Gem Diamonds Limited is pleased to provide the following Trading Update detailing the Group's operational performance for the Period 1 July 2016 to 30 September 2016 ("Q3 2016" or the "Period") and sales performance to the date of this report (the "Sales Period").

Letšeng:

Operational performance on track to achieve full year guidance


• Ore treated 1 612 728 tonnes (1 711 336 tonnes in Q2 2016) despite extreme weather disruption as reported on 10 August 2016.


• Recovered 24 388 carats during the Period (28 682 carats in Q2 2016).


• Fleet management system successfully commissioned.


• 12 diamonds achieving greater than US$ 1.0 million each were sold in the Sales Period for a total of US$ 24.5 million.


• Average price achieved for year to date of this report is US$ 1 785 per carat, reflecting fewer than expected +100 carat diamonds recovered.

Ghaghoo:

Steady progress with focus remaining on reducing costs and increasing production


• 54 337 tonnes of ore were treated during the Period (up 21% from Q2 2016).


• Operating costs trending downwards.


• Encouraging recoveries of larger diamonds as mining moves into the undiluted portions of kimberlite ore.


• This demonstrates the fundamental potential of the mine, however given current market conditions for these types of diamonds, the on-going development of the mine in the near term, is under review.

Financial:

• The Group had US$ 44.1 million cash on hand as at 30 September 2016, of which US$ 39.6 million is attributable to Gem Diamonds Limited.


• US$ 28.2 million of available facilities have been drawn down resulting in a net cash position of US$ 15.9 million. No new draw down of any facilities took place during the Period. At Period end, the Group had US$ 53.2 million worth of undrawn and available facilities.


• During the Period, Letšeng paid dividends of US$ 25.7 million, which resulted in a net cash flow of US$ 16.2 million to Gem Diamonds and a cash outflow from the Group as a result of withholding taxes of US$ 1.8 million and payment of the Government of Lesotho's dividend portion of US$ 7.7 million.

Gem Diamonds' CEO, Clifford Elphick commented:
"Letšeng remains on track to achieve all of its guided production targets for 2016. This is despite production interruptions during July and August due to the worst weather conditions experienced since the Letšeng mine opened. Prices achieved for Letšeng's high quality diamonds have remained robust, with twelve diamonds having been sold for more than $1 million US dollars each during the Sales Period. However, the continued paucity of large high value diamonds during the Period has resulted in an average tender price year to date of US$ 1 785 per carat. At Ghaghoo ramping up production levels and reducing costs has seen positive progress being made. There have been encouraging signs of larger diamonds being recovered as mining has progressed into the undiluted portions of the kimberlite ore."