DGM

Diagem Inc. (TSX VENTURE:DGM)

Diagem's principal objectives are to explore, develop and eventually bring to
production (alone or with a partner) a primary source diamond mine. Of late
we've received a number of comments and queries about our operations in Juina,
Brazil. This communique is intended to respond to the broadest audience in the
most transparent manner.


Primary source diamond mining versus alluvial recovery: what is the difference?

Exploration of kimberlite and alluvial diamonds require very different mining
methods. Primary source diamonds are generally mined by open pit mining
vertically at depths that can reach several hundred metres down into the
kimberlite pipes, as opposed to dredging or excavating diamonds from secondary
or alluvial deposits at shallow depths of a few metres. Alluvial mining recovers
diamonds from current and/or historic river beds which can stretch over several
kilometres.


Alluvial operations have been outlined by Diagem on its properties and may be
developed as a prerequisite to preserving mining rights and to generate cash
flow, if proven feasible.  Diagem does not currently have an alluvial mining
operation.


Why primary if alluvial mining finds stones?

Diagem has made tremendous progress in the area of kimberlite exploration,
particularly in the last year, after decades of exploration by De Beers (10 to
15 years), Rio Tinto (10 to 15 years) and Diagem (10 years). The Company now has
scientific evidence that kimberlite bodies on its properties have fed the
regional drainage systems that garimpeiro (small miners) have been mining for
several decades.


Although the Juina area is known for small diamonds of relatively lower value
occurrences of large diamonds, and sometimes very valuable stones - the 9.32
carat pink stone purchased by Diagem, March 2007, for example - is also a
characteristic of the Juina area.  The primary source kimberlite pipes should
inevitably contain such large and valuable diamonds. The discovery of an
economic primary diamond deposit (Diagem has not proven this yet) is a costly
proposal for any company, but the expected rewards would be of great
significance not only for Diagem but also for the local economy and even Brazil
as a whole.


What is the environmental effect of mining?

Open pit kimberlite mining is confined to the surface area of the kimberlite and
then spirals vertically into the ground following the carrot-shaped body of the
kimberlite pipe.  Such pipes extend several kilometres below the earth's surface
and can be mined down to several hundreds of metres.


By comparison, alluvial mining operations cause large surface disturbances to
access shallow ore, which is usually not more than three metres thick and
follows the regional drainage system over several kilometres, whereas kimberlite
bodies have restricted surface areas of 0.5 to 30 hectares (one hectare is 100
metres by 100 metres).


Diagem is a public company committed to following permitting and environmental
guidelines while exploring and developing its projects, sometimes to the
detriment of the advancement of the projects. However, due to the relaxed
regulatory regime for artisanal mining and the limited enforcement on the part
of regulatory bodies which often ill-equipped to enforce mining and
environmental regulations, artisanal miners rarely restore the land which they
mine and occasionally extend their activities outside their legal claim areas.
Diagem has identified instances of illegal encroachment on its claim areas and
is taking direct legal action against the offending parties.


What is the expected potential of the Collier-04 project?

Diagem has not yet made public any figures relating to the resources or the
feasibility of its Collier-04 project.  Studies are progressing based on results
of the large-scale bulk sampling in 2006 which is continuing at an elevated pace
in 2007. A qualified report in accordance with National Instrument 43-101 is
being prepared.


Collier-04 is to be developed in stages.  In the initial stages, the pilot plant
is designed to recover the top weathered portion of the kimberlitic material,
down to a maximum depth of 20 metres. In these first stages of the
operation/evaluation, the economic parameters may be comparable to those of
alluvial operations, while providing necessary data (geological, ore type and
quality, operating cost, etc) to be used in assessing the feasibility of the
project. To reduce operating costs during this phase, Diagem has delineated
three zones, each exposed at surface where no stripping is required and where
higher grades are indicated by sampling.


The initial operation is restricted to a modest near-surface deposit. However,
should the current project prove feasible, deepening of the pit(s) and the
addition of an attrition mill to the operation flowchart would allow access to
more than 10 million tonnes of kimberlite material (up to a maximum depth of 95
metres) based on the historical resource estimates made by Rio Tinto on the
strength of more than 100 drill holes (see also Diagem's August 2005 43-101
report and the Cautionary Statement below).  Increasing the size of the
operation to benefit from the economy of scale will be investigated.


How are the diamonds recovered from Collier-04?

