Annual report on exploration activities for EL 9669 'Cox River', year nine of tenure, 1 November 2004 to 31 October 2005

Abstract

EL 9669 'Cox River' currently forms part of a farmin agreement between Rio Tinto Exploration Pty Ltd 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. 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. EL 9669 is considered prospective for commercial sources of diamonds. Historic sampling has identified kimberlitic indicator mineral occurrences, including diamonds within the tenement. During 2003 Falcon(tm) data was acquired over all of EL 9669. The flying program also included coverage of other proximal exploration licenses controlled by Rio Tinto (and included in the Rio Tinto - Gravity Diamonds - DMA joint venture). During the previous reporting period, detailed interpretation, anomaly ranking and exploration targeting from the Falcon(tm) data by Gravity Diamonds was completed, with several target areas identified for follow-up work. Statutory requirements for field access and approvals for work programs were finalised allowing testing of these targets to commence during year 9 of tenure. During the past year of tenure, 9 Falcon(tm) anomalies were field inspected within EL9669 and sampled where appropriate. A total of 7 loam samples were collected during a broader exploration programme in the Hodgson Project area. Samples have been sent to Diatech Laboratories in Perth for recovery of kimberlite indicator minerals. Results are pending at the time of writing and will be detailed in the next annual report.