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Gemfields to acquire Kagem emerald mine in Zambia from Rox Limited

Gemfields Resources plc (AIM:
GEM), the AIM-listed Zambian gemstone mining and exploration company, is pleased
to announce that it has conditionally agreed to acquire from Rox Limited (“Rox”,
a Pallinghurst Resources portfolio company) a 75% interest in the Kagem emerald
mine in Zambia.   

Rox has also granted to
Gemfields an option to acquire a portfolio of in excess of 25 licences and
licence applications for gemstone exploration in Madagascar held through its subsidiary Oriental Mining.

In addition, Fabergé Limited,
another Pallinghurst Resources portfolio company has agreed to grant Gemfields
an option to acquire a worldwide and exclusive 15 year licence to use the
Fabergé brand name in respect of gemstones (excluding diamonds). 

Under the proposed
transaction, Gemfields is to acquire Greentop International Inc. (a BVI
company) and Krinera Group SA (a Panamanian company), the holding companies
through which Rox’s interest in the Kagem mine is held (via intermediate
holding companies).  In consideration for
the acquisition of Greentop and Krinera and the options referred to above, Gemfields
will issue to Rox 137,910,340 new ordinary shares in Gemfields (constituting
55% of Gemfields’ issued share capital after implementation of the transaction
on a fully diluted basis).

As the proposed transaction is
classified as a reverse takeover under the AIM Rules, the transaction is conditional,
amongst other things, on Gemfields obtaining the approval of its shareholders.  Gemfields’ shares have been suspended from
trading pending the preparation and publication of a re-admission document and notice
of extraordinary general meeting (“EGM”) setting out the details of the
proposed transaction and seeking shareholder approval.  A competent persons report is being prepared
and will form part of the re-admission document.  It is expected that the re-admission document
and notice of EGM will be sent to shareholders as soon as they are available,
which is currently intended to be in the first quarter of 2008. 

Graham Mascall, Chairman of Gemfields
said:

“This transaction adds significant
value-adding building blocks to Gemfields’ vision of becoming a leading
supplier of both rough and polished coloured gemstones. Since its IPO in
November 2005, Gemfields has assembled a world class operational team with extensive
experience in all aspects of the gemstone business. Significant operational
synergies will be generated from the combination of these two sets of assets.  

Gemfields will now be the dominant
company on Zambia’s Fwaya-Fwaya emerald belt, and this bodes well for further
consolidation of the belt. Gemfields’ current position in the emerald industry will
form the basis for targeting significant interests in other coloured gemstones.”

Mr Brian Gilbertson, Chairman
of Pallinghurst Resources said:  

“We have long held the view
that the coloured gemstone industry is unusually fragmented and
undercapitalised. Given the increasing popularity of coloured gemstones, and
the resulting price increases in recent years, Pallinghurst Resources believes
that a significant opportunity exists in pursuing consolidation and vertical
integration of the coloured gemstone industry.

The vision of supplying a
range of ethically sourced coloured gemstones with guaranteed provenance, and with
the premium stones bearing the Fabergé brand name, creates an attractive value
proposition. The combination of the assets of Gemfields and Rox establishes a
solid framework for the development of an integrated company involved in the
exploration, mining, processing, marketing and sales of coloured gemstones on
an international scale. ” 

Kagem

Kagem is the largest emerald
mine in Zambia and is one of the most attractive operating emerald
assets in Africa. Notably, Kagem has a long and demonstrated history
of producing high quality emeralds. During the last three years, Kagem has
produced an average of 6.5 million carats of emeralds annually. Gemfields
believes that these production levels can be significantly improved.  

Kagem presently has in excess
of 350 employees and has two processing plants. The Kagem assets include a
cutting works in nearby Kitwe
where lower grade emeralds will be cut and polished.

While Kagem’s licence area is
extensive and includes five emerald bearing belts, production to date has
focussed on a single pit known as “FF-F10″ which lies on the Fwaya-Fwaya belt.  

Under the terms of the
proposed transaction, Gemfields would acquire Rox’s 75% indirect interest in
Kagem. The Government of the Republic of Zambia
owns the remaining 25%.

Fabergé 

Under the terms of the proposed
transaction, Gemfields will acquire an option to be granted a 15 year worldwide
and exclusive licence to use the Fabergé name in branding, marketing and
selling coloured gemstones (excluding diamonds).  The name carries exceptional branding
potential and would, in terms of the proposed transaction, become Gemfields’
flagship brand.  The option will be
exercisable by Gemfields in the three months following completion of the transaction,
however, if it has not done so, Fabergé Limited can require it to.

Madagascar 

Madagascar is presently one of the most prospective mineral provinces
in the world for coloured gemstones. Gemfields would, in terms of the proposed
transaction, be granted an option to acquire Oriental Mining which holds a
portfolio in excess of 25 licences and licence applications in Madagascar covering rubies, sapphires and emeralds, as well as garnets
and tourmalines.  The option is
exercisable by Gemfields at any time in the three months following completion
of the proposed transaction, however, if it has not done so, Rox may require it
to.

Enquiries:  

Gemfields

Richard James, CFO                                          richard.james@gemfields.co.uk 

+44 (0)20 7016 9416

Conduit PR

Ed Portman/Leesa Peters                                   +44 (0)20 7429 6607

+44 (0)773 336 3501 

Canaccord Adams Limited

Robin Birchall                                                    +44 (0)20 7050 6500

About Gemfields Resources plc 

Gemfields is an AIM-quoted
gemstone exploration, mining and processing company. Gemfields existing assets
include:

The wholly owned Mbuva-Chibolele
emerald mine on the Fwaya-Fwaya belt, where trial mining commenced in July 2006.
A 10,050 carat emerald was recovered from Mbuva-Chibolele in August 2007; 

The wholly owned Kamakanga
emerald mine on the western limb of the Fwaya-Fwaya belt in Zambia, which was acquired in December 2005;

The 50% (an agreement to
increase to 76% is expected to be signed shortly) owned Kariba amethyst mine
where production is being ramped up, and a large-scale amethyst prospecting
licence in the surrounding area; 

An option (valid until 31 March 2008) to acquire the Jagoda pink tourmaline mine for USD
1.95 million. Geological mapping is presently underway on this property;

Substantial prospecting licences
in the Ndola Rural Emerald Restricted Area. 

About Rox Limited

Rox Limited is incorporated
in the Cayman Islands and is a portfolio company of Pallinghurst Resources
(see www.pallinghurst.com for more information). Rox was established by
Pallinghurst Resources as a special purpose vehicle for the pursuit of
consolidation and vertical integration of the coloured gemstone sector. 

About Fabergé Limited

Fabergé Limited, another
portfolio company of Pallinghurst Resources, acquired the worldwide rights to
the Fabergé brand name from Unilever in January 2007. 

First established in 1842 in Russia (but originally of French descent), Fabergé is one of
the most revered luxury names in history. Fabergé’s catalogues of luxury items
and objets d’art are intimately associated with the use of colour and of
coloured gemstones. A Fabergé egg belonging to the Rothschild Family was sold
at auction in November 2007 by Christies for a record breaking GBP 8.9 million.

In a reversal of the Fabergé
family’s loss of the rights to the Fabergé name in a legal settlement in 1951,
the historic re-unification of the Fabergé brand with the direct descendents of
Peter Carl Fabergé was announced in October 2007. Mark Dunhill, the former
president of Alfred Dunhill Ltd, was appointed as CEO of the unified Fabergé in
November 2007 (see www.faberge.com for more information).

 
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