Annual report on exploration activities for EL 5954 'Benda Bluff', year eight of tenure, 29 March 2007 to 28 March 2008

Abstract

EL 5954 currently forms part of a farmin agreement between Rio Tinto Exploration Pty Ltd and Diamond Mines Australia Pty Ltd ('DMA') 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, which is a wholly owned subsidiary of Gravity. Under the terms of the farm-in agreement, DMA is conducting predominantly diamond exploration by utilising the Falcon(tm) airborne gravity gradiometer system. The Falcon(tm) system has been shown to be effective in detecting kimberlite pipes. EL 5954 is considered prospective for commercial sources of diamonds. Previous sampling has identified kimberlitic indicator mineral occurrences, including diamonds within the tenement. During 2003 and 2004 Falcon(tm) data was acquired over the majority of EL 5954. The flying program also included coverage of an adjacent exploration license controlled by Rio Tinto (and included in the Rio Tinto - Gravity Diamonds - DMA joint venture). Approximately 37 targets for follow-up exploration were located. During 2005, 20 Falcon anomalies from the Benda Falcon(tm) survey were directly assessed within EL 5954 and sampled where appropriate. A total of 33 heavy mineral samples, comprising 26 gravel samples and 7 loam samples were collected. Additionally, a total of 129 geochemical samples were collected, the majority comprising standard -200 micron soil samples. However, -200 micron samples were also collected at the majority of the gravel sample sites as a test for base metal anomalism. Eighteen (18) indicator mineral samples returned chromites while two (2) samples reported pyrope garnets. Re-processing of the very fine fraction of the concentrate (0.2-0.3mm) from these samples recovered the pyrope garnets and further fine fraction work was undertaken. As several of the indicator minerals recovered were of ambiguous provenance discussions and re-assessment of the grain chemistries and morphologies continued during the reporting period with both Rio Tinto inhouse experts and Diatech Mineral Laboratories reviewing available data. An assessment was carried out on the major and minor trace element geochemistry of selected chromites from the area by PRISE at the ANU. In addition nickel thermometry was requested on the pyrope grains recovered, however in a laboratory error the thermometry work was actually carried out on the chromite grains. The results of the geochemistry work on the chromite grains were negative with all grains displaying a crustal rather than mantle signature. Nonetheless the pyrope garnets recovered from earlier samples continued to be deemed of sufficient interest to warrant further work. A sampling program was proposed and forwarded to the NLC in Darwin for assessment and site consultation and approval (as the tenement is in SE Arnhem Land) during March 2007. A site meeting to discuss this work program was delayed several times and finally occurred during late August 2007 at Ngukurr. The site meeting approved the exploration program proposed, subject to several conditions including the employment of personnel from within the Ngukurr area, approximately 60-80 kilometres south of the licence. The operational difficulties associated with this request (as there is no existing road access to the licence area) and the relatively late period in the year of the approval meant that helicopters of sufficient size and range were difficult to book. The sampling program proposed has been deferred to 2008 field season.