Relinquishment report on blocks dropped at the conclusion of year five of tenure period ending 28 July 2007

Abstract

EL 10436 Top Spring forms part of a farmin agreement between Rio Tinto Exploration Pty Ltd and Diamond Mines Australia Pty Ltd 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 was conducting predominantly diamond exploration by utilising the Falconairborne gravity gradiometer system. The Falcon system has been shown to be effective in detecting kimberlite pipes. Falcon data was acquired over the majority of adjoining EL 10427 during 2003, and followed up during 2004. No kimberlites were discovered. EL 10436 is considered prospective for commercial sources of diamonds. Historic sampling has identified kimberlitic indicator mineral occurrences, including diamonds within the tenements. During Year 5 of EL 10436, high resolution aeromagnetic data previously collected by Ashton was acquired and reprocessed by DMA. Reconnaissance geology mapping and recognition that the existing aeromagnetic data did not cover the entire tenement area indicated that relinquishment of several blocks would be prudent. A compulsory relinquishment of 50% of the licence area (39 blocks) was made at the conclusion of Year 5.