EASTERN GRAVELS (TAWANA ALLUVIAL)

The proposed next stage is a large scale operating trial. As a precursor to this, it is proposed to investigate the most effective methods to extract diamonds from the channels and to determine the most effective processing methods. It is proposed to contract South African alluvial diamond specialists to advise on the project scope and implementation, including the costs of conducting the operating trial.

Trial mining was completed in an area which appeared to typify the geology and grade of the Eastern Gravels. Diamond grades from the regularly spaced Bauer drilling in the top 5 meters of the gravels in this section were 2.27 and 3.07 carats per 100 cubic meters (cphm3). Excavation during trial mining has shown that there is an overburden of only 1.6m of fine sand and gravel, which contains traces of diamonds. This is underlain by 4-5m of coarse gravels. Diamonds recovered from the base of these gravels recorded an average size of 0.4 carats per stone (ct/st). This is a much larger average stone size than the 0.1ct/st recorded from the Feeder Channel near the De Beers Finsch Diamond Mine and re-confirms the company's view that the Eastern Gravels diamonds are not all derived from the Finsch kimberlite. The Bauer sample grades were significantly greater than the estimated breakeven grade (1.32 cphm3) of the Eastern Gravels providing strong encouragement for the economic potential of this deposit. The 0.48cphm3 grade (see table below) reported from the trial mining pit is lower than the grades from the nearby Bauer holes; the grade discrepancy is considered typical of the erratic distribution of diamonds in alluvial deposits. The proposed next stage for the Eastern Gravels Project is a large scale operating trial.

Tawana Resources placed 3.7 million shares at 60 cents each, raising A$2.2 million. Intersuisse Corporate placed the shares. Funds will be used for exploration and development with a focus on diamond mining.