River Diamonds plc (“River Diamonds” or “the Company”) 25 October 2006 Proposed Acquisition of the Panguma Diamond Project River Diamonds today announces that it has agreed terms with Olympus Development Company Limited ("Olympus"), a subsidiary of African Precious Metals Limited (“APM”), to acquire the Panguma Diamond Project in Sierra Leone (“Panguma”). River Diamonds has been exploring Panguma since January 2006 under the terms of a Joint Venture agreement which was signed with Olympus in June 2005. To date River Diamonds has been sampling, mapping and drilling the kimberlite dykes at Panguma and has obtained encouraging results. The Company has defined the lateral extent of the Talama 1 Kimberlite Dyke, proving up one kilometre and inferring a further three kilometers of strike length, and in addition to this, it has identified two further kimberlite intrusions one of which was sampled and 1.5 carats was subsequently recovered from a 2.6 tonne sample. In total the mini bulk sampling has recovered 6.71 carats from 12.5 tonnes to date. River Diamonds is now in the final stages of a drilling programme at the Pandobu Intrusion in Panguma, which will allow a bulk sample to be taken at the locality and will enable the Company to move the project forward to a formal resource definition. Under the terms of the acquisition agreement (“the Agreement”), River Diamonds will acquire the entire issued share capital of Panguma Diamond Company Limited (“Panguma Diamonds”). Under the terms of the Acquisition, an Exploration Licence over a 54 square km area at Panguma is to be transferred to Panguma Diamonds by Olympus (the “Exploration Licence”). The consideration for the Acquisition is to be satisfied by the issue of 93,985,000 ordinary shares of 0.1 pence each (“the Consideration Shares”) in River Diamonds (roughly 20 per cent. of the enlarged share capital of River Diamonds). Based on the closing mid-market share price of River Diamonds as at 23 October 2006 (the most recent practicable date to the release of this announcement) of 0.75 pence, the consideration for the Acquisition is valued at approximately £0.7 million. The Consideration Shares will be subject to a 12 month lock-in arrangement under the terms of which, other than in certain limited circumstances, Olympus will be precluded from disposing of its interest (or any part thereof) in the Consideration Shares for a period of 12 months from the date of completion of the Acquisition. However, should River Diamonds dispose of more than 50 per cent of its interest in Panguma Diamonds, Olympus will be free to dispose of its interest in the Consideration Shares. The Consideration Shares will be issued on transfer of the entire issued share capital of Panguma Diamonds to River Diamonds. This is expected to occur by the end of November 2006, completion of the Acquisition now being conditional solely on the transfer of the Exploration License into Panguma Diamonds by Olympus. Such completion will be announced in due course. In addition, on completion of the Acquisition, Martin Grahame Hills, aged 50, Projects Director of APM will be joining the River Diamonds board as a Non Executive Director. His wealth of technical and operational experience in Africa will further strengthen the Company’s board and assist us in our developments in Sierra Leone. Martin is a director of African Precious Minerals Ltd, and Panguma Diamonds Co Ltd. There are no other requirements of AIM Rule Schedule 2(g) that fall to be disclosed. Colin Orr-Ewing, Executive Chairman of River Diamonds said, “We are very pleased to announce the proposed acquisition of this property. The adjacent Tongo dyke fields contain some of the richest kimberlite diamond dykes deposits in the world and this, coupled with the encouraging results from our exploration programme provides a great opportunity for River Diamonds to own outright a highly prospective diamond deposit.” Background on Panguma The Panguma area is about 230 kilometres from Freetown and covers approximately 54 square kilometres in eastern Sierra Leone. It is also approximately 50 kilometres from Koidu, where the first hard rock diamond mine in Sierra Leone is being developed. The Panguma licence adjoins the Tongo diamond field, which hosts kimberlitic dykes that are, in terms of diamond grade and quality, among the highest in the world. A number of diamondiferous dykes, extending from Tongo, were discovered at Panguma in the 1960's and one six tonne sample was taken; this gave a grade of 38 carats per hundred tons ("cpht") although the size of the sample may have given a misleading result as other samples taken on three of the dyke exposures on the adjoining Tongo lease gave grades of 150cpht, 268cpht and 100cpht. Little commercial exploration work has been carried out at Panguma, with no sampling or testing undertaken on the property in the last 40 years. Qualified Person Kiran Morzaria B.Eng (ACSM), (FGS), MBA, has reviewed the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School. Kiran is the Finance Director of River Diamonds. Enquiries Colin Orr-Ewing, Executive Chairman Cathy Malins / Annabel Leather Peter Jackson/ Philip Haydn- Slater River Diamonds plc Parkgreen Communications W.H. Ireland Limited Tel: 020 7352 4117 Tel: 020 7493 3713 Tel: 020 7220 1666 Background information on River Diamonds plc River Diamonds is a UK-based international diamond exploration and mining company with current operations in Sierra Leone and Brazil. Between 1730 and 1870, Brazil was the world leader in diamond production. Total production is estimated to have been in excess of 15 million carats from recorded history to the present day. Brazil currently ranks tenth in the world with an annual diamond production of approximately 700,000 carats. Sierra Leone is also renowned for the high quality of its diamonds that have been recovered, as well the large stones that have been discovered in the alluvial deposits – the largest to date being the 969.8 carat “Star of Sierra Leone”. River Diamonds’ strategy is to build a portfolio comprising early and advanced large scale exploration projects that have the potential to yield significant reserves of gem quality diamonds. In the short to medium term, the Company is focused on developing the current portfolio of diamond projects it holds in Brazil and Sierra Leone. It will also seek to identify and acquire additional areas where they have the potential to add shareholder value and to meet the Company's key performance targets.
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