🕐25.11.14 - 08:27 Uhr

PARAGON DIAMONDS: SIGNIFICANTLY ENHANCED ECONOMICS OF FLAGSHIP LEMPHANE KIMBERLI
TE PIPE PROJECT IN LESOTHO THANKS TO STATE OF THE ART PROCESSING PLANT AHEAD OF COMMENCEMENT OF PRODUCTION IN Q1 2015



Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources 25 November 2014 Paragon Diamonds Limited (“Paragon” or the “Company”) Update on Processing Plant for Lemphane Kimberlite Project, Lesotho Paragon Diamonds Limited, the AIM quoted vertically integrated diamond development company in Lesotho, Africa, is pleased to announce the finalisation of the design and order plans for a state of the art processing plant for its 80% owned Meso Diamonds’ Lemphane kimberlite mine (‘the Project’), which is located among a cluster of kimberlites known for producing large, high value diamonds.

The plant’s modular design and use of the latest X-Ray Transmission (XRT) diamond recovery technology will reduce both capital and operating costs at Lemphane, improve diamond recovery, and as a result significantly enhance the Project’s economics.

This update is in line with the Company’s objective to commence Stage I production at Lemphane in Q1 2015, which will involve the extraction of 1 million tonnes of kimberlite over a two year period and, according to an independent report, is expected to lead to the recovery of over 100 diamonds larger than 9 carats, including stones over 100 carats in size.
* Finalisation of design and order plans for US$6 million 75tonne per hour (0.5Mt/yr) processing plant follows a comprehensive analysis of various plant options and evaluation of technologies successfully used by other key industry players previously * Lemphane Project’s economics significantly enhanced as a result of the state of the art plant: * Lower operating costs – the plant will incorporate the latest advances in XRT diamond recovery technology which is proven to significantly reduce costs, maximise the recovery of large high value stones and minimise breakages. * Capital costs of Stage II production expected to be significantly reduced from the initial scoping study as a result of the new technology when applied to a full-scale 3Mt/yr plant - it is expected that the overall size and footprint of the plant will reduce along with the associated operating costs * Improved diamond recoveries – XRT technology has been shown to significantly improve diamond recoveries compared to other conventional diamond recovery technology * An upgraded pre-feasibility study, based on the revised 48Mt of kimberlite amenable to open-pit mining and incorporating the latest improvements in both operating and capital costs, including the planned national grid electrification of the region due mid-2015 will be undertaken in due course to verify management’s assertions * Titanium Capital Investments Ltd (‘Titanium Capital’), a private equity investment company managed by Paragon’s Chairman Philip Falzon Sant Manduca, is acting as assuror (for nil consideration) for the pre-ordering costs of the plant supporting Paragon’s efforts to prepare for the plant’s construction as soon as Stage I production funding negotiations have been successfully concluded – the acquisition of the plant is conditional upon Paragon securing the required funding.

The assurance given by Titanium Capital constitutes a Related Party Transaction under AIM Rule 13.

The directors, excluding Philip Falzon Sant Manduca consider, having consulted Northland Capital Partners Limited (the Company’s Nominated Adviser) that the terms of the assurance are fair and reasonable insofar as the Company’s shareholders are concerned. * Board is highly focused on prioritising debt financing over equity as a means of structuring the funding, thereby rewarding existing shareholders by generating maximum value added * Plant is on course to be commissioned in time for commencement of Stage I production in Q1 2015 Paragon’s Chairman, Philip Falzon Sant Manduca said, “The construction of this ‘state of the art’ processing plant is a major milestone for Paragon as we home in on our Q1 2015 target for the commencement of Stage I production.

As Lemphane is the last, known undeveloped large diamondiferous kimberlite pipe in Lesotho, Paragon benefits from last mover advantage, whereby we get to see in practice the advantages and disadvantages of the various techniques and technologies employed on other kimberlites to date, as well as enjoying access to the latest equipment.

We have therefore cherry-picked the best-in-class X-Ray technology for our plant, which not only lowers our forecast operating costs but also maximises the recovery rates of large high value stones at Lemphane, reduces the potential for breakages, and enhances on-site security. “From the outset, Lemphane’s company-making credentials have always been clear to me.

By potentially providing a source of large, high value diamonds, Lemphane delivers a strong platform from which we can build Paragon into a vertically integrated diamond house, with material interests in upstream and downstream activities to capture as much value as possible for our shareholders.

Thanks to the plant’s modular design its capacity can be easily scaled up to accommodate Stage II’s higher volumes, which along with the current technology to be adopted will translate into a significant reduction in Stage II’s CAPEX requirement.

When measured against a static quantum of resource, this increases the potential magnitude for future revenues and therefore substantially improves Lemphane’s potentially attractive economics.

This lies behind a further increase in Titanium’s commitment to Paragon in the form of assurance towards the design and pre-ordering costs of the plant to the relevant contractors, so that we have a greater potential to meet our timetable of production commencing in Q1 2015.

I look forward to providing further updates in the near term.” Further Information The processing plant will have a name-plate capacity of 75 tonnes per hour, and at a planned utilisation (90%) and availability (92.5%) of approximately 20 hours per day, an annual throughput of 0.5Mt/yr is expected.

