Annual report on exploration activities for EL 5954 'Benda Bluff', year seven of tenure, 29 March 2005 to 28 March 2006

Abstract

EL 5954 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, which is a wholly owned subsidiary of Gravity. 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 5954 is considered prospective for commercial sources of diamonds. Previous sampling has identified kimberlitic indicator mineral occurrences, including diamonds within the tenement. During 2003 Falcon(tm) data was acquired over the majority of EL 5954. The flying program also included coverage of an adjacent exploration license controlled by Rio Tinto (and included in the Rio Tinto - Gravity Diamonds - DMA joint venture). During 2004, detailed interpretation, anomaly ranking and exploration targeting from the Falcon(tm) data by Gravity Diamonds was completed. Delays relating to the receipt by DMA of statutory approvals for access and work programs deferred the testing of these targets until the 2005 field season. During the past year of tenure, 20 Falcon anomalies from the Benda Falcon(tm) survey were directly assessed within EL5954 and sampled where appropriate. A total of 33 heavy mineral samples, comprising 26 gravel samples and 7 loam samples were collected. Additionally, a total of 129 geochemical samples were collected, the majority comprising standard -200 micron soil samples. However, -200 micron samples were also collected at the majority of the gravel sample sites as a test for base metal anomalism. Results from sampling programs implemented during 2005 have been received, with a number of indicator mineral samples returning chromites and two samples also reporting pyrope garnets. Preliminary interpretation of the probe data indicates that some of the recovered grains are possibly of kimberlitic origin. The significance of the positive results obtained is still being assessed, but follow-up work is anticipated during the 2006 field season. No elemental responses were noted from the geochemistry samples to indicate that the Benda project area is prospective for base metals.