Trading Statement

Gem Diamonds Limited
12 July 2007


News Release
12 July, 2007
                              GEM DIAMONDS LIMITED
                       ('Gem Diamonds' or the 'Company')

              TRADING UPDATE FOR THE SIX MONTHS ENDED 30 JUNE 2007


Gem Diamonds Limited (LSE: GEMD) is aiming to become a leading diamond producer
and is pursuing an accelerated growth strategy through acquisitions and the
development of existing assets.  Gem Diamonds has a balanced portfolio
consisting of both a producing kimberlite mine and alluvial mine, numerous
development projects and a number of exploration assets with long-term
prospects.  The Company's current operations are situated in, Angola, Botswana,
the Central African Republic, the Democratic Republic of Congo, Lesotho and
Indonesia.

Established in July 2005, Gem Diamonds listed on the main board of the London
Stock Exchange in February 2007 raising over US$600 million.  It is currently
capitalised at approximately US$1,25 billion and has US$519 million of cash on
its balance sheet.  Senior Management at Gem Diamonds has more than 150 years
experience in the diamond mining industry.

Gem Diamonds issues this statement as an unaudited trading update for the six
months ended 30 June 2007 (the period), in advance of its half year results to
be  announced on 13 September.


HIGHLIGHTS:


Sales
     
o    39 204 carats sold from Letseng Mine, compared to 30 549.sold in the
     same period last year (28% increase)

o    US$69,6 million total sales value from Letseng Mine, compared to
     US$38,0 million for the same period last year (83% increase)

o    Letseng average price per carat over the period of US$1,894 from Satellite 
     Pipe (2006: US$1281) and US$1128 from Main Pipe (not previously mined)

o    Cempaka sales of US$2.3 million to end June

o    First export of diamonds from the DRC, awaiting sale


Operational

o    215 carat D-colour flawless diamond recovered in January, sold for
     US$8.3 million

o    Letseng Mine continues to produce large stones - with 226 diamonds of
     more than 10.8 carats recovered in the period

o    Improved recovery techniques at Letseng achieve grade of 2.26 cpht from
     the Satellite Pipe

o    Construction of second plant at Letseng to double processing capacity
     on time for completion early 2008 and currently on budget

o    Mining of second Letseng kimberlite begun, recovery of 58 carat
     diamond, sold for US$2.1 million

o    Commissioning of plant commenced at Mbelenge Mine in DRC, ahead of
     schedule

o    Trial mining set to commence in 2008 at Longatshimo in DRC, ahead of
     original planned date


Corporate
     
o    Two acquisitions, BDI Mining and Gope, completed since listing; for a
     combined net purchase consideration of US$114 million

o    BDI Mining acquisition gives Gem Diamonds its second producing mine at
     Cempaka, Indonesia

•    Ramp up of Cempaka production set to commence shortly

•    Sale of Woodlark gold asset underway

o    Gope acquisition concluded, resource subsequently upgraded and updating
     of feasibility study begun


Gem Diamonds CEO Clifford Elphick comments:

'In executing its business plan and investing the capital provided to it, Gem
Diamonds is establishing itself as a gem diamond producer of significance.  The
Letseng Mine has delivered excellent production increases and sales prices
achieved have exceeded expectations.  The expansion project at Letseng is on
time and budget.  Since the Company listed on the London Stock Exchange in
February 2007, it has acquired BDI Mining and Gope.  With the acquisition of BDI
Mining, Gem Diamonds has added another producing mine with significant growth
potential to its portfolio.  We will continue to seek further strategic
acquisition opportunities that offer further growth potential.'

     
1    Lesotho

Gem Diamonds holds a 70% shareholding in Letseng Diamonds (Pty) Ltd (Letseng) in
partnership with the Government of the Kingdom of Lesotho which owns the
remaining 30%.


1.1   Letseng Operational Update

1.1.1 Production

A total of 1 367 113 tonnes were mined and treated from the Satellite Pipe over
the six months.  Carats recovered were 30 876.53 at a recovered grade of 2.26
cpht, 14% above the budget grade of 1.98 cpht.

Alluvial Ventures, who are contracted to mine and process alluvial, eluvial and
dump material on behalf of Letseng, successfully completed the double up in its
plant capacity during H1 2007 and treated a total of 508 193 tonnes and
recovered 6 976.98cts at a grade of 1.37 cpht, 11.4% above budget grade of 1.23
cpht.  All ore treated by Alluvial Ventures from early February 2007 was
weathered kimberlite from the Main Pipe


1.1.2          Diamond Sales

Tender results for the period are as follows:

Tenders            Carats sold       Total tender value US$     Achieved US$/ct
Satellite Pipe     33 153.33         62 808 167                 1 894
Main Pipe          6 050.48          6 828 441                  1 128
Total              39 203.81         69 636 608                 1 776


These compare to the tender results for the six month period ended 30 June 2006
as follows:


Tenders              Carats sold         Total tender value US$         Achieved US$/ct
Satellite Pipe       26 487.85           33 921 432                     1 281
Alluvials            4 060.71            4 067 650                      1 135
Total                30 548.56           37 989 082                     1 244



1.2               Letseng Expansion Project

Letseng is currently engaged in a doubling up of its processing capacity with
the construction of a second plant.  Combined, the two plants will process 5.2
million tonnes per annum from forecast full production date of end Q2 2008.

