Annual report on exploration activities for EL 24699 'Top Springs Creek East', year two of tenure, 01 December 2006 to 30 November 2007

Abstract

EL 24699 forms part of a major diamond exploration enterprise in the Northern Territory initiated by Gravity Diamonds (then Gravity Capital) in 2003. The foundation of this enterprise has been a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA', a 100%-owned subsidiary of Gravity Diamonds) covering numerous Rio Tinto-controlled tenements and applications in the Northern Territory. Under this agreement, DMA has conducted diamond exploration over the tenements utilising the recently-developed Falcon(tm) airborne gravity gradiometer system, which has been shown to be very effective in detecting kimberlite pipes. Gravity has also acquired a significant tenement holding in its own right in the NT. The initial Falcon(tm) programs in 2003 resulted in the discovery of a kimberlite pipe within the 'Abner Range' survey area, some 35 kilometres northeast of EL 24699, and this led Gravity to apply for a number of areas in proximity to the discovery. EL 24699 comprising 7 sub blocks was granted to Gravity on 25 November 2005. The area had previously formed part of EL 9926, one of the Rio Tinto-controlled tenements included in the above farmin arrangement. The decision to proceed with a partial relinquishment on EL 9926 was made just prior to the discovery of the Abner Range kimberlite pipe, and subsequently it was agreed that Gravity should re-acquire the ground in its name, but include any new tenure within the terms of the farmin. During year 2 of tenure the company has collected heavy mineral gravel samples within the few drainages in the tenement area. Both samples returned negative results and further exploration on the licence will be assessed pending outstanding sampling results from adjoining tenements in the Gravity / Rio Tinto farm in area.