EL 24285 Abner South Annual report on exploration activities year five of tenure period ending 23 January 2010

Abstract

EL 24285 'Abner South' 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 for diamond exploration in Australia. Gravity established a number of diamond projects in northern Australia using this technique. The Falcon system has proven 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 expired in February of 2009. During 2004, Falcon data was acquired over tenements controlled by DMA immediately to the north of EL 24285. The survey covered approximately 267 square kilometres with 100m spacing, 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, available previous exploration data was compiled and reviewed, new colour aerial photography at 1:25,000 was flown over the tenement which was interpreted and integrated with historic sampling data and second order Falcon targets were inspected. Four gravel samples were collected within the tenement however results did not present encouraging results. Re-evaluation of airborne photography, Landsat Imagery, geophysical datasets and geology mapping in the southeast of the tenement has highlighted a broad area of Cretaceous aged cover which may be the source of the Possum Point Yard anomalous indicator minerals. A sample taken in the drainage to the east of Possum Point yards returned several possibly kimberlitic chromites (reconfirming historic sampling). Track access to the area was re-established and drill rigs should now be able to travel from the McArthur Pastoral Station to the tenement area. Intense sampling was planned for the tenement for the 2008 season including a possible helicopter Falcon gravity gradiometer survey -- however a crash involving the helicopter system during 2008 (pilots safely rescued and unharmed) and the advancing global finiancial crisis limited the planned programme. In February 2009, the DME granted a waiver of reduction over the EL pending new developments. In April 2009, Gravity signed an agreement for Legend International Holdings Inc to acquire the EL as part of a package of tenements held by Gravity for diamond exploration. The exploration program for 2009 was curtailed pending completion of the sale and involved a re-evaluation of the existing data rather than field based work. 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 24285 which will be tested by Legend.