Final report on exploration activities on EL 22346 'Arnold River South', 24 February 2005 to 22 February 2006

Abstract

EL 22346 formed part of a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA') covering numerous Rio Tintocontrolled tenements and applications in the Northern Territory. Under this agreement, DMA is conducting predominantly diamond exploration over the tenements utilising the newlydeveloped Falcon(tm) airborne gravity gradiometer system, which has been shown to be very effective in detecting kimberlite pipes. Gravity Diamonds Ltd is managing the farmin arrangement for Diamond Mines Australia and owns 100% of DMA. During the first year of tenure, Gravity assessed open file data including regional geology, geophysics and historic sampling data. These data were evaluated in the context of Gravity's results on the neighbouring EL 7970, where it had flown a Falcon(tm) survey and conducted ground sampling over target areas. The conclusion from this work was that insufficient encouragement was evident to warrant significant exploration effort. On this basis, Gravity handed back the licence to Rio Tinto in February 2006 and the licence was subsequently surrendered on 22 February 2006.