Discovery of New Kimberlites at the Kyle Project

A 28,620 line kilometre airborne geophysical survey was flown in late 2006. A total of 34 targets were identified by the survey and have been staked. Priority targets are in the process of being drilled.

On December 13, 2006 the Company reported the drill intersection of a new kimberlite (U1) on its T1 project. The new kimberlite is located in between the soon to be Victor Diamond Mine and the Company’s prospective T1 diamond project.

Drilling intersected kimberlite at a depth of approximately 10 metres. Geophysical surveys indicate that U1 is a small pipe (less than one hectare). Continued drilling to a depth of 90 metres recovered a sample of about 108.42 kilograms which was air freighted to the CF Mineral Research laboratory for extraction of contained diamonds and analysis of indicator minerals. The diamond indicator minerals found within the sample are similar to those of samples from De Beers’ Victor Mine 40 kilometers away. Diamond indicator minerals recovered include 59 Group I eclogitic garnets, 17 olivines, 6 clinopyroxenes, 3 chromites and 1 peridotitic G10 garnet.

Three microdiamonds were recovered. On January 30, 2007 the Company reported the drill intersection of a second new kimberlite, U2, at a depth of 17 meters. An 87.88 kilogram sample of kimberlite from the discovery hole was processed for indicator minerals and microdiamonds by attrition milling. Two micro-diamonds were recovered. Diamond indicator minerals recovered from this sample include 67 Group I eclogitic garnets, 20 clinopyroxenes, 16 olivines, 9 orthopyroxenes, 5 chromites and 3 peridotitic G10 garnets.

The diamondiferous nature of U2 was confirmed on May 23, 2007 when 17 diamonds were recovered from 142.82 kg of drill core from 71.3 to 99.1 meters in hole U2-2. The diamonds have a coarse size distribution and are predominantly gem quality, similar to those recovered from DeBeers’ Victor Mine.

The Company has completed four NQ (4.76 cm diameter) inclined delineation holes in U2 to intersect additional kimberlite phases that occur as breccia clasts in the discovery hole. This delineation drilling indicates that the U2 kimberlite is approximately 9 hectares in size.

Drilling has shown that, like Victor, U2 contains varying diamond contents. Diamond contents range from nearly barren to values approaching those expected from Victor. Combining samples U2-2-234-325 and U2-3-198-300 yields 77 diamonds greater than 106 microns per 1000 kilograms. The percentage of gem quality diamonds greater than 106 microns for the two aforementioned samples is 78% while the average for all of the samples from U2 is 74%. The presence of high grade regions with a high proportion of gem quality diamonds, as evidenced by the current results, supports the continued processing of the delineation drill core.

The Company has also discovered a third new kimberlite. U2NW is just to the northwest of U2 and is approximately 1 hectare in size. Processing of the discovery hole confirmed that the kimberlite is diamondiferous.

The small sample of U2-NW processed does not allow an accurate estimation of the diamond count of the pipe. However, the diamond indicator minerals and microdiamonds recovered from the discovery hole indicate that the U2 NW kimberlite warrants additional testing. Delineation drilling (5.61cm core) of U2-NW has been completed.

The diamond results of the delineation drilling will be used to assess the potential of the kimberlites. Should there be sufficient potential U2 and/or U2-NW will be bulk sampled.