Acquisition

Gem Diamonds Limited
31 October 2007



31 October 2007

                      Acquisition by Gem Diamonds Limited
                           of the remaining 50.01% of
                          Kabongo Development Company

Summary

Gem Diamonds Limited (LSE: GEMD) ('Gem Diamonds' or the 'Company') is pleased to
announce today that it has entered into an agreement to acquire the 50.01% of
Kabongo Development Company s.p.r.l ('KDC') from Almesta Holdings Limited 
('Almesta') which it does not already own (the 'Acquisition').  KDC holds all of
the concessions on which Gem Diamonds is conducting operations at Mbelenge and
Tshikapa and the majority of the concessions at Lubembe and Longatshimo, all
located in the Kasai Occidental Province of the Democratic Republic of Congo 
('DRC').

Acquisition highlights

•   Acquisition consolidates Gem Diamonds' position in the DRC

•   Initial consideration will be settled in cash for US$56.2 million

   -   A deferred payment will be made to Almesta in the event of an
       increase in the valuation of KDC on the first anniversary of the 
       Acquisition.  The deferred payment will be 50,01% of the increase in 
       value of the concession as determined by an independent competent person 
       and will be capped at US$56.2 million.

   -   A further deferred payment is payable to Almesta in the event a 
       diamondiferous kimberlite is discovered on a KDC concession which proves 
       to be economically exploitable. The deferred payment amount will be 5% of 
       Gem Diamonds attributable value and will be capped at US$100 million.

•   Acquisition increases Gem Diamonds ownership of the Mbelenge mine and 
    Lubembe dredging project to 100%

•   Sales and agency agreement entered into with Almesta over DRC and Central 
    African Republic production

•   Attributable DRC in situ resource of Gem Diamonds increases 53.5% to 9.46 
    million carats

•   Gem Diamonds remains confident of its security of tenure over its licenses 
    in the DRC


Commenting on the Offer, Clifford Elphick, CEO of Gem Diamonds, said:

'The ownership and development of KDC and its concessions has been a key part of
Gem Diamonds' strategy since our first pre-IPO, equity capital raising.
Securing controlling ownership of these assets, to complement our existing
operating role, is a natural and progressive step for Gem Diamonds enabling our
shareholders to participate more fully in the value we expect to deliver from
our exciting mining and exploration activities in the DRC.'


1.             Introduction

Gem Diamonds currently holds a 49.99% interest in KDC which, in turn, holds
diamond concessions located at Mbelenge, Lubembe, Longatshimo and Tshikapa in
the Kasai Occidental Province of the DRC.  Under Gem Diamonds' management a mine
has been built and commissioned and is now running at designed capacity at
Mbelenge.  At Lubembe, trial dredge mining is ongoing in the Kasai River and at
Longatshimo trial mining will commence in late 2008. Tshikapa is yet to be
developed.  The kimberlite exploration program undertaken by Gem diamonds in the
DRC on all concessions has identified 79 targets of which 23 have been drilled
so far without successful discovery of a kimberlite.  The remaining undrilled
targets will be drilled in due course.

2.             The Acquisition

Gem Diamonds will acquire the 50.01% of KDC from Almesta for an initial total
cash consideration of US$56.2 million, which amount will be settled on
completion of the Acquisition.

In the event of an upward revaluation of KDC (as determined by an independent
competent person) on the first anniversary of the Acquisition, Gem Diamonds will
make a deferred payment to Almesta equal to 50.01% of the increase in the value
of Almesta's attributable share.  This deferred payment will be settled in cash
and is capped at US$56.2 million.

In the event that, within the five years following the Acquisition, a
diamondiferous kimberlite is located on any of the concessions currently held by
KDC in respect of which a bankable feasibility study is completed indicating its
economic viability, Gem Diamonds will make a further deferred payment to Almesta
equal to five per cent of Gem Diamonds' attributable interest in this kimberlite
as determined by an independent competent person.  All such kimberlite payments
will be capped at a total of US$100 million and payable in cash.

A transaction on similar terms between the parties was contemplated for some
time prior to the Company's listing on the London Stock Exchange and was
detailed in the Prospectus published at that time.

Gem Diamonds has also entered into a sales and agency agreement with Almesta,
which is advised by Mr Ehud Laniado, associated with renowned diamantaire
company Omega Diamonds, whereby all Gem Diamonds' rough diamond production from
the DRC and the Central African Republic concessions, held at the time of the
Acquisition, will be marketed through Almesta for three years from the date of
the agreement.  Almesta has extensive experience in the Central African diamond
market, having marketed diamonds produced in this area for over 20 years.  Gem
Diamonds has the option to retain any diamonds produced in these territories for
cutting and polishing in house should it so wish.

Omega Diamonds is one of the largest diamond trading companies outside of the De
Beers' sightholder network; currently marketing approximately of US$1 billion of
rough diamonds annually.  Diamonds will be valued by independent valuators in
Antwerp, post-acidisation.  Commission payable to Almesta will be in line with
Gem Diamonds' existing marketing arrangements in other territories.

For the six months ended 30 June 2007, KDC reported no revenue and a loss before
tax of US$1.72 million.  As at 30 June 2007, KDC had net liabilities of US$3.2
million and gross assets of US$38.4 million.


3.             Background to and reasons for the Acquisition

Gem Diamonds has been operating the KDC concessions in the DRC for approximately
18 months and continues to explore the prospective nature of these concessions.
Ownership of 100% of KDC will allow for development of these concessions to be
expedited and co-ordinated with Gem Diamonds' other majority owned operations in
the DRC, which will result in reduced costs and other synergies through
restructuring.  Over time it is intended that the operations of KDC and Gem
Diamonds' subsidiary Gem Diamond Mining Company of Africa (RDC) s.p.r.l. will be
fully integrated which will enhance operations efficiency in the DRC

4.             Financing

The consideration for the Acquisition will be settled from Gem Diamonds'
existing cash resources, which as at the last reported financial period end of
30 June 2007 was US$524.4 million.

5.             Licenses

Gem Diamonds remains confident of its security of tenure over its licenses in
the DRC.  Recent enquiries with the Deputy Minister of Mines as well as the
Cadastre Miniere in the DRC have confirmed that there are no investigations
underway or pending on any licenses held directly or indirectly by Gem Diamonds
in the DRC.


For further information:


Gem Diamonds Limited

Clifford Elphick

[phone]


Gem Diamond Technical Services (Pty) Limited

Angela Parr

Tel: [phone]



Pelham PR

Candice Sgroi

Tel: [phone]



About Gem Diamonds


Gem Diamonds is a diamond mining company with a balanced portfolio of a
producing kimberlite mine, two producing alluvial mines, development projects
and long-term prospects. Established in July 2005, Gem Diamonds is
pursuing an accelerated growth strategy and aims to become one of the world's
leading diamond companies. Gem Diamonds currently has one producing kimberlite
mine, Letseng, in Lesotho, two producing alluvial mines - Cempaka in
Indonesia and Mbelenge in the Democratic Republic of Congo (DRC), a kimberlite
development project in Botswana, two development projects in the DRC, one in the
Central African Republic and an option to develop the Chiri kimberlite
concession in Angola.


The Company recently made an offer to Kimberley Diamond Company's
shareholders to acquire their shares in this company, which owns the Ellendale
Mine in north Western Australia, and which was approved by Gem Diamonds'
shareholders at an Extraordinary General Meeting on 16 October 2007.


Gem Diamonds currently has a specific focus towards higher value diamonds, a
segment of the market that its management believes will deliver superior long
term returns.


For further information about Gem Diamonds visit www.gemdiamonds.com.


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