Release: Gem Diamonds: Further operational update on Cempaka

(26 June 2008)-- Gem Diamonds is an 80% shareholder, in partnership with PT Aneka Tambang, a company controlled by the Government of Indonesia, in the Cempaka alluvial diamond mine. The Cempaka mine comprises two paleo channel systems, the Danau Seran and the Cempaka channels, both located in a low lying coastal swamp area of the South Kalimantan Province of Indonesia.

Subsequent to issues raised by the regional Government of the South Kalimantan Province in April 2008 with regard to the waste water discharge from Cempaka and in line with the Company's commitment to best practice environmental issues management, Gem Diamonds elected to temporarily suspend mining.

Extended discussions with the regional Government ensued and Gem Diamonds is pleased to announce that agreement on an appropriate water treatment process was reached. These water treatment facilities were duly constructed at a capital cost of US$0.1 million and trials thereon were conducted. A site inspection has been conducted by the Environmental Monitoring Group of South Kalimantan and permission has been granted to continue pumping discharge water from the mining area on a trial basis. The ongoing treatment of water through these facilities is not expected to materially increase mining costs at the Cempaka mine.

The updated environmental impact assessment and management and monitoring plans for the mine as well as the updated feasibility study have all been submitted to the relevant authorities and are currently under review. Mining will recommence once all of these are approved, which is expected to be in Q308.

Cempaka has operated as an alluvial mine since 2004, subsequent to being awarded a Contract of Work by the President in 1998 that runs for 35 years. It is the first commercial mine in the area, where artisanal mining has been ongoing for hundreds of years. (end of release)