EL 7970 Arnold River Hodgson Diamonds Project NT annual report on exploration activities year eight of tenure 24 July 2007 to 23 July 2008

Abstract

EL 7970 forms part of Rio Tinto's 'Hodgson Diamond Project' and is centred approximately 150km northeast of Daly Waters in the Northern Territory, within the Hodgson Downs 1:250,000 map sheet. The EL was granted to Ashton Mining on 24th July 2000. Ashton Mining Ltd was acquired by Rio Tinto Limited during the 4th quarter of 2000. The tenement forms part of a farmin agreement between Rio Tinto Exploration Pty Ltd ('Rio Tinto') and Diamond Mines Australia Pty Ltd ('DMA') covering numerous Rio Tinto tenements and applications in the Northern Territory. Under this agreement, DMA is conducting predominantly diamond exploration utilising the newly-developed Falcon- airborne gravity gradiometer system. The Falcon- system has been shown to be effective in detecting kimberlite pipes. Gravity Diamonds Ltd is managing the farmin arrangement for Diamond Mines Australia and owns 100% of DMA. The tenement is considered prospective for commercial sources of diamonds. During the initial year of the Rio Tinto-DMA farmin arrangement, a review of historic exploration data was conducted by Gravity and a Falcon- airborne gravity survey was planned to cover prospective areas within EL 7970 and adjacent farmin tenements held by Gravity and Rio Tinto to the east of EL 7970. The survey was conducted during September 2003. Initial interpretation and exploration targeting from the Falcon- data was completed during 2004, with target areas defined for follow-up work. Field testing and remodelling of the gravity data and targets has been carried out since the 2005 field season. Targets tested to date and comprehensive stream sediment sampling has recovered a number of indicator mineral grains (primarily chromite). Microprobe data of these grains has indicated that several are of probable kimberlitic origin. Two diamonds have been recovered by target sampling to date. During the past year of tenure with the aid of an access track constructed from Broadmere Station several rounds of follow-up sampling have taken place primarily in the COX022 target drainage system and the COX02 drainage area. A total of 37 gravel samples were collected within EL 7970 during exploration campaigns carried out in July-August 2007 and September-October 2007. Of the samples collected, 16 reported chromite, with one of the chromite positive samples also reporting a macrodiamond. This recovery of chromites within EL 7970 by DMA continues to be at odds with historic sampling results, and may be indicative of a series of kimberlitic intrusions. Expenditure on the tenement during the reporting period totalled $113,606.