Arnold River 2 - Hodgson Diamonds project , NT -Relinquishment report on blocks dropped at the conclusion of year four of tenure period ending 24 July 2004

Abstract

EL 8821 is located approximately 150km northeast of Daly Waters in the Northern Territory, within the Hodgson Downs 1:250,000 map sheet. The EL was granted to Ashton Mining on 24th July 2000. Ashton Mining Ltd was taken over by Rio Tinto Limited in the 4th quarter of 2000. EL 8821 forms part of a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA') covering numerous Rio Tinto tenements and applications in the Northern Territory. Under this agreement, DMA will conduct predominantly diamond exploration by utilising the Falcon(tm) airborne gravity gradiometer system. The Falcon(tm) system to detect kimberlite pipes. Gravity Capital Ltd is managing the farmin arrangement for Diamond Mines Australia and owns 40% of DMA. EL 8821 is considered prospective for commercial sources of diamonds. Historic gravel sampling shows that there are unresolved chromite and diamond occurrences in an area of Bukalara Sandstone on a nearby licence. During the past year of tenure, a review of historic exploration data was conducted by Gravity. The surface sampling had identified macrodiamonds, microdiamonds and other indicator mineral occurrences and clusters. On this basis, a Falcon(tm) survey was planned to cover prospective areas within the Hodgson Project Area. The survey was conducted in August - September 2003 and results were received by Gravity Capital in November 2003. This survey was carried out over a licence to the east of EL 8821 and there are no data relevant to the relinquished portion.