Shear Diamonds Limited: Processing and Operations Update

TORONTO, 06/08/12 -- Shear Diamonds Ltd. (TSX VENTURE: SRM) ("Shear") is providing a processing and operations update with respect to the high grade concentrate stockpiles at its Jericho diamond mine:

- On May 29, 2012 Shear delivered its first parcel of diamonds to Tache Company N.V. ("Tache"), Shear's diamond marketing partner, for sale into end markets. This first parcel amounted to 11,317.98 carats.

- Pending ultimate determination of the prices to be paid by Tache for the parcel, Tache has made an initial payment of US$500,000 to Shear. Tache will reconcile a final payment to Shear once prices per carat can be ascertained based on the formula provided in the marketing agreement. While it is anticipated that the ultimate amount to be paid by Tache will exceed the initial payment made to Shear by Tache, recent significant reductions in world rough diamond market prices have resulted in an expected ultimate price for the parcel being significantly lower than world market prices existing until very recently.

- Although, Shear has had considerable success in starting up and steadily improving processing, it had to temporarily suspend processing for two full days and reduce processing for an additional two days to address clean-up requirements for wind dispersed fine processed kimberlite which came to light as a result of spring thawing. Processing has now fully resumed.

- On the recommendation of operations personnel, the processing rate has been slowed to more fully maximize the processing yield.

Shear's processing activities to date are meeting two of Shear's three stated goals, in that (i) Shear has demonstrated that a significant number of diamonds went unrecovered by Jericho's prior operators and can be recovered and (ii) Shear has acquired (and continues to acquire) key processing knowledge which can be applied to future production at Jericho. However, the recent drop in world diamond market prices, which are significantly lower than those used for Shear's operating plans and budgets, will not generate sufficient cash flow to support operations.

Efforts continue to achieve around the clock processing to generate significantly greater carat recovery, and it is anticipated that 24 hour processing will commence shortly. Lower current diamond prices need to be offset with greater production. Shear must obtain financing in the very near term to fund continuing operations and to increase production by going to around the clock processing.


About Shear Diamonds Ltd.

Shear is a Canadian-based company focused on diamond exploration and development in Canada's North, where it explores established diamond districts and has discovered new ones. Shear currently has a portfolio of eight diamond projects, including three advanced projects with development potential. Shear holds a 100% interest in its recently acquired Jericho Diamond Mine and surrounding exploration assets, located in the Kitikmeot region of Nunavut.


On behalf of the Board of SHEAR DIAMONDS LTD.

Julie Lassonde
President & CEO



This news release may contain forward looking statements, being statements which are not historical facts, including, without limitation, statements regarding potential mineralization, exploration results, resource or reserve estimates, anticipated production or results, sales, revenues, costs, "best-efforts" financings or discussions of future plans and objectives. There can be no assurance that such statements will prove accurate. Such statements are necessarily based upon a number of estimates and assumptions that are subject to numerous risks and uncertainties that could cause actual results and future events to differ materially from those anticipated or projected. Important factors that could cause actual results to differ materially from Shear's expectations are in its documents filed from time to time with the TSX or the TSX Venture Exchange and provincial securities regulators, most of which are available at www.sedar.com. Shear disclaims any intention or obligation to revise or update such statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.



Contacts:

Shear Diamonds Ltd.
416-479-8728 or 1-866-298-9695
www.sheardiamonds.com