Combined annual report on exploration activities for EL 22740 and EL 22741 Hodgson Diamonds Project NT, year three of tenure, 9 July 2004 to 8 July 2005

Abstract

EL's 22740 and 22741 (Hodgson Diamonds Project) are located approximately 215 km SE of Katherine, to the east of the Larrimah and Maryfield Station homesteads. The EL's were granted on 9 July 2002 and are referred to as the Hodgson Diamonds Project. EL's 22340, 22343, 22742 & 22743, which were previously included in the Hodgson Diamonds Project were surrendered during the period and are subject to individual Final Reports due in October. The tenements form part of a farm-in agreement between Rio Tinto and Diamond Mines Australia Pty Ltd ('DMA') covering numerous Rio Tinto tenements and applications in the Northern Territory. Gravity Diamonds Ltd (formerly Gravity Capital Ltd) is managing the farm-in arrangement for Diamond Mines Australia and now has 100% ownership of DMA. Under the terms of the farm-in agreement, DMA is conducting predominantly diamond exploration by utilising the Falcon(tm) airborne gravity gradiometer system. The Falcon(tm) system has been shown to be effective in detecting kimberlite pipes. The tenements are considered prospective for commercial sources of diamonds. Historic sampling identified kimberlitic indicator mineral occurrences, including microdiamonds within the tenements, but the source of these remains enigmatic. During the past year of tenure, 20 Falcon(tm) anomalies were field inspected and sampled where appropriate. A total of 3 loams, 5 gravel samples and 57 soil samples were collected, with a total of 23 chromites recovered from the gravel samples. Additionally, 19 RC holes & 1 RAB hole for a total of 961 metres were drilled to test 10 of these Falcon(tm) anomalies. Unfortunately, no kimberlite pipes were discovered. Further details regarding the exploration completed within EL's 22740 and 22741 in Year 3 of tenure are presented in this annual report.