Annual report on exploration activities, year 3 of tenure, 8 September 2006 to 7 September 2007

Abstract

EL 23995 'Tanaburs SW' was granted to Gravity Diamonds Ltd ('Gravity') on 8 September 2004. The EL lies within a general area where Gravity is operating a large diamond exploration program, 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. A substantial amount of historical diamond exploration work has been carried out in the general vicinity of the tenement, the main diamond prospect identified to date being the Tanaburs Prospect (also known as Leila Creek). The prospect was identified by Ashton in the 1990s and is located in adjacent EL 22307. During 2003 and 2004, DMA through an exclusive arrangement with BHP Billiton deployed 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. The Falcon system includes airborne gravity gradient data, high resolution magnetics and accurate elevation data derived from on-board differential GPS and laser scanner devices. The 2003/04 flying program covered seven areas in the Northern Territory, focusssing on areas where previous exploration reported unresolved kimberlite indicator mineral sampling results, including the Tanaburs prospect. Falcon coverage did not extend into EL 23995, which abuts EL 22307. Field reconnaissance of the area and reviews of previous diamond exploration data within EL 23995 suggested that previous heavy mineral sampling within EL 23995 was adequate, however results from Gravity Diamonds sampling programs elsewhere in the Northern Territory has indicated that several sampling programs carried out by previous explorers suffered from poor site selection and sample collection practices. Additionally advances in heavy mineral processing through micro-DMS plants has increased the recovery and decreased the effective grainsizes of heavy mineral recovered. During the past year of tenure, ground Indicator Mineral sampling within EL 23995 has been undertaken of the major drainages within the tenement. Although no kimberlitic indicator minerals were recovered, reinterpretation of reprocessed openfile aeromagnetic data being undertaken by Gravity and joint venture partner Sandfire Resources is ongoing.