report summary

Some highlights from the second quarter activities report:


AIM Listing

Progress towards listing the company's issued share capital on the Alternative Investment Market in London has substantially progressed with the appointment of a sponsoring Broker and Nominated Adviser. A compliance listing should be completed by the end of the March 2005 quarter.
Following the placement of shares to BHP Billiton and sophisticated European investors, which was approved by shareholders on 30 September 2004, and the commencement of the company's exploration activities in the Democratic Republic of Congo, the board of Gravity Diamonds recognised that the potential and value of the company would be enhanced by listing the company's issued share capital on the Alternative Investment Market of London Stock Exchange plc ("AIM") in London. During the quarter, the company reviewed the alternative methods of achieving this listing.
This review has now been completed and it is with great pleasure that Gravity Diamonds advises that it has appointed RFC Corporate Finance Limited as the company's Nominated Adviser in connection with the proposed admission of the issued share capital of the company to the trading on AIM.


Expected exploration expenditure during the March 2005 quarter is estimated at approximately $750,000. The following programmes are planned:


Kasai Craton
DRC, Africa
Airborne geophysics
February - March 2005

Ellendale Diamonds (KDC JV)
Ellendale
Target identification and planning
March 2005

DMA (Striker JV)
King George North
Planning for follow-up work on identified targets
March 2005

DMA (Rio Tinto Exploration Agreement)
Northern Territory
Planning for follow-up work on Abner Range and other targets
January - March 2005

Northern Australian Diamonds JV (Rio Tinto Exploration Agreement, DMA can earn 51%)

Drilling of initial identified FALCON® Targets in the North Australia Diamond Exploration Agreement area was completed in three areas (Abner, Larrimah and Lancewood) during the quarter. A total of 21 targets was assessed by 42 reverse circulation drill holes totalling 1,767 metres. Two drill holes from this programme intersected kimberlite, with samples processed to date returning three good quality diamonds from one of the holes.

A further 38 targets were assessed by loam and drainage sampling throughout the Exploration Agreement area, with several targets promoted to priority drill targets by the recovery of indicator minerals from FALCON® gravity targets with marked similarities to the gravity signature of the newly discovered kimberlite. Further drilling of the new kimberlite discovery and the other priority target areas will commence upon the cessation of the Northern Australian wet season.


Abner Range (McArthur Project)

In this area, centred 42 kilometres southwest of Xstrata's McArthur River Mine, five FALCON® targets were tested by 11 drill holes for 402 metres during the quarter, whilst a further seven targets were assessed by various surface geochemical methods. As announced to the ASX on 17 January 2005, two of four RC drill holes drilled into a robust FALCON® gravity anomaly intersected kimberlite with one of the holes containing diamonds. The three diamonds were reported as being unresorbed, colourless octahedra with flat faces and sharp edges, which are indicative of gem quality stones. (For further details, see the ASX release dated 17 January 2005.)

The kimberlite was discovered by drilling a priority target which had been identified from the FALCON® gravity aerial survey, flown as part of Gravity Diamond's 2004 field programme. Importantly, several similar, untested gravity features in the vicinity of the discovery are now considered as further priority drill targets for the upcoming field season.

King George North JV (50/50 JV with Striker Resources NL, Striker managing)

During the quarter, Striker Resources NL completed processing of surface samples from 12 FALCON® targets in the King George North JV area in the Kimberley Region of Western Australia. All of the high priority targets identified by DMA following the 2003 FALCON® survey now have initial sampling results available.

Of the 12 targets sampled, eight have reported positive for kimberlitic indicator minerals or microdiamonds. The results considered amongst the most significant include the 11 chromites recovered from two loam samples on the KGN-111 gravity anomaly, and the 27 chromites recovered from three loam samples taken from the adjacent KGN-110 gravity anomaly. Both anomalies are situated in the headwaters of the previously intensely explored AN11 drainage system and represent strong targets for drilling and costeaning in 2005.

Perhaps more significantly, four microdiamonds were recovered from two loam samples taken on the 260 metre x 200 metre KGN-070 anomaly in the southern portions of the joint venture area. These samples did not report any associated indicator minerals but it is significant that this anomaly is upstream of a previously taken reconnaissance bulk stream sample which reported three commercially sized diamonds, but with no source identified to date.

Gravity Diamonds is pleased with the proportion of positive results from the FALCON® gravity anomalies tested in this programme and, with Striker Resources, will assess the importance and significance of these results and plan conclusive exploration programmes for early in 2005.

Democratic Republic of Congo (Kasai Craton) JV
(BHP Billiton JV, Gravity can earn 100%)

A large-scale, regional heavy mineral sampling programme involving three helicopter-supported crews was completed during the quarter. The programme covered tenement areas on the Kasai Craton where alluvial diamond occurrences are abundant and the kimberlitic source for these diamonds is expected to be located. These tenements are subject to the Framework Agreement between Gravity and BHP Billiton in relation to which Gravity is currently earning a 100% interest.

The programme was designed and implemented by BHP Billiton geologists supervising Congolese geologists and contract staff. A total of 247 heavy mineral samples and 248 geochemical samples for multi-element analysis was collected. Samples weighing a total of 8.3 tonnes were shipped to South Africa for heavy mineral concentration and analysis. The results from the programme are expected in early 2005.

Heavy mineral fractions for all indicator mineral samples have now been produced at Scientific Services in Cape Town. A report on the concentrate weights is pending. The samples are scheduled for kimberlitic indicator mineral picking as soon as laboratory time permits.

The geochemical samples have been delivered to Genalysis Laboratories in Johannesburg for preparation and shipping to Perth. Independent quality control standards are currently being sourced for insertion into the sample sequence prior to shipping.

Gravity Diamonds is encouraged by the incidence of artisanal workings in many of the drainages that were sampled and by the number of diamonds being recovered from the area. As a result, an aeromagnetic survey will be flown over the area seeking to pinpoint direct magnetic targets that could be potential sources for these diamonds. Tenders to complete this work are currently being sought from geophysical contractors now operating in the DRC. Depending on their availability and weather conditions, the survey is scheduled for completion in early 2005.

Field operations are currently suspended due to the onset of the monsoonal wet season. Fieldwork should resume in February 2005. Planning for this next phase of work, which will incorporate the results of the recently completed diamond heavy indicator mineral survey, is in progress.