; however, production levels have not been affected.

At present, work is ongoing to investigate if upgrades can be made to the other of the LEC's key supply lines which also services Letšeng and which is not expected to experience power outages. In the shorter term, to mitigate risks to forecast production levels, the installation of generator sets at the Letšeng Mine is being investigated. In addition, discussions are ongoing with the LEC who remain positive on their ability to provide an uninterrupted power supply in both the short and long term.

Gem Diamonds CEO, Clifford Elphick commented:

"The completion and commissioning of the second plant at Letšeng is a critical step in developing this world class asset to its full potential. As the global demand for top class diamonds continues unabated, Gem Diamonds is increasingly better positioned to meet it."

For further information:
Gem Diamond Technical Services

Clifford Elphick
Tel: +27 11 327 3162

Angela Parr
Tel: +27 11 560 9600

Pelham PR

Candice Sgroi
Tel: +44 207 743 6376

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$175 million of cash on its balance sheet at 2007 year end.

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