Diagem has all the necessary permits in Brazil to extract, process and market
its diamonds from Collier-04. It could thus use any cash flow resulting from the
sale of the diamonds to reduce the evaluation and feasibility study costs. 
Accordingly, Diagem recently announced it is ramping up diamond recovery by
adding a second shift at the concentration plant, while upgrading the electronic
diamond sorting facility in Juina, both of which should take effect in September
2007.


The 22 cubic metre per hour pilot concentration plant is expected to recover
over 90% of the diamonds processed through it.  Quality control methods such as
the use of tracers are being implemented.  This should not be compared with
garimpeiro jigs that have considerably lower rates of recoveries.


Are there alternatives for increasing revenue from Collier-04?

Previous testing has indicated that recovering diamonds between the sizes of 1.0
to 1.7 millimetres (currently only diamonds larger than 1.7 millimetres are
recovered) could potentially more than double the carats of diamonds recovered
from Collier-04.  This would require additional components to the diamond
recovery flowchart in order to recover these smaller diamonds. Diagem will
investigate whether the economic benefit would outweigh the incremental costs.
In addition, as some diamonds are non-fluorescent and not recovered by the
electronic sorting facility, Diagem will be adding a grease table to increase
recoveries even further.


What is the cost of operation at Collier-04?

The cost of Collier-04 operation is being studied and documented and will be
disclosed in due time.  Some comments and inquiries compare Juina operating
costs to Canadian operations where costs are much higher by a factor of 15 to 20
times. This is due to the difficulty of accessing remote areas, the thick
overlying glacial deposits found in such environments or the necessity to access
the deposits from underground.  The extraction costs in Juina are expected to be
much lower due to the ease of access to exposed or outcropping deposits, reduced
labor cost, and milder climates. Thus lower value ore could be mined at a
profit.


What is the significance of the ore value at Collier-04?

As noted earlier, the Juina diamonds generally carry a lower dollar value per
carat. In a 2002 article, Dr. Felix Kaminsky documented that the Juina diamonds
are unique and super-deep in origin that have been somewhat downgraded by
extreme internal stress. He also pointed out that the same phenomenon is also
responsible for occasionally enhancing the value of the diamonds.  The coarser
and occasionally very valuable pink diamonds are possibly a separate and
distinct diamond population.  Although larger stones are usually eliminated in
arriving at a feasibility decision, the frequency of large stones recovered in
the Juina Diamond Province (say between 5 and 20 carats) warrant giving them a
strong consideration in a "to mine or not to mine" decision. The Diavik diamond
mine in the North West Territories can serve as a good example.  At the PDAC
2006 annual convention, management of the Aber Diamond Corporation indicated
that more than 70% of the revenue at Diavik comes from less than 10% of the
diamond population.  Through its development work and the diamond recovery
process in place at Collier-04 for commercial size stones (those larger than
1.7mm), Diagem is starting to have sufficient statistical data on the frequency
of occurrence of the larger stones (say greater than 1 carat) to predict with
more confidence their occurrences. Diagem has nearly accumulated enough diamonds
(3 to 5 thousand carats) for a price evaluation in order to determine with more
certainty the ore value of Collier-04.


What differentiates Diagem's mineral properties?

Although Collier-04 is the most advanced development stage project of the
Company, the two recently discovered kimbertlite clusters are Diagem's highest
priority targets as they are believed to be the main sources of the Juina
Province's historical alluvial diamond production. The 9.32 carat pink stone
purchased by Diagem was recovered downstream close to the Chapadao cluster.
Occurrences of such diamonds in the kimberlites would have a significant impact
on the ore value and economic value of those kimberlites.


About Diagem

Diagem Inc. is a Canadian exploration mining company focused on diamondiferous
resources in the Juina Diamond Province of Mato Grosso, Brazil, where it
controls a large portfolio of mineral properties. The Company has one advanced
development stage project and recently discovered two clusters of kimberlite
pipes believed to be the main sources of the Juina Province historical alluvial
diamond production.


This press release has been reviewed by Mousseau Tremblay, Ph.D, P. Eng.,
Diagem's Chairman and a qualified person under National Instrument 43-101. 


Cautionary Statement: A qualified person has not done sufficient work to
classify the historical estimate as current mineral resources, the issuer is not
treating the historical estimate as current mineral resources and the historical
estimate should not be relied upon.


Forward-looking statements: Except for statements of historical fact, all
statements in this news release, without limitation, regarding new projects,
acquisitions, future plans and objectives are forward-looking statements which
involve risks and uncertainties. There can be no assurance that such statements
will prove to be accurate; actual results and future events could differ
materially from those anticipated in such statements.


THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR
ACCURACY OF THIS PRESS RELEASE.

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