Year five and final report on exploration activities, 9 July 2002 to 26 March 2007

Abstract

EL 22740 (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 formed part of the Hodgson Diamonds Project. The tenement formed 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. 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 subject to this Report was considered prospective for commercial sources of diamonds. Historic sampling identified kimberlitic indicator mineral occurrences, including microdiamonds within the tenement. During year 3 of tenure, 4 Falcon(tm) anomalies were field inspected and sampled where appropriate. One loam sample and 15 soil samples were collected. No targets were recommended for further work, with subsequent drilling activities focusing on adjacent EL 22741 where a total of 961 metres of RC drilling was carried out to test 10 Falcon(tm) anomalies. Given the disappointing results from the drilling in adjacent EL 22741 in year 3, an internal review of the potential for the Hodgson EL's was conducted during year 4 of tenure. The internal review process re-affirmed the potential of the area to host diamondiferous kimberlites and that their discovery would likely result from geophysically driven exploration programs. Existing FalconTM data was reprocessed to take advantage of new processing techniques developed by BHP Billiton to enhance 'signal' and reduce 'noise' levels in the gravity gradient data. The reprocessed FalconTM data confirmed that the anomalies previously targeted were indeed robust geophysical targets and that their potential to be the result of kimberlite intrusives had been adequately tested via the completed drilling. However, no additional priority targets were evident in the reprocessed dataset and as such no further work was recommended for either license. EL 22740 was officially 'handed back' to Rio Tinto on 8 March 2007. Rio Tinto subsequently surrendered the tenement on 26 March 2007.