Relinquishment report on blocks dropped at the conclusion of year three of tenure for EL 22740, Hodgson Diamonds Project, period ending 8 July 2005

Abstract

EL 22740 (Hodgson Diamonds Project) is located approximately 215 km SE of Katherine, to the east of the Larrimah and Maryfield Station homesteads. The EL was granted on 9 July 2002 and is part of the Project referred to as the Hodgson Diamonds Project. EL's 22340, 22343, 22742 and 22743, which were previously included in the Hodgson Diamonds Project were surrendered during 2005 while EL 22741 remains as part of the Project. The tenement forms 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 farmin 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 to detect kimberlite pipes. The tenement is considered prospective for commercial sources of diamonds. Historic sampling identified kimberlitic indicator mineral occurrences, including microdiamonds within the tenement, but the source of these remains enigmatic. This Report is in respect of the two hundred and fifty (250) blocks relinquished from EL 22740 at the conclusion of Year 3. No work was carried out within the relinquished portion of EL 22740 as the Falcon(tm) survey flown in 2003 did not extend to the relinquished blocks.