Strategy - Exploration Summary

It is vital to look in the right place, and also to use a technique that will record some type of anomalous response when near a mineral deposit. Without these features much money could be spent in the wrong place, or work could be carried out over a deposit without detecting its presence. This emphasises the strategic importance of having conceptual exploration models to help predict "the right places" and innovative exploration techniques to make sure that if present, a deposit is detected. Flinders' methods of satisfying these strategies are detailed below.

Conceptual Models

Flinders has used two particular conceptual models which predict that diamondiferous kimberlites are likely to occur within the Company's tenements.

Gravity Corridors

The Australia-wide transcontinental gravity corridors, as shown on the project location map, are seen as deep and long-lasting zones of weakness in the earth's crust along which primary diamond source rocks have been intermittently emplaced during periods of local crustal tension. These zones may act as loci for other types of mineralising activity such as at Olympic Dam, located about 100 kilometres along the G2 Corridor southeast of the Company's G2 Project.

The intersections of gravity corridors are even more important loci of interest. The Strangways Project lies at the intersection of G1, G2 and G3, and the Springfield Project is near the intersection of the G2 and G7 gravity corridors.

Global Emplacement Model (GEM)

The Company has recently adopted a global emplacement model developed by Mr John Towie of Independent Diamond Laboratories. The model is described on Independent Diamond Laboratories' website at www.diamondlab.com.au/gem.html. The Company has modified the model slightly to suit its local information. Mr Towie's model has general application but is particularly applicable to the Springfield and Leigh Creek Projects. The model is based on observation of global kimberlite occurrences.

Kimberlites are thought to be diamond bearing if they intrude the crust at or near mantle pressure. When high energy kimberlite magma is trapped beneath brittle lithosphere, the energy can be rapidly released by volume and pressure reduction during a volcanic eruption.

Innovative Exploration Techniques

Heavy Mineral Concentration

Undercover Sampling

Regolith Studies

Collaborative Research with PIRSA

Prospectivity

Flinders has selected diamond exploration projects that it believes have high prospectivity, with a strong likelihood of a kimberlite discovery which will lead to a commercial diamond mine. This is demonstrated by the presence of 369 diamonds in the Springfield Project area and diamonds at or near all the other projects except Leigh Creek, which is conceptual at this stage. At Echunga in the Adelaide Hills, the size (up to 5.3 carats) and presence of many gem quality stones is also promising. The presence of known kimberlites at Springfield and Skeleton Flat and several carbonatite occurrences at Strangways also demonstrates the strong chances for additional kimberlite discovery. It should be noted that diamond occurrences and kimberlites are rare and that a significant amount of previous exploration has already been completed to identify the current promising situations.