To date the project is running on budget however the final estimated cost of the
project is being challenged by legitimate scope changes and increased costs due
to shortage of skilled resources.

An extensive review of funding options for the project was undertaken earlier in
the year.  However, strong production results and high diamond prices achieved,
have resulted in Letseng being in a position to self fund this expansion
project.  As such no debt funding will be raised.



2                     Botswana

On 29 May 2007, the Company announced its acquisition of 100% of the shares of
Gope Exploration Company (Pty) Ltd (Gope) from De Beers and Xstrata for US$34
million.



2.1               Resource development and exploration

An independent review of the GEMCOM model available on the Gope kimberlite
deposit was undertaken by Competent Persons Venmyn Rand.  The results of this
independent review have resulted in a resource upgrade to indicated down to 500m
from the De Beers model of indicated to 300m and inferred to 400m.  The result
is an increase in the total resource to 97 million tonnes and 18.8 million
carats at a grade of 19.3cpht, from a previous 79 million tonnes and 15 million
carats at similar grade.



2.2               Gope Project Update

The process of updating the existing feasibility study and completing a revised
EIA on the Gope kimberlite has commenced with relevant advisors appointed.
Discussions with relevant stakeholders and affected persons are ongoing.  The
application for a Mining Licence will be submitted as and when appropriate.



3                     Indonesia

Gem Diamonds successfully completed the acquisition of BDI Mining Corp (BDI
Mining), first announced in April 2007 at a net cost of US$80 million.  BDI
Mining owns 80% of PT Galuh Cempaka (PTGC), which holds the mining rights to the
Cempaka alluvial diamond mine in Indonesia.  The remaining 20% is held by ANTAM,
an Indonesian state mining company.  BDI Mining also owns 100% of the Woodlark
Gold Project in Papua New Guinea.

Integration of BDI Mining into Gem Diamonds is proceeding well.  A restructuring
of the boards of BDI Mining and its subsidiaries has been completed and a review
of the BDI Mining group structure, with a view to simplification, is in
progress.  Gem Diamonds appointees have been made to the boards of BDI Mining
and its subsidiaries.  Neil Kaner, formerly Letseng Diamonds Consulting Mining
Engineer has been appointed as Managing Director and Lee Spencer, the former
CEO, has been appointed as New Business and Development Director.  Lee will
continue to be closely involved in the development of the Cempaka Mine.


3.1               Resource development and exploration

Following a site inspection of Cempaka in April 2007, the existing fluvial
geological model was further refined.  Although the basal, quartzose gravels
constitute the principal diamond placer, additional resource potential was
identified in the overlying sand dominated package.  Using the extensive
drilling and sampling results generated from previous exploration campaigns,
preliminary 3-D modelling of the Cempaka deposit has now commenced.


3.2               Cempaka Operational Review

Production, pre Gem Diamonds ownership, for the first half of the year was
adversely affected by a lack of capital which resulted in low levels of
overburden stripping leading to diamondiferous gravel shortages for feed to the
plant.

Following the acquisition, plans have been implemented to ramp up production to
80 000 bank cubic metres (BCM) per month during H2 2007.  The first batch of new
mining equipment has been ordered and delivery is due in Q3 2007 as part of a
move from contractor to owner mining.

Due to the size of the deposit Gem is evaluating upscaling the operation
significantly beyond 80 000 BCM per month.  Investigations into this have
commenced alongside a review of the mining method with a view to reducing unit
costs.



3.3               Woodlark Operational Review

As a focused diamond mining company, Gem Diamonds has elected to dispose of the
Woodlark Gold Project and is actively pursuing a sale process.



4                     Democratic Republic of Congo (DRC)



Gem Diamonds has interests in four projects in the DRC at Mbelenge, Lubembe,
Longatshimo and Tshikapa.  These interests are held via a number of companies in
which Gem Diamonds has between a 49.99 and 100% shareholding.



4.1               Resource development and exploration

Detailed mapping of river features and trapsites along the Lubembe, Tshiumbu,
Tshikapa, Longatshimo and Kasai Rivers was completed using Quickbird satellite
imagery and limited ground-truthing.  Additional field mapping and manual
sampling of river terraces and floodplains is ongoing.

A helimag follow up survey was completed over 74 aeromagnetic anomalies, 55 in
the Lubembe area and 19 in the Longatshimo area.  These detailed surveys
generated an additional anomaly in Lubembe and an additional three anomalies in
Longatshimo.  In Lubembe, 23 of the 55 aeromagnetic anomalies were drilled and
resolved.  No kimberlites have been intersected to date.  Drilling will continue
at Lubembe and will shortly commence at Longatshimo.



