Acquisition

RNS Number:1206K
Gemfields Resources PLC
18 December 2007


                                                                18 December 2007


                            Gemfields Resources plc

                                 ("Gemfields")


                              Acquisition of Kagem


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, Faberge 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 Faberge 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 Faberge 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%.


Faberge


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 Faberge 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, Faberge 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 [e-mail]

[phone]


Conduit PR

Leesa Peters/Ed Portman [phone]

[phone]


Canaccord Adams Limited

Robin Birchall [phone]


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 Faberge Limited


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


First established in 1842 in Russia (but originally of French descent), Faberge
is one of the most revered luxury names in history. Faberge's catalogues of
luxury items and objets d'art are intimately associated with the use of colour
and of coloured gemstones. A Faberge 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 Faberge family's loss of the rights to the Faberge name in
a legal settlement in 1951, the historic re-unification of the Faberge brand
with the direct descendents of Peter Carl Faberge was announced in October 2007.
Mark Dunhill, the former president of Alfred Dunhill Ltd, was appointed as CEO
of the unified Faberge in November 2007 (see www.faberge.com for more
information).


End.




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