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Karelian Diamond Resources Plc - Half-year ReportKarelian Diamond Resources Plc - Half-year Report
PR Newswire
London, February 26
26 February 2021
Karelian Diamond Resources plc(“Karelian” or “the Company”)
Half-yearly results for the six months ended 30 November 2020
Karelian Diamond Resources plc (AIM: KDR), the diamond exploration company focused on Finland, announces its unaudited results for the six months ended 30 November 2020. Details of these can be found below and a full copy of the statement can be viewed on the Company’s website.
Highlights of the half-year period included:
Process of granting a full Mining Permit to develop the Company’s diamond deposit at Lahtojoki continued. Work regarding ground rental compensation on behalf of TUKES (The Finnish Mining Authority) is now in its final stages. The process in relation to compensation for landowners at Lahtojoki is now at an advanced stage. However, a public meeting is required before the process can be completed. This will be held when COVID-19 regulations allow. A full Mining Permit follows. Vehicular access to the deposit, the adjacent Lahtojoki South exploration permit area and the surrounding reservation area granted. The Company’s exploration programme also continued despite the inevitable delays related to the COVID-19 pandemic.Professor Richard Conroy, Chairman of Karelian, said:
“We are working hard towards the development of a mine at Lahtojoki and despite the restrictions imposed due to COVID-19 good progress continued to be made both in relation to the Lahtojoki Diamond Deposit and the Company’s exploration programme”.
For further information please contact:
www.kareliandiamondresources.com |
Chairman’s Statement
Dear Shareholder,
I have great pleasure in presenting the Company’s half-yearly report for the six month period ended 30 November 2020. The Company made excellent progress during the period despite delays caused by the COVID-19 pandemic.
The process of granting a full Mining Permit to develop the Company’s diamond deposit at Lahtojoki continued, as did its diamond exploration programme. The work regarding ground rental compensation by the National Land Survey of Finland (“NLSF”) on behalf of TUKES (The Finnish Mining Authority) also continued and is now in its final stages. Under Finnish regulations a public meeting is required before the process can be completed. This meeting will be held when COVID-19 regulations allow. TUKES can then proceed to issue a full Mining Permit to the Company over the Lahtojoki diamond deposit.
The National Land Survey of Finland has in the meantime, during the half-year, formally granted rights of way to the Company over the entire Naviskangas private forest road, together with a side road, giving vehicular access to the deposit, the adjacent Lahtojoki South exploration permit area and the surrounding reservation in the Kaavi region of Finland. The granting of vehicular rights of way will facilitate the Company in its technical assessment of the deposit.
The Lahtojoki deposit is situated in a highly favourable location with excellent infrastructure including good road access and power distribution, combined with local technical and logistics availability, which significantly reduces the likely capital and operating costs of a mine as compared with the situation in regions of the world with less adequate infrastructure.
The Lahtojoki deposit also appears to have a significant percentage of coloured diamonds, in particular pink diamonds, which could add to its financial attractiveness especially with the closure of the main source of pink diamonds - the Argyle mine in Western Australia.
The Company’s diamond exploration programme in Finland has led to the discovery of a green diamond in till in the Kuhmo region of Finland which lies close to the Russian border. The Company believes that the Kuhmo region could be part of a new kimberlite province.
The Company is also engaged in exploration in the vicinity of the Lahtojoki diamond deposit.
COVID-19 Update
The Company continued with measures in accordance with Government guidelines to protect the health, safety and well-being of its employees, contractors and partners in Finland and Ireland. COVID-19 continues to limit field and laboratory work given the restrictions on operations and movement. Directors and executives took a 50% reduction in fees and salaries during the period while technical and field staff took a 25% reduction in salaries.
Finance
The loss after taxation for the half year ended 30 November 2020 was €193,243 (for the six-month period ended 30 November 2019: €250,150) and the net assets as at 30 November 2020 were €9,393,315 (30 November 2019: €9,177,513).
During the half-year the Company raised a total of £420,000 through a placing of 10,500,000 ordinary shares at 4pence per ordinary share.
Directors and Staff
I would like to express my deep appreciation of the support of all the directors, consultants and staff, which has made possible the continued progress and success which the Company has achieved.
Future Outlook
I look forward to continued progress towards the development of a diamond mine at Lahtojoki and further exploration success.
