Relinquishment report on blocks relinquished at the conclusion of year 5 of tenure, 26 September 2006 to 25 September 2007

Abstract

EL 22732 'Mt Young' was acquired by Gravity Capital Limited from BHP Billiton soon after it was granted, as part of a diamond exploration venture involving Gravity, Gravity's 100%- owned subsidiary, Diamond Mines Australia Pty Ltd and BHP Billiton. Gravity and Diamond Mines Australia also have a diamond exploration arrangement with Rio Tinto Exploration covering a large number of Rio Tinto-controlled tenements in the Northern Territory. During the second year of tenure, on the basis of encouraging diamond sampling data from nearby tenements, a Falcon(r) airborne gravity gradiometer survey was flown over a substantial part of the Mt Young tenement. Detailed interpretation, anomaly ranking and exploration targeting from the Falcon(r) data by Gravity Capital was completed during 2004. Gravity Capital Ltd changed its name to Gravity Diamonds Ltd late in 2004 to reflect its sole emphasis on diamond exploration and development. Several potential target areas were identified from the Falcon(r) survey as requiring ground follow-up work. Statutory requirements for field access and approvals for work programs were finalised in early 2005 and field testing of these targets was carried out during the 2005 and 2006 field seasons. No samples were collected within the relinquished blocks during the tenure year. A relinquishment of twenty-four (24) blocks comprising the northern and southern sections of EL 22732 was made at the conclusion of Year 5.