The primary head-feed size will be +50-85mm.

A 50mm x 25mm x 20mm diamond would typically weigh at least 300ct, thus the potential for diamond breakage during primary crushing operations is reduced. “Tomra®” XRT technology will be used to recover all +15mm diamonds, corresponding to circa 7.5ct for an oblate shape, typical of type IIa diamonds.

Furthermore, all XRT feed will be sorted to recover diamonds prior to any subsequent crushing, and secondary crushing will be at a maximum closed-size setting of 35mm, corresponding to circa 100ct for an oblate shape.

As such, the vast majority of the one hundred and nineteen +9ct diamonds, including a +100ct diamond, four 50-100ct and twenty two 20-50ct diamonds predicted from the Size Frequency Model for the initial 1Mt of mining, will be recovered by the XRT circuit, without further exposure to a secondary crushing circuit. After coarse diamond recovery, all material will be progressively reduced to -15mm before further processing by traditional Dense Media Separation (DMS) and fluorescent X-ray “FlowSort®” recovery to extract the smaller (<~7ct) diamonds. Processing will be fully automated with XRT and X-ray concentrate containing all diamonds gravitating directly into sealed glove boxes for picking.

All subsequent manual diamond picking and handling will be ‘hands-off’ and under the supervision of multiple layers of security.

Recovered diamonds will be verified, documented and registered prior to deposition into secure storage.

There is no opportunity for manual handling of any diamond from the point at which ore is tipped into the feed-hopper of the plant until diamonds are deposited into the export safe with no on-site access. The plant will be assembled under a turnkey contract by Consulmet, a leading designer and fabricator of diamond processing plants.

Consulmet has recently successfully constructed, installed and commissioned GEM Diamond’s Ghaghoo process plant in Botswana, as well as the diamond process plants at the Lace - South Africa (DiamondCorp plc) and Koidu - Sierra Leone (OCTÉA Ltd) diamond mines. Consulmet have also agreed to operate the Paragon/Meso plant for an initial six month period, processing the first 0.25Mt of ore, and providing on-site technical support for the XRT technology at this critical phase.

The Consulmet specialists will run the plant for an initial period of six months in conjunction with Paragon Diamonds prior to full handover to the Company, however, Paragon Management and their appointed security contractors will run all aspects of the diamond final recovery facility.

The approximate cost of the plant is US$6 million. In accordance with the AIM Rules for Companies, the information in this announcement has been reviewed by Stephen Grimmer PhD., MSc., a qualified geologist with over 25 years diamond exploration experience.
**ENDS** For further information please visit www.paragondiamonds.com or contact: Philip Falzon Sant Manduca Paragon Diamonds Limited +44 (0) 20 7182 1920 Simon Retter Paragon Diamonds Limited +44 (0) 20 7182 1920
Edward Hutton/Gerry Beaney
Northland Capital Partners Limited
+44 (0) 20 7382 1100
John Howes/Charles Laughton Northland Capital Partners Limited +44 (0) 20 7382 1100 Felicity Winkles St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Frank Buhagiar St Brides Media and Finance Ltd +44 (0) 20 7236 1177
Notes Paragon Diamonds has a pipeline of projects in Lesotho, Botswana and Zambia, the most advanced of which is its Lemphane Kimberlite Pipe Project in Lesotho, located close to the world class Letšeng mine, Lesotho’s largest diamond mine.

Lemphane is the last known world-class sized kimberlite to be developed in Lesotho.

Among the stones recovered in the Company’s 2013 bulk sampling programme were several large high value stones of up 8.9 carats in size and individual diamond values in excess of US$2,400/ct have been achieved, demonstrating the potential for Lemphane to hold large and valuable diamonds.

The first of a two stage production programme is currently expected to commence late 2014 (subject to financing) which will further define the resource at Lemphane.

As increased tonnages of kimberlite are processed the proportion of larger diamonds recovered will improve, increasing the average value of diamonds recovered at the project, as was the case at Letšeng. Stage 1 production will cover a two year period during which approximately 1 Mt of kimberlite will be mined and processed out of the currently estimated 48.6Mt of kimberlite (to 350m depth) at the site, using a 75 tonne per hour processing plant.

The Company is targeting 20,000 carats during Stage 1 production with an estimated minimum value of US$930 per carat that is expected to generate revenues in excess of US$9m per annum.

Cash flow will be reinvested to further develop Lemphane and complete a bankable feasibility study, a 3D geological model and a substantial inferred resource ahead of commencing the Stage 2 production phase.

Stage 2 will see production ramped up to 3Mt/year with peak production expected to hit 65,000 carats per year of high value diamonds. It is the intention of the Company to become a fully integrated diamond company maximizing the margins gained from being exposed from the mining to selling of diamonds.
[cid:image002.png@01CECBDD.61F8A860] Frank Buhagiar St Brides Media & Finance Ltd 3 St Michael’s Alley, London, EC3V 9DS www.stbridesmedia.co.uk Tel: 0207 236 1177 | Mob: 07788410221 | Twitter: @StBrides1



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