EL 24286 Abner North Annual report on exploration activities, year four of tenure, period ending 23 January 2009

Abstract

EL 24286 'Abner North' was granted to Gravity Diamonds Ltd (Gravity) on 24 January 2005. Gravity, through its wholly owned subsidiary, Diamond Mines Australia Ltd (DMA), had an agreement with BHP Billiton to utilise BHP Billiton's Falcon airborne gravity gradiometer system in diamond exploration in Australia and Gravity has established a number of diamond projects in northern Australia using this technique. The Falcon system has proven very effective in detecting kimberlite pipes in Canada, Africa and in Australia. The BHP Billiton - DMA 'Falcon Agreement' allowed DMA to conduct exploration using Falcon with BHP Billiton retaining certain buy-in rights to major discoveries - a right that expires in February of 2009. During 2004, Falcon data was acquired over tenements controlled by DMA immediately to the south of EL 24286. The survey covered approximately 267 square kilometres with 100m spacings, north south oriented flight lines, flown at a mean terrain clearance of 80m. Gravity gradiometer, magnetics, and laser scanner data were gathered and compiled. Interpretation yielded a number of kimberlite targets and drilling of these targets in late 2004 and 2005 resulted in the discovery of the diamond-bearing ABN21 kimberlite pipe. During the initial years of tenure of EL 24286, available prior exploration data was compiled and reviewed and field work planning commenced. New colour aerial photography at 1:25,000 was flown over the tenement and this was interpreted and integrated with prior sampling data, some limited sampling was carried out. A portion of the tenement was covered by an airborne Hoistem MkII surveys in late 2006. Several targets were identified by an independent geophysicist with sampling carried out during year 3 of tenure. Attempts were made to identify a viable vehicle access track onto the 'West Plateau' area of the tenement, however no suitable route and helicopter sampling has been required. Intense sampling was planned for the tenement for the 2008 season. A possible helicopter Falcon(r) gravity gradiometer survey was planned - however a crash involving the helicopter system during 2008 (pilots safely rescued and unharmed) and the advancing global liquidity crisis, however, recently Gravity has recently reached an agreement with Legend International Holdings Inc which will facilitate an aggressive exploration programme going forward. Historically, Gravity Diamonds Limited has spent approximately $5.5m on diamond exploration in the Abner Range / McArthur Basin region since it took over management of the project under the exploration agreement with Ashton Mining Limited and others. A number of targets have been identified on tenement EL 24286, that increased funding will ensure adequate testing of identified targets.