Exploration for possible commercial diamond deposits has been carried out along a portion of the G2 gravity lineament located immediately south of William Creek and the southern Peake and Denison Ranges, looking for inferred diamondiferous kimberlite intrusions that likely were emplaced ca. 270 Ma to 170 ma within the Permian sedimentary sequence, and have thereafter become buried under the thick Mesozoic Great Artesian Basin and younger cover. Several alluvial macrodiamonds have historically been found in this district, near Edwards Creek and in the Peake Creek gold diggings, while numerous often fairly unweathered kimberlite indicator mineral grains have been recorded, mostly eroding out out of exposed Tertiary strata which are themselves partly products of the reworking of basal Mesozoic sediments (i.e. where the latter represent secondary diamond sources overlying primary kimberlite). Licensee Flinders Diamonds took up this ground to implement an exploration strategy which involved trying to track down the locations of buried primary diamond sources via exploratory RAB drilling followed by geochemical and mineralogical analysis of composite cuttings samples of unconsolidated detritus from the basal cover, in order to be able to follow palaeodrainage and colluvium dispersal trains of kimberlite indicators. The company considered that drilling and sampling one hole per 25 square km would be sufficient to detect part of an indicator mineral dispersal train if a source exists within 100 km or less, based on its previous experience gained from exploring the Springfield Basin in the southern Flinders Ranges. Accordingly it proposed to drill a series of holes spaced 4.8 km apart on an offset grid across the entirety of both subject licences, with progressive infill drilling and sampling, and complementary ground geophysical surveying, as follow-up to positive results from initial holes. No diamond exploration occurred during the licences' second year, while Native Title issues were being resolved that prevented a commencement of drilling. However, another objective on which work was able to be advanced was the preliminary exploration for potential iron oxide - associated copper-gold (IOCG) mineralisation, which Flinders Diamonds believed could also exist in this portion of the G2 lineament corridor, situated ~70 km north-northwest of Olympic Dam and ~50 km east of the newly discovered Prominent Hill IOCG deposit. A prospectivity report was prepared by consultant firm Euro Exploration Pty Ltd for distribution to potential joint venture partners, after a re-interpretation of available magnetic and gravity data by Chris Anderson identified four target areas where major structural breaks are possibly related to IOCG mineralisation. Also during this year, in order to identify areas of shallow crystalline magnetic basement that might provide accessible IOCG targets, a separate group of consultants were engaged to undertake an investigation of basement structure using automated depth estimation methods applied to the magnetic data over the southern part of the G2 tenement area. The estimates were based on two-dimensional spectral depth analysis applied to an existing total magnetic intensity grid. Only a poor quality 35 m aeromagnetic TMI grid was available for making depth estimates, and owing to its numerous levelling and gridding artefacts, the results were not as unambiguous as hoped for, so only EL 2759 was covered in the work. Previous exploration drilling done within this part of the G2 lineament corridor, which had targeted coincident gravity/magnetic anomalies, in all cases had failed to intersect magnetic basement, despite the deepest hole (SR 17/2) terminating at 1500 m. Half slope modelling of the prominent magnetic anomaly in the south-eastern corner of EL 2759 suggested a depth to magnetic source of 1900 m for the main “core”, surrounded by an “annulus” of shallower magnetic material, possibly 1200 m deep. This implied that modelling with better quality magnetic data, if such were acquired, might enable shallow drill targets to be identified. During October 2002, the postponed drilling and sampling programme was conducted, with 65 vertical aircore holes completed for a total penetration of 1690.1 m. The drilling originally had been planned to be carried out by RAB, but attempts made at various locations demonstrated that the technique was unsatisfactory within the Bulldog Shale, with a loss of air circulation occurring at just 6 to 9 m depth. Consequently all of the drilling was by done using aircore equipment, which overcame loss of circulation problems but reduced the ability to penetrate harder rock. 10 holes (AC02GT01-AC02GT10) were drilled on EL 2758, with 9 holes intersecting sampleable Algebuckina Sandstone at close to predicted depths. Most cuttings samples collected weighed approximately 20 kg, and were derived from good quality basal cobble horizons. 55 holes (AC02GT11 – AC02GT65) were drilled on EL 2759. Only 20 of these holes were sampled due to the following limitations: • An absence of Algebuckina/Mount Anna Formation material • Encountering silicified rock unable to be drilled by the aircore method Most of the holes sampled were located on the western side of the tenement, with sample weights ranging from 10 kg to 40 kg. 23 of the 29 bottomhole sample heavy mineral concentrates observed yielded between 2 and 100 indicator mineral grains ranging up to 0.8 mm in size, with a number of these grains being positive for kimberlite affinity. This outcome was regarded as highly significant, because the sampling technique using an offset drill pattern did not target trapsites as would occur in a conventional drainage survey. This suggested to Flinders Diamonds that there is a high background of indicator minerals in the G2 Project area, especially in the south-west. Wear characteristics of many grains suggested short transport distances. Three interpretations were advanced which could explain the number of grains recovered: 1. The drillholes are proximal to a kimberlite field that is shedding numerous grains. Therefore, if drilling were to be extended to the south-west and further positive results obtained, this scenario would be confirmed. 2. The area drilled to date may reflect some form of local palaeoconcentration of detritus during the Mesozoic, that is not necessarily proximal to a kimberlite field. 3. Permian ice flows may have deposited large numbers of grains with low wear characteristics, at a location not necessarily proximal to a kimberlite field. It was recommended that follow-up drilling on EL 2758 be carried out south of the October 2002 drilling, and that additional drilling should be done to the south-west of EL 2759 on ground that was currently under tenement application by Flinders Diamonds. No more exploratory work ensued for 30 months after April 2003, from the time when the diamond laboratory geochemical and mineralogical results were to hand, until the subject licences were renewed. Planned infill aircore drilling on 1.6 km centres around the October 2002 drillholes that were positive for kimberlite indicators, which would later be reduced to 800/400/200/100 m hole spacings if results warranted, and then be complemented with ground magnetic and gravity surveys to attempt to locate kimberlite intrusions in the bedrock, was not progressed, partly due to unavailability of a suitable lightweight drilling rig. An application was made to PIRSA for a grant of PACE Year 2 subsidy funds to help with realising this planned drilling, but the application was unsuccessful.