Yours faithfully,
____________________________
Professor Richard Conroy
Chairman
26 February 2021
Condensed income statement and condensed statement of comprehensive income for the six month period ended 30 November 2020
| Condensed income statement | |||||||||||
| Note | Six month period ended 30 November 2020 (Unaudited) € | Six month period ended 30 November 2019 (Unaudited) € | Year ended 31 May 2020 (Audited) € | ||||||||
| Continuing operations | |||||||||||
| Operating expenses | (193,243) | (250,150) | (446,710) | ||||||||
| Loss before taxation | (193,243) | (250,150) | (446,710) | ||||||||
| Income tax expense | - | - | - | ||||||||
| Loss for the financial period/year | (193,243) | (250,150) | (446,710) | ||||||||
| Loss per share | |||||||||||
| Basic and diluted loss per share | 2 | (€0.0039) | (€0.0069) | (€0.0111) | |||||||
| Six month period ended 30 November 2020 (Unaudited) € | Six month period ended 30 November 2019 (Unaudited) € | Year ended 31 May 2020 (Audited) € | ||||
| Loss for the financial period/year | (193,243) | (250,150) | (446,710) | |||
| Income/expense recognised in other comprehensive income | - | - | - | |||
| Total comprehensive expense for the financial period/year | (193,243) | (250,150) | (446,710) |
Condensed statement of financial position as at 30 November 2020
| Note | 30 November 2020 (Unaudited) | 30 November 2019 (Unaudited) | Year ended 31 May 2020(Audited) | |||
| € | € | € | ||||
| Assets | ||||||
| Non-current assets | ||||||
| Intangible assets | 3 | 10,710,335 | 10,282,861 | 10,523,570 | ||
| Financial assets | 4 | 4 | 4 | |||
| Total non-current assets | 10,710,339 | 10,282,865 | 10,523,574 | |||
| Current assets | ||||||
| Cash and cash equivalents | 108,393 | 20,901 | 15,942 | |||
| Other receivables | 26,304 | 13,254 | 118,991 | |||
| Total current assets | 134,697 | 34,155 | 134,933 | |||
| Total assets | 10,845,036 | 10,317,020 | 10,658,507 | |||
| Equity | ||||||
| Capital and reserves | ||||||
| Called up share capital | 13,385 | 10,010 | 10,760 | |||
| Called up deferred share capital | 3,174,672 | 3,174,672 | 3,174,672 | |||
| Share premium | 9,613,965 | 9,005,750 | 9,150,829 | |||
| Share based payments reserve | 474,090 | 456,624 | 456,624 | |||
| Retained losses | (3,882,797) | (3,469,543) | (3,666,104) | |||
| Total equity | 9,393,315 | 9,177,513 | 9,126,781 | |||
| Liabilities | ||||||
| Non-current liabilities | ||||||
| Convertible loan | 154,222 | - | 148,945 | |||
| Derivative liability | 146 | - | 146 | |||
| Trade and other payables: amounts falling due after more than one year | - | 93,662 | - | |||
| Total non-current liabilities | 154,368 | 93,662 | 149,091 | |||
| Current liabilities | ||||||
| Trade and other payables: amounts falling due within one year | 1,203,691 | 1,045,845 | 1,288,973 | |||
| Related party loans | 5 | 93,662 | - | 93,662 | ||
| Total current liabilities | 1,297,353 | 1,045,845 | 1,382,635 | |||
| Total liabilities | 1,451,721 | 1,139,507 | 1,531,726 | |||
| Total equity and liabilities | 10,845,036 | 10,317,020 | 10,658,507 |
Condensed statement of cash flows
for the six month period ended 30 November 2020
| Six month period ended 30 November 2020 (Unaudited) € | Six month period ended 30 November 2019 (Unaudited) € | Year ended 31 May 2020 (Audited) € | |||
| Cash flows from operating activities | |||||
| Loss for the financial period/year | (193,243) | (250,150) | (446,710) | ||
| Adjustments for: | |||||
| Expense recognised in income statement in respect of equity settled share based payments | 17,466 | - | - | ||
| Interest expense | 5,277 | - | 3,262 | ||
| (Decrease)/increase in trade and other payables | (154,744) | 77,133 | 350,280 | ||
| Decrease/(increase) in other receivables | 92,687 | 89,735 | (11,774) | ||
| Net cash used in operating activities | (232,557) | (83,282) | (104,942) | ||
| Cash flows from investing activities | |||||
| Investment in exploration and evaluation | (186,765) | (130,128) | (370,837) | ||
| Repayments from Conroy Gold and Natural Resources P.L.C | - | - | 40,818 | ||
| Payments to Conroy Gold and Natural Resources P.L.C | - | - | (45,046) | ||
| Net cash used in investing activities | (186,765) | (130,128) | (375,065) | ||
| Cash flows from financing activities | |||||
| Issue of share capital | 465,761 | 238,862 | 320,266 | ||
| Share issue costs | (23,450) | (978) | (979) | ||
| Shareholder’s loan advances/(repayments) | - | 7,000 | 145,829 | ||
