Report on blocks relinquished at the conclusion of year 4 for EL 10436 'Top Springs', period ending 28 July 2006

Abstract

EL 10436 Top Spring 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 tenements and applications in the Northern Territory. Gravity Diamonds Ltd (formerly Gravity Capital Ltd) is managing the farm-in arrangement for Diamond Mines Australia. Under the terms of the farm-in agreement, DMA has been 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 10436 is considered prospective for commercial sources of diamonds. Historic sampling has identified kimberlitic indicator mineral occurrences, including diamonds within the tenements. Sampling was carried out during Year 4 however the results were disappointing and led to the relinquishment of the western and southern sections of the licence together with a small section in the southeastern corner. There was no sampling work carried out on these relinquished blocks.