SRM Shear Diamonds Ltd.

Shear Diamonds Ltd. (TSX VENTURE:SRM)("Shear") announces that it has suspended
production of its high grade stockpiles at the 100% owned Jericho diamond mine
as a result of continuing weak world diamond prices. During this interim phase
and until prices improve, Shear will look at exploration assets proximal to the
Jericho site such as its Carat and Muskox properties, coupled with further
definition of its in situ diamond resource at Jericho that will include diamond
results from Shear's in pit drilling. Having successfully recovered a
significant number of carats from the high grade concentrate stockpiles and
having successfully re-established continuing around-the-clock production at
Jericho over the last months, Shear has demonstrated that a significant number
of diamonds went unrecovered during Jericho's previous operations.


World diamond market prices have dropped sharply, well below Shear's break even
prices. As previously disclosed, this drop has posed significant challenges to
Shear's finances. In June, Shear and its diamond marketing partner and lender,
Tache Company N.V. ("Tache"), had determined to continue funding production from
the high grade stockpiles. Shear and Tache jointly have deferred end user sales
of the parcels that had been shipped to Tache in the hope that diamond prices
would recover relatively quickly.


Shear has accomplished two significant milestones for the year - renewal of our
Type A Water Licence plus around the clock production and diamond recovery from
stockpiles. Given the continuing low prices, the decision has therefore been to
suspend production and to seek financing or alternative transactions to move the
project and exploration forward, in order to be in the position to proceed to
production when diamond markets recover.


"While we are gratified that we achieved our 2012 goals, we are subject to many
factors that are outside our control, such as current low diamond prices. Prices
have dropped significantly just as we were hitting our stride," said President
and CEO Julie Lassonde. "Shear had assembled an outstanding team that has
enabled us to overcome many challenges and in achieving our goals, including
recently repairing a damaged thickener core well ahead of schedule and on
budget," added Ms. Lassonde. "We will now turn to obtaining further financing
for exploration."


Since commencing production in April, Shear has delivered three parcels to
Tache, with an aggregate of 47, 516.32 carats. A further shipment to Tache of
the diamonds produced to date will be made in mid- September. In addition to its
$2 million term loan, Shear has to date drawn US$1.6 million against its US$3
million revolving line of credit with Tache. Shear and Tache have jointly agreed
that this suspension is in Shear's long term interest, and continue to
collaboratively consider project value maximization.


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
2010 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

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