| Shareholder’s loan converted | - | (71,425) | - | ||
| Advances from/(repayments to) fromConroy Gold and Natural Resources P.L.C. | 69,462 | 30,019 | - | ||
| Net cash provided by financing activities | 511,773 | 203,478 | 465,116 | ||
| Increase/(decrease) in cash and cash equivalents | 92,451 | (9,932) | (14,891) | ||
| Cash and cash equivalents at beginning of financial period/year | 15,942 | 30,833 | 30,833 | ||
| Cash and cash equivalents at end of financial period/year | 108,393 | 20,901 | 15,942 |
Condensed statement of changes in equity
for the six month period ended 30 November 2020
| Share capital (including deferred share capital) | Share premium | Share-based payment reserve | Retained losses | Total equity | |
| € | € | € | € | € | |
| Balance at 1 June 2020 | 3,185,432 | 9,150,829 | 456,624 | (3,666,104) | 9,126,781 |
| Issue of share capital | 2,625 | 463,136 | - | - | 465,761 |
| Share issue costs | - | - | - | (23,450) | (23,450) |
| Sharebased payments | - | - | 17,466 | - | 17,466 |
| Loss for the financial period | - | - | - | (193,243) | (193,243) |
| Balance at 30 November 2020 | 3,188,057 | 9,613,965 | 474,090 | (3,882,797) | 9,393,315 |
| Balance at 1 June 2019 | 3,183,294 | 8,768,276 | 456,624 | (3,218,415) | 9,189,779 |
| Issue of share capital | 1,388 | 237,474 | - | - | 238,862 |
| Share issue costs | - | - | - | (978) | (978) |
| Loss for the financial period | - | - | - | (250,150) | (250,150) |
| Balance at 30 November 2019 | 3,184,682 | 9,005,750 | 456,624 | (3,469,543) | 9,177,513 |
Share capital
The share capital comprises the nominal value share capital issued for cash and non-cash consideration. The share capital also comprises deferred share capital. The deferred share capital* arose through the restructuring of share capital which was approved at an Annual General Meeting held on 9 December 2016.
Authorised share capital:
The authorised share capital at 30 November 2020 compromised 7,301,301,041 ordinary shares of €0.00025 each, and 317,785,034 deferred shares of €0.00999 each* (€5,000,000), (30 November 2019: 7,301,301,041 ordinary shares of €0.00025 each, and 317,785,034 deferred shares of €0.00999 each* (€5,000,000)).
*Capital reorganisation:
Following approval at an Annual General Meeting (“AGM”) held on 9 December 2016, the Company reorganised its share capital by subdividing and reclassifying each issued ordinary share of €0.01 as one ordinary share of €0.00001 each and one deferred share of €0.00999 each. The Deferred Shares have no right to vote, attend or speak at general meetings of the Company and have no right to receive any dividend or other distribution, and have only limited rights to participate in any return of capital on a winding-up or liquidation of the Company, which will be of no material value. No application was made to the London Stock Exchange for admission of the Deferred Shares to trading on the AIM.
Consolidated shares:
On 21 December 2017, the Company passed a Special Resolution at the Company’s AGM, that all of the ordinary shares of €0.00001 each in the capital of the Company, whether issued or unissued were consolidated into New Ordinary Shares of €0.00025 each in the capital of the Company (“consolidated shares”) on the basis of one consolidated share for every 25 existing ordinary shares. Following the consolidation of the ordinary shares on 21 December 2017, the warrants in issue were consolidated into one consolidated warrant for every 25 existing warrants. The exercise price in relation to the warrants was also adjusted at this time (see Note 2).
Share issues during the period:
On 25 August 2020, the Company raised €465,761 (£420,000), (before expenses), through the issue of 10,500,000 ordinary shares of €0.00025 in the capital of the Company at a price of £0.04 per Subscription Share.
On 16 July 2019, the Company raised €111,377 (£100,00), (before expenses) through the issue of 2,500,000 ordinary shares of €0.00025 in the capital of the Company at a price of £0.04 per Subscription Share. On 8 October 2019, the Company raised €56,060 (£50,000), (before expenses) through the issue of 1,428,571 ordinary shares of €0.00025 in the capital of the Company at a price of £0.035 per Subscription Share. On 4 September 2019, the Director, Richard Conroy converted €71,425 (£65,000) of his loan into 1,625,000 shares of €0.00025 in the capital of the Company at a price of £0.04 per Subscription Share.
