core sector communique

Gem Diamonds Limited

(“Gem Diamonds” or the “Company”)

Results for the half year ended 30 June 2011

Gem Diamonds (LSE: GEMD) a leading diamond mining company reports its results for the half year ended 30 June 2011 (H1 2011):

H1 2011 Highlights:

§ Record rough diamond prices achieved.

§ Record EBITDA of US$90.8 million:

- 489% increase over the US$18.5 million achieved in H1 2010.

- exceeding the US$82.0 million achieved for the full year 2010.

§ Record attributable earnings of US$28.9 million (20.89 US cents per share).

Financial Highlights:

§ Revenue of US$196.5 million; (US$103.9 million in H1 2010).

§ Cash generated from operating activities of US$101.2 million; (US$27.9 million in H1 2010).

§ Profit before tax from continuing operations of US$79.0 million; (US$7.8 million in H1 2010).

§ US$165.6 million cash on hand (US$108.3 million in H1 2010).

Operational highlights:

§ Letšeng achieved a record average value of US$3 052 per carat in H1 2011 (US$1 728 per carat in H1 2010).

§ Letšeng produced 105 rough diamonds that were valued at greater than US$20 000 per carat.

§ Letšeng produced a total of 295 rough diamonds greater than 10.8 carats in size.

§ Ellendale achieved a record average price of US$4 045 per carat for its fancy yellow diamonds in H1 2011 (US$2 588 per carat in H1 2010).

§ A new pricing mechanism has been agreed for the fancy yellows which has resulted in price increases of 35.3%.

§ The pre-feasibility study for the Letšeng expansion is nearing completion and a detailed presentation by Gem Diamonds management will be made on the Letšeng expansion in London on 5 September 2011.

§ The first stage of the development of the Ghaghoo mine in Botswana (formerly known as Gope) has commenced.

Health, Safety, Social and Environmental Key Points:

§ Subsequent to the Company’s record safety achievements in 2010, a vehicle accident at Letšeng regrettably resulted in a fatality in March 2011.

§ Group-wide All Injury Frequency Rate (AIFR) of 4.55 (well below both the 2011 AIFR threshold and 2008 – 2010 AIFRs).

§ Ellendale remains LTI free since August 2009 (668 LTI free days as at the end of June).

§ Zero major environmental and community incidents year to date.

§

Clifford Elphick, CEO, commented:

“In the first six months of 2011 the Group achieved a record EBITDA of US$90.8 million which exceeds the EBITDA generated for the whole of 2010. The first half of 2011 has seen the continued benefit of Letšeng having a more active role in managing its sales and marketing strategy, as well as the implementation of the downstream initiatives. The new monthly pricing mechanism agreed with Tiffany & Co. for Ellendale’s fancy yellow diamonds has resulted in average prices rising by 52.1% from January 2011 to July 2011. Mined rough diamond supply is still below the pre crash highs. Lower stocks of rough and polished diamonds in the cutting centres and strong diamond jewellery demand from India and China have resulted in record rough diamond prices being achieved, reflected in rising polished diamond prices. Work has commenced on the construction of Phase 1 of the Ghaghoo project in Botswana and the pre-feasibility study into the substantial increase in production at Letšeng is nearing completion. With a strong balance sheet of US$165.6 million of cash on hand, Gem Diamonds is well positioned to deliver on its growth plan and benefit from the positive supply demand dynamics. The current economic uncertainty, however, remains a risk.”