Relinquishment report on the blocks dropped at the conclusion of year three of tenure, 8 September 2006 to 7 September 2007

Abstract

EL 23994 'Tanaburs NE' was granted to Gravity Diamonds Ltd ('Gravity') on 8 September 2004. The EL forms part of broader project area where Gravity is conducting diamond exploration, 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. During 2003 and 2004, DMA through an exclusive arrangement with BHP Billiton deployed the Falcon(r) Airborne Gravity Gradiometer system in diamond exploration in Australia. The Falcon(r) system has proved an effective diamond exploration tool since its development by BHP Billiton in the late 1990's. During the first year of tenure Falcon(r) data was acquired over the portion of EL 23994 retained following this relinquishment. During the second year of tenure a single gravel sample was collected within the relinquished portion of EL 23994 as part of a broader sampling program in the Tanaburs project area. The sample reported negative for kimberlite indicator minerals. A detailed review of previous diamond exploration within the whole tenement was subsequently conducted during the 3rd year of tenure. This review suggested that whilst previous heavy mineral sampling coverage was adequate, results from Gravity Diamonds sampling programs elsewhere in the Northern Territory indicated that several sampling programs carried out by previous explorers often suffered from poor site and sample collection. Additionally advances in heavy mineral processing through micro-DMS plants has increased the recovery and decreased the effective grainsizes of heavy mineral recovered. An additional gravel sample was collected from within the relinquished portion of the tenement area, which also returned a negative result. A 50% relinquishment comprising the eastern portion of EL 23994 occurred at the conclusion of Year 3.