Sales and Operational Update

21 May 2015

Gem Diamonds Limited (LSE: GEMD) is pleased to provide an update detailing the Company's operational performance for the period 1 January 2015 to 30 April 2015 (the Period) and sales performance for the period 1 January 2015 to 20 May 2015 (Year to Date).

Highlights:

Letšeng:
Continued strong performance at Letšeng

• An average of US$ 2 1461 per carat was achieved for the first three tenders of 2015 (US$2 1401 per carat in Q4 2014)
• A 314 carat Type IIa white diamond was recovered during the Period and was sold into a partnership arrangement in May 2015
• A further three high quality diamonds of over 100 carats each were recovered during the Period
• Eight rough diamonds achieved a value of greater than US$ 1.0 million each for the Year to Date
• Plant 2 Phase 1 upgrade was completed on time and on budget, increasing the plant capacity by 250 000 tonnes per annum and is anticipated to further reduce diamond damage

1Refer to Section 2.2 "Rough Diamond Sales and Diamonds Extracted for Manufacturing" for further details

Ghaghoo:
Ghaghoo development progressing well, first production area yielding encouraging diamond recoveries

• Production blasts have commenced on Level 1 in production area 1
• Decline is being developed down to Level 2, with development of production area 2 commencing later in 2015
• 67 330 tonnes of ore was treated during the Period, with 16 174 carats recovered at a grade of 24 cpht
• Average recovered grade of 29 cpht has been achieved in the month of May to date, above the reserve grade of 27.8 cpht
• Optimisation of the recovery plant has led to the recovery of diamonds in all size ranges
• Five diamonds of greater than 10 carats each have been recovered during the month of May to date, with the largest being 48 carats

Financial:

• The Group had US$ 92.5 million cash on hand as at the date of this report
• The Group has drawn down US$ 35.6 million of its available facilities resulting in a net cash position of US$ 56.9 million at the date of this report
• The Board recommended a maiden dividend of 5 US cents per share (US$6.9 million) to shareholders following the final results announcement in March 2015 with payment to be made on 9 June 2015 to holders of ordinary shares on the register at close of business on 8 May 2015

Gem Diamonds' CEO, Clifford Elphick, commented:

"It is pleasing to see that the prices achieved for the first three Letšeng tenders of 2015 are on a par with those of Q4 2014, despite a noticeably weaker overall market for Q1 2015 as reported by other diamond producers. Moreover, the recovery of a 314 carat white diamond, which was virtually undamaged, and three other diamonds of over 100 carats underscores the technical advances made in reducing diamond damage. The 19 -day shutdown of Plant 2 to accommodate the upgrade of the plant was accomplished as planned.

The progress at Ghaghoo has also been satisfying with increasing tonnages achieved each month during the Period as planned, with an average grade of 29 cpht being achieved in recent weeks (in excess of the reserve grade of 27.8 cpht). The recovery of five diamonds greater than 10 carats each is also encouraging. The development is on track to achieve planned tonnages and grade for the second half of 2015."

21 May 2015 Sales and Operational Update (381KB PDF)