Annual report on exploration activities for EL 8915 'Tee Dee Hill', year six of tenure, 7 June 2005 to 6 June 2006

Abstract

EL 8915 forms part of a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA') covering numerous Rio Tinto-controlled tenements and applications in the Northern Territory. Under this agreement, DMA is conducting predominantly diamond exploration over the tenements utilising the Falcon(tm) airborne gravity gradiometer system to detect kimberlite pipes. Gravity Diamonds Ltd ('Gravity') is managing the farmin arrangement for Diamond Mines Australia and owns 100% of DMA. During the initial stages of the farmin arrangement, a review of historic exploration data, including considerable surface sampling focussed on diamonds, was conducted by Gravity with a number of anomalous results noted. On this basis, a Falcon(tm) survey was planned to cover the central part of EL 8915. Flying was conducted in November-December 2003 and results were received by Gravity in May 2004. Interpretation and exploration targeting were completed during 2004 and proposed field programmes were submitted to the Northern Land Council to obtain Traditional Owner approval. The NLC was not able to process Gravity's field programme proposal in 2004, but approval to proceed was received in early 2005 and field testing of kimberlite targets was scheduled for August-September 2005. During the past year of tenure, 16 Falcon anomalies from the TeeDee Falcon(tm) survey were assessed within EL 8915 and sampled where appropriate. A total of 6 heavy mineral samples, comprising 4 gravel samples and 2 loam samples were collected. The kimberlite potential of the majority of anomalies inspected was considered to be low, primarily due to the presence of extensive outcropping Proterozoic sandstone over these anomalies. Results from sampling programs implemented during 2005 have been received, with a number of indicator mineral samples returning chromites. Preliminary interpretation of the probe data indicates that some of the recovered grains are potentially of kimberlitic origin. The significance of the results obtained is still being assessed, but follow-up work is anticipated during the 2006 field season. During the reporting period, a partial surrender was executed. A total of 317 blocks were relinquished, effective 6th June 2006, with a total of 97 blocks retained.