Annual report on exploration activities for year two of tenure EL 10296 'Fraynes 1', EL 10297 'Fraynes 2', EL 10298 'Fraynes 3' and EL 10209 'Fraynes 4', period ending 30 January 2005

Abstract

The four contiguous EL's 10209,10296,10297 and 10298 form part of a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA') covering numerous Rio Tinto-controlled tenements and applications in the Northern Territory. Under this agreement, DMA will conduct predominantly diamond exploration over the tenements and utilising the Falcon(tm) airborne gravity gradiometer to detect kimberlite pipes. Gravity Diamonds Ltd is managing the farmin arrangement for Diamond Mines Australia and owns 40% of DMA. During the first year of tenure, North Mining, the then holder of the licences, conducted a thorough a review of historic exploration data, including considerable surface sampling focussed on diamonds, and recommended divestment of the tenements. The timing of the divestment arrangement with DMA during year two of tenure precluded the instigation of field exploration activities on the four EL's during 2003. The planned program for EL's 10209, 10296, 10297 and 10298 during 2004 was contingent on Gravity Diamonds Ltd achieving access clearance for follow up of Falcon survey targets in the nearby Tee Dee Hill area which, like the above four EL's, forms part of the original Rio Tinto 'Victoria Project Area'. Gravity was not able to get the required access clearances and this resulted in the postponement of planned exploration on EL's 10209, 10296, 10297 and 10298 during the 2004 field season. No on-ground work was completed in the tenement during year 3. This work is now scheduled to commence in 2005 Expenditure on the group of tenements during the reporting period totalled $10,765.