4.2               Mbelenge Operational Review

More than 60% of the earthmoving fleet has arrived and the first mine cut has
been prepared ahead of the scheduled production start-up.  The Treatment Plant
facility has been erected and tested successfully with a first pass of gravel
material.  Commissioning of the DMS plant commenced at Mbelenge in late June,
ahead of the scheduled start date in Q3 2007.



4.3               Longatshimo Operational Review

Based on historical data and the results of the conventional prospecting
programme conducted in 2006 and 2007, a trial mining programme has been defined.
  Scope of work, staffing and equipment requirements and budget have been
determined and orders have been placed for long lead items.  Trial mining is
expected to commence in H1 2008 ahead of earlier expectations for production in
2009.



4.4               Lubembe Operational Review

Phase 1 delineation drilling of basal Kwango gravels on the terraces was
completed at Lubembe.  Furthermore two 8' dredges were operational in the
Lubembe region recovering a total of 7,571.41 carats, below the expected half
year target of 10,500 carats.  This shortfall is due to prolonged flooding
precluding work in the higher grade, but more turbulent, rapid reaches.  The
diamonds were dispatched to Antwerp with Kimberley Process certificates for
further analysis and later sale.

Two aquasweeper units and associated gravel pre-treatment systems have been
delivered to the Lubembe project and are expected to substantially improve the
efficiency of the dredge exploration programme.



5                     Central African Republic (CAR)



Gem Diamonds holds a 75% interest in Gem Diamonds Centrafrique SA, in
partnership with the Government of the CAR which holds the remaining 25%.





5.1               Resource development and exploration

Quickbird satellite coverage of the lowermost portion of the Mambere concession,
including le Buckle - one of the initial target areas - was carried out at the
end of the dry season.  A base grid of sample and observation pits was
established over le Buckle of which a total of 45 pits were excavated and the
gravel recovered and treated.  The process delivered inconclusive grade results
but yielded valuable information on the bedrock geology and the surface
geomorphology.  On the basis of the above observations, five mega pits were
sited and the first bulk samples were excavated with material being treated
through a 15 tonne per hour DMS delivered to site and commissioned during the
first half of 2007.



5.2               Mambere Project Update

The Treatment Plant arrived on site in mid March.  The DMS section was
operational by end April but the Final Recovery section was damaged during
transportation to site and as a result the Plant will only be fully commissioned
in early July.  The plant is now operating beyond design capacity.

291 diamonds weighing 88.2cts have been recovered from both the terraces and
river at this early stage, but grades achieved have been lower than anticipated.
 Accordingly, the sampling programme has been extended and the initiation of
trial mining delayed.





6                     Angola

A Co-operation Agreement for the evaluation of the Chiri kimberlites in the
Lunda Sul province of Angola was signed with Avantis Angola Limited (Avantis),
one of five companies in a joint venture that were granted exploration rights
for the Chiri 1 and 2 kimberlites, in December 2006.  The conditions precedent
to the Co-operation Agreement were subsequently met in March 2007.



6.1               Resource development and exploration

A first reconnaissance site visit was conducted in February 2007 by Gem Diamonds
and Remote Exploration Services, the geological consulting and contracting
company appointed to design and manage the preliminary evaluation and
feasibility studies.  A preliminary evaluation programme comprising geophysical
surveys and a core drilling programme over the kimberlites has been designed.



6.2               Chiri Operational Review

The Chiri Technical Committee, comprising three representatives from Gem
Diamonds and two from Avantis, met at the beginning of May.

Manufacture of the sample treatment plant is nearing completion in South Africa
and, when the requisite Government approvals and permissions are in place, will
be transported overland to site.



7                     Corporate

As indicated at the time of the Company's IPO, discussions are ongoing to
increase the representation of Non-Executive Directors on the Board and, in
accordance with the Company's commitment to compliance with the Combined Code,
spilt the role of Chairman and Chief Executive.



Efforts are ongoing to ensure the inclusion of the Company's shares in the
FTSE250.





ENDS



For further information:

Gem Diamond Technical Services
Clifford Elphick
Angela Parr
Tel: [phone]

Pelham PR
Candice Sgroi
Tel: [phone]

James Henderson
Tel : [phone]

Charles Vivian
Tel : [phone]



About Gem Diamonds

Gem Diamonds is a diamond mining company with a balanced portfolio of a
producing kimberlite mine, a producing alluvial mine, 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 producers. Gem Diamonds currently has one producing kimberlite mine, Let
seng, in Lesotho, a producing alluvial mine Cempaka in Indonesia, a kimberlite
development project in Botswana, four development projects in the Democratic
Republic of Congo, one in the Central African Republic and an option to develop
the Chiri kimberlite concession in Angola. Gem Diamonds has a specific focus
towards higher value diamonds, a segment of the market that its management
believes will deliver superior long term returns.



In February 2007, Gem Diamonds listed on the London Stock Exchange and raised
over US$600 million (net of expenses) to fund development of its existing assets
as well as to pursue acquisitive growth opportunities. Gem Diamonds trades under
the code GEMD. At the time of this announcement the market capitalization of the
company is approximately US$1,25 billion.



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


                      This information is provided by RNS
            The company news service from the London Stock Exchange