Annual report on exploration activities for EL 23994 'Tanaburs NE' year 2 of tenure, 8 September 2005 to 7 September 2006

Abstract

EL 23994 'Tanaburs NE' was granted to Gravity Diamonds Ltd ('Gravity') on 8 September 2004. The EL forms part of broader project area where Gravity is conducting diamond exploration, much of which is under an exploration agreement with Rio Tinto group companies and Diamond Mines Australia (DMA), which is a 100%-owned subsidiary of Gravity. During 2003 and 2004, DMA had an exclusive arrangement with BHP Billiton to deploy the Falcon airborne gravity gradiometer system in diamond exploration in Australia. The Falcon system has proved an effective diamond exploration tool since its development by BHP Billiton in the late 1990's. During the first year of tenure Falcon data was acquired over part of EL 23994. The system includes airborne gravity gradient data, high resolution magnetics and accurate elevation data derived from on-board differential GPS and laser scanner devices. The area of coverage amounted to approximately 27 km(2) (~295 line kms) . During the second year of tenure, detailed targeting based on the acquired gravity gradiometer data within the southwestern part of EL 23994 was completed. Although some second order preliminary targets were proposed, no priority targets were identified for follow-up within the portion of the EL covered by the Falcon survey. A single gravel sample was collected within EL 23994 as part of a broader sampling program in the Tanaburs project area. The sample reported negative for kimberlite indicator minerals. A detailed review of previous diamond exploration within the whole tenement was subsequently conducted. This review suggested that previous heavy mineral sampling coverage was adequate, with the generally negative results from these samples indicating there generally appears to be limited potential for undiscovered kimberlites to be located within the EL. However, it was noted that aside from the sporadic single microdiamond recoveries, one historic Ashton Mining sample reported 4 chromites. Despite this result, the tenement that Ashton Mining held was surrendered in the same year. As no follow-up was completed on this result and no further details regarding the provenance of these grains given, a number of check samples have been proposed for this drainage, with a view to recovering chromite for probing. Further work will be dependent on the outcome of this proposed sampling, with surrender of the EL likely if encouraging results are not obtained.