Relinquishment report on blocks dropped at the conclusion of year two of tenure period ending 23 July 2004

Abstract

EL 22754 Coanjula Creek originally comprised part of Rio Tinto Exploration's McArthur Diamonds Project located on the margin of the McArthur Basin, Northern Territory, Australia. The EL was granted on 23 July 2002 and now forms part of a farmin agreement between Ashton Exploration Australia Pty Limited ('Ashton Exploration') 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 utilising the Falcon airborne gravity gradiometer system to detect kimberlite pipes. Gravity Capital Ltd is managing the farmin arrangement for Diamond Mines Australia and owns 40% of DMA. During the past year of tenure, a review of historic exploration data, including considerable surface sampling focussed on diamonds, was conducted by Gravity and numerous anomalous results were noted in and around the EL. Owing to the timing of the exploration agreement between DMA and Rio Tinto (late July 2003) field exploration under the agreement did not extend to this EL during the 2003 field season. A large Falcon(tm) survey was flown in the Lancewood area to the west of the EL as part of the Rio Tinto - DMA agreement in late 2003. No Falcon impinged on the relinquished areas and no on-ground work was completed on this licence.