Paragon Diamonds Ltd : Lemphane Water Pipeline Complete, Drilling Contract Commences

21 January 2013

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Lemphane Water Pipeline Complete, Drilling Contract Commences

· High pressure pipeline to deliver process water installed to enable continuation of bulk sampling

· Drilling commenced, 1st of six deep delineation holes underway

· Environmental Impact Assessment study commissioned for Lemphane

Paragon Diamonds Ltd. announces the completion and testing of it water supply pipeline to the Lemphane bulk sampling plant, as well as the commencement of delineation drilling on the kimberlite.

Following the approval of the August 2012 application for a water use permit from the Malibamatso River by the Dept. of Water Affairs (Ministry of Natural Resources) announced in December 2012, the company is pleased to announce the successful completion and testing of the necessary pump installation and pipeline. The installation consists of a low-pressure water extraction pump, surge tanks, generator station and high pressure booster pump at the Malibamatso River, circa 1,500 m from, and 300 m below the Lemphane bulk sampling plant, as well as a high-pressure steel and HDPE pipeline to bring water at 40 bar pressure to the process plant dam. The system is designed to safely deliver the required 500 m³/day of process water to enable the bulk sampling plant to operate at its full design capacity.

Rodio Geotechnics Ltd. has successfully mobilized one of their C910 crawler diamond drill rigs to the Lemphane site, and commenced drilling on the first of a series of six planned holes. All holes will be rotary diamond core drilling, initially in the "PQ" core size for surface casing through the upper weathered kimberlite, and in "HQ" and "NQ" core sizes thereafter. Four holes of circa 380 m depth to intersect the kimberlite/basalt contacts at a depth of 350 m below mean surface, as well as two 400+m holes to determine characteristics at depth are planned. The first hole commenced from a central position in the kimberlite, drilling at a 70° inclination angle, to an azimuth of 315° (NW). The drilling is being guided by surface mapping and geophysical modelling undertaken to date on the kimberlite. All drill cores are being stored on site and will be logged and stored in a purpose-built core shed being constructed for this purpose.

Loci Environmental (Pty) Ltd has also been commissioned to undertake an Environmental Impact Assessment (EIA) on the Lemphane Kimberlite Project. This study will, together with the scoping study already under preparation by PPM, will form an integral and required component to the company's Mining Lease application for the Lemphane Kimberlite which is under preparation. It is expected that the study will be completed and delivered to the Company during the current Quarter. Loci are a Botswana-based consultancy with extensive experience in the region, including similar studies on other major kimberlite mining and development projects in Lesotho and Botswana.

In comment, Paragon MD Stephen Grimmer said: "the functioning water supply system will overcome past difficulties associated with recent droughts in Lesotho, and allow us to accelerate and rapidly complete our present bulk sampling program. We anticipate that drilling will also proceed rapidly, and allow us to develop a greater understanding of the Lemphane Kimberlite at depth, in particular, an accurate volume determination beyond the conceptual 30Mt to -200 m provided by the initial 43-101 Independent Technical report of 2010, and the planned EIA is an essential component of our Mining Lease Application currently in preparation"

In accordance with the AIM Rules, the information in this announcement has been reviewed by Stephen Grimmer PhD., MSc., a qualified geologist with over 25 years' diamond exploration experience.

For further information:

Paragon Diamonds Limited Martin Doyle - Chairman Simon Retter - Finance Director www.paragondiamonds.com	[phone]
Fox-Davies Capital Ltd (Nomad and Broker) Jonathan Evans Simon Leathers	[phone]

Notes to editors

Paragon Diamonds is looking to rapidly develop producing and exploration diamond properties into a portfolio of high value assets located within Africa. To date it has secured a series assets which its exploration and development teams are working to progress. The core focus at present are the companies hard rock licences located in Lesotho, a major producing diamond region. The Projects include:

Lemphane Kimberlite project Lesotho (85%)

Lemphane is one of five known diamond bearing kimberlite pipes within Lesotho, located 5km from the Liqhobong project.The Environmental assessment plan and access routes and exploration camp have been completed.DMS plant constructed and bulk sampling commenced with 35,000 tonnes of ore stockpiled awaiting processing. Extended bulk sampling of a further 25 - 40,000 tonnes is possible once initial sample completed.

Motete Dyke exploration, Lesotho (85%)

Motete is a substantial kimberlite dyke (fissure system) in close proximity to the Lemphane project.  The licence was awarded in December 2011. During 2012 a resource of 0.86Mct attributable to Paragon at a grade of 65 cpht and an average value of US$62/ct was defined.

Kaplamp diamond hosting Lamproite', Zambia

Kaplamp is a large prospecting licence known to host 14 Lamproite pipes within a known diamondiferous region and with five high profile targets identified for initial evaluation. The area is highly prospective as De Beers recovered significant amount of stones in 60's and 70's but relinquished area as Lamproites were not yet recognised as viable. The Argyle Diamond Mine in Western Australia is the most renowned Lamproite hosted mine - in 1994 produced 39% of worlds diamond production. 

Kopje kimberlite exploration, Botswana

This newly awarded prospecting licence covering 15 km sq in highly prospective area 35 km east of DeBeers' large producing Orapa Mine.

Mabuki, Tanzania

Located 81km south of Mwanza, Tanzania with good infrastructure nearby (roads, power, water, transport) the licence sits within a known Kimberlite Field.  Artisanal activity occurs to the west of licence with diamond bearing gravels identified off the edge of the licence. The intention is to explore (detailed geophysics and sampling) and map-out, then establish drill targets and define a resource. Wardell Armstrong completed a competent persons report on Tanzania in September 2010.