Annual report on exploration activities - year one of tenure, 01 December 2005 to 30 November 2006

Abstract

EL 24699 forms part of a major diamond exploration enterprise in the Northern Territory initiated by Gravity Diamonds (then Gravity Capital) in 2003. The foundation of this enterprise has been a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA', a 100%-owned subsidiary of Gravity Diamonds) covering numerous Rio Tinto-controlled tenements and applications in the Northern Territory. Under this agreement, DMA has conducted diamond exploration over the tenements utilising the recently-developed Falcon(tm) airborne gravity gradiometer system, which has been shown to be very effective in detecting kimberlite pipes. Gravity has also acquired a significant tenement holding in its own right in the NT. The initial Falcon(tm) programs in 2003 resulted in the discovery of a kimberlite pipe within the 'Abner Range' survey area, some 35 kilometres northeast of EL 24699, and this led Gravity to apply for a number of areas in proximity to the discovery. EL 24699 comprising 7 sub blocks was granted to Gravity on 25 November 2005. The area had previously formed part of EL 9926, one of the Rio Tinto-controlled tenements included in the above farmin arrangement. The decision to proceed with a partial relinquishment on EL 9926 was made just prior to the discovery of the Abner Range kimberlite pipe, and subsequently it was agreed that Gravity should re-acquire the ground in its name, but include any new tenure within the terms of the farmin. During year 1 of tenure the company acquired and assessed all open file data on the area and planned a field program for 2007.