Diagem Inc.
TSX CROISSANCE : DGM

Diagem Inc.

August 11, 2006 13:33 ET

Diagem: Final Results of the Eluvial Gravel Bulk Samples at Collier-04 Enhance the Potential for the Economic Recovery of Diamonds Over the 17 Hectare Kimberlite Pipe

MONTREAL, QUEBEC--(CCNMatthews - Aug. 11, 2006) - Diagem Inc. ("Diagem" or "the Company") (TSX VENTURE:DGM) is pleased to report that processing of the eluvial bulk samples has returned an average grade of 0.62 carats per cubic metre enhancing the potential for the economic recovery of the eluvial diamonds over the 17 hectare Collier-04 kimberlite pipe. When using an arbitrary cut-off grade of 0.25 carat per cubic metre, the average grade soars to 0.83 carat per cubic metre and defines an area of 14.6 hectares with higher mining potential. The area is split into two separate zones overlying the northeast and southwest portions of the Collier-04 kimberlite pipe (see figure 1). Nine of the eluvial bulk samples have grades above 1.0 carat per cubic metre up to 2.69 carats per cubic metre while only three samples have grades less than 0.10 carat per cubic metre. On average, the eluvial gravels are 0.6 metres thick and occur below 0.9 metres of soil cover.

Processing of the eluvial gravels have produced 6,051 diamonds weighing 917 carats from 1,487 cubic metres of gravels obtained out of 47 bulk test pits. The average size (by weight) of the eluvial diamonds recovered for the fractions above the +1.7mm is 0.150 carat. The largest stone recovered was a boart of 17.08 carats. Close to 80% of the stones fall in the fraction 2.36 -- 1.7 mm but their weight represents only 45% of the total weight of the stones coarser than 1.7 mm. A valuation of the current eluvial diamond collection at Collier-04 is planned in the near future.

All samples were processed through Diagem's new Sortex facility. The facility is now processing gravel concentrates during the day time only. A night shift will be added to increase productivity.



Table 1: Average Grade of the Bulk Samples at Collier-04

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Diamonds greater or equals 1.7 mm
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In situ Grade of
Number and Type Volume Diamonds Carat Grade Lower Cut-
of Bulk Samples (m3) Recovered Weight (ct/m3) off (ct/m3)
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47 Eluvial
Gravel 1,487 6,051 917 0.62 none
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0.83 0.25
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1 Soil 246 554 71 0.29 none
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2 Soil 239 125 25 Pending
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8 Kimberlite 1,111 3,661 406 0.37 None
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20 Kimberlite 2,261 Results Pending
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In addition, the soil cover at Collier-04 has been sampled at three locations. Processing of one of three samples has revealed a grade of 0.29 carat per cubic metre. Preliminary hand sorting of approximately half of the concentrate of the other two bulk samples produced 125 diamonds weighing 25 carats from 239 cubic metres of soil. Final Sortex processing is expected to significantly improve diamond recovery. In light of these encouraging results, systematic bulk sampling of the soil cover overlying the eluvial gravels is planned to determine the feasibility of including such material with the potential eluvial ore material. Reduction of the waste to ore ratio will enhance the economic viability of the eluvial deposit.

Kimberlite Bulk Samples: the processing of the initial eight kimberlite bulk samples from 1,111 cubic metres of oxidized (saprolitic) kimberlite has recovered 3,361 diamonds weighing 406 carats. These initial bulk samples yielded an average grade of 0.37 carat per cubic metre. Bulk sample TR-06-08, a 126 cubic metre sample collected in the southeast portion of the pipe, returned a grade of 1.10 carats per cubic metre in the vicinity of eluvial samples EBT-49 and EBT-12 that returned grades of 1.22 carats per cubic metre and 0.68 carat per cubic metre, respectively. Results of 20 additional kimberlite bulk samples totaling 2,261 cubic metres are pending.

The plan is to continue the evaluation of the weathered portion of the kimberlite to a depth of approximately eight metres and to process the material through the new 25 cubic metre per hour pilot plant that is currently nearing completion. With the increased capacity of the new plant, the tailings dam at Collier-04 is being relocated and expanded. The relocation plan has been approved by SEMA, the Mato Grosso state environmental agency.

Kimberlite Potential outside Collier-04: The Upper Chicoria Creek area hosts a cluster of at least four kimberlite bodies at the boundary of Properties 213 and 214 which have never been tested and are believed to be the source of the highest concentration of coarse stones recovered by artisanal miners in the area. Diagem plans to move the 10 cubic metre per hour moveable plant at Collier-04 to this area following completion of the construction of the 25 cubic metre per hour concentration pilot plant.

Alluvial Potential: A program of approximately 686 shallow holes, drilled within and peripheral to the collier-04 kimberlite pipe has delineated significant potential for colluvial and alluvial diamond deposits. The anomalous gravels, including the eluvial gravels described above, cover a one hundred (100) hectare area and extend for a distance of one kilometre downstream from the Collier-04 kimberlite pipe on the south side of the Duas Barras River. The holes were used to investigate the extent of the gravels and their content in diamond indicator minerals. At Collier-04, eluvial gravels with similar concentrations of picro ilmenites show good correlation with the diamond grades of the gravels, as illustrated on figure 2. Pit sampling must now be conducted on the colluvial and alluvial deposits to define an alluvial resource and to determine the feasibility of a mining plan. The north side of the river remains to be investigated.

The Collier-04 project is located in the Juina diamond district of Mato Grosso, Brazil, famous for its historical alluvial diamond production. Diagem controls over 130,000 hectares of mineral concessions in the area. The Collier-04 project is part of Mining Concession 214, one of two properties, including Property 213, under option from (RTZ). Diagem owns a 100% interest in these properties subject to certain royalties payable to Rio Tinto Desenvolvimentos Minerais LTDA (RTZ). However, on completion of exploration and development expenditures by Diagem totalling $US 6.0 million,. RTZ retains an option to a 55% buy back on the properties by reimbursing Diagem 1.75 times its exploration and development expenditures.

The technical content of this news release has been approved by Dr. Mousseau Tremblay, of Williamstown, Ontario, a Qualified Person and Chairman of the Board of Directors of Diagem Inc.

Maps are available on the CCNMatthews' web site at :

http://www.ccnmatthews.com/docs/aab.pdf


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