Relinquishment report on blocks dropped at the conclusion of year four of tenure for EL 22741, period ending 8 July 2006

Abstract

EL 22741 (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. 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 farm-in arrangement for Diamond Mines Australia and now has 100% ownership of DMA. Under the terms of the farm-in agreement, DMA has been conducting predominantly diamond exploration on tenements covered by the agreement by utilising the Falcon(tm) airborne gravity gradiometer system. The Falcon(tm) system has been shown to be effective in detecting 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. During the previous reporting period, a number of Falcon(tm) anomalies were field inspected and sampled where appropriate. No kimberlite pipes were discovered and a compulsory 50% relinquishment comprising the southern part of the EL, was implemented at the conclusion of the reporting period for EL 22741. This report is in respect of the one hundred and twenty-five (125) blocks relinquished from EL 22741 at the conclusion of Year 4. No on-ground work was conducted in the relinquished area and no Falcon data was acquired over it.