Annual exploration report year 9 mineral lease ML1154 Merlin 15th June 2006 to 14th June 2007

Abstract

Exploration completed during the reporting period included the processing of 169 loam samples collected during the previous reporting period. Trial mining operations included the mining of kimberlite from existing open pits and processing of approximately 25,000 tonnes of material that recovered 11,810 carats of diamonds. A Prefeasibility Study of Gawain and Ywain pipes was completed to evaluate the economics of underground operations that identified a potentially economic project. The study identified the need for further resource definition and geotechnical drilling to move the project to Feasibility stage. It is proposed that the resource drilling be undertaken during the next reporting period. In addition, grade test work will be undertaken on the recovered drill core.