Year seven and final report on exploration activities, 7 June 2006 to 26 March 2007

Abstract

EL 8915 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 controlled tenements and applications in the Northern Territory. Under this agreement, DMA is conducting predominantly diamond exploration over the tenements utilising the newlydeveloped Falcon(tm) airborne gravity gradiometer system, which has been shown to be very effective in detecting kimberlite pipes. Gravity Diamonds Ltd ('Gravity') is managing the farmin arrangement for Diamond Mines Australia and owns 100% of DMA. During the initial stages of the farmin arrangement, a review of historic exploration data, including considerable surface sampling focussed on diamonds, was conducted by Gravity with a number of anomalous results noted. On this basis, a Falcon(tm) survey was planned to cover the central part of EL 8915. Flying was conducted in November-December 2003 and results were received by Gravity in May 2004. Interpretation and exploration targeting were completed during 2004 and proposed field programmes were submitted to the Northern Land Council to obtain Traditional Owner approval. The NLC was not able to process Gravity's field programme proposal in 2004, but approval to proceed was received in early 2005 and field testing of kimberlite targets was scheduled for August-September 2005, being year 6 of tenure. During year six of tenure, 16 priority Falcon anomalies from the TeeDee Falcon(tm) survey were assessed within EL 8915 and sampled where appropriate. The kimberlite potential of the majority of anomalies inspected was considered to be low, primarily due to the presence of extensive outcropping Proterozoic sandstone over these anomalies and to a lesser degree by suspected topographic effects causing a small number of false anomalies. A total of 6 heavy mineral samples, comprising 4 gravel samples and 2 loam samples were collected. During the past year of tenure, exploration activities within EL 8915 comprised a focussed sampling program to both confirm the repeatability, and follow up, indicator minerals recovered from sample 159822. This sample was collected by DMA in 2005 and returned 15 chromite which were potentially of kimberlitic origin. A total of seven gravel samples were collected in drainages around the area proximal to this previously collected sample in late September 2006. Results from the sampling program implemented during 2006 were very disappointing. In light of the poor results, no further work was recommended for EL 8915 and the tenement was officially 'handed back' to Rio Tinto on 25 January 2007. Rio Tinto subsequently surrendered the tenement on 26 March 2007.