Share premium
The share premium reserve comprises the excess consideration received in respect of share capital over the nominal value of the shares issued.
Share based payment reserve
The share based payment reserve comprises of the fair value of all share options and warrants which have been charged over the vesting period, net of amounts relating to share options and warrants forfeited, exercised or lapsed during the period, which are reclassified to retained earnings.
Retained losses
This reserve represents the accumulated losses incurred by the Company up to the condensed statement of financial position date.
Notesto and forming part of the condensed financial statements for the six month period ended 30 November 2020
1 Accounting policies
Reporting entity
Karelian Diamond Resources plc (the “Company”) is a company domiciled in Ireland.
Basis of preparation and statement of compliance
The condensed financial statements for the six months ended 30 November 2020 are unaudited.
The condensed financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34:Interim Financial Reporting.
The condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual financial statements as at 31 May 2020, which are available on the Company’s website - www.kareliandiamondresources.com. The accounting policies adopted in the presentation of the condensed financial statements are consistent with those followed in the preparation of the Company’s annual financial statements for the year ended 31 May 2020.
The condensed financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are measured at fair value at each reporting date.
The condensed financial statements are presented in Euro (“€”). € is the functional currency of the Company.
The preparation of condensed financial statements requires the Board of Directors and management to use judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the financial period in which the estimate is revised and in any future financial periods affected. Details of critical judgements are disclosed in the accounting policies detailed in the annual financial statements.
The financial information presented herein does not amount to statutory financial statements that are required by Chapter 4 part 6 of the Companies Act 2014 to be annexed to the annual return of the Company. The statutory financial statements for the financial year ended 31 May 2020 were annexed to the annual return and filed with the Registrar of Companies. The audit report on those financial statements was unqualified.
These condensed financial statements were authorised for issue by the Board of Directors on 26 February 2021.
Going concern
The Company incurred a loss of €193,243 (30 November 2019: €250,150) for the six month period ended 30 November 2020. The Company had net current liabilities of €1,162,656 (30 November 2019: €1,011,690) at that date.
The Board of Directors have considered carefully the financial position of the Company and in that context, have prepared and reviewed cash flow forecasts for the period to 31 January 2022. As set out further in the Chairman’s statement, the Company expects to incur capital expenditure in 2021, consistent with its strategy as an exploration company. In reviewing the proposed work programme for exploration and evaluation assets and, on the basis of the equity raised during the financial period, the results obtained from the exploration programme and the prospects for raising additional funds as required, the Board of Directors are satisfied that it is appropriate to prepare the financial statements on a going concern basis.
Statement of compliance
The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European Union (“EU”).
Recent accounting pronouncements
The following new standards, amendments to standards and interpretations adopted and endorsed by the EU have been issued but were not effective for the financial year ended 31 May 2020:
Amendments to references to the Conceptual Framework in IFRS Standards – Effective date 1 January 2020; Amendments to IFRS 3 Business Combinations – Definition of a Business – Effective date 1 January 2020; Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform – Effective date 1 January 2020; and Amendment to IFRS 16 about providing lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification – Effective date 1 June 2020.The adoption of the above amendments to standards and interpretations has been considered for the purposes of these interim financial statements and is not considered material.
The following new standard and amendments to standards have been issued by the International Accounting Standards Board but have not yet been endorsed by the EU, accordingly none of these standards have been applied in the current year. The Board of Directors are currently assessing whether these standards once endorsed by the EU will have any impact or a material impact on the financial statements.
Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture – Postponed indefinitely; IFRS 1 amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (subsidiary as a first-time adopter) – Effective date 1 January 2022; IFRS 3 amendments updating a reference to the Conceptual Framework – Effective date 1 January 2022; IFRS 4 amendments regarding the expiry date of the deferral approach – Effective date 1 January 2023; Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16, and IAS 39 regarding replacement issues in the context of the IBOR reform – Effective date 1 January 2021; IFRS 9 amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (fees in the ‘10 per cent’ test for derecognition of financial liabilities) – Effective date 1 January 2022; IFRS 17: Insurance contracts – Effective date deferred to 1 January 2023; IAS 1 amendments regarding the classification of liabilities - Effective date 1 January 2023; IAS 16 amendments prohibiting a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use –Effective date 1 January 2022; and IAS 37 amendments regarding the costs to include when assessing whether a contract is onerous – Effective date 1 January 2022.2 Loss per share
| Basic earnings per share | |||||||||
| Six month period ended 30 November 2020 (Unaudited) € | Six month period ended 30 November 2019 (Unaudited)€ | Year ended 31 May 2020 (Audited)€ | |||||||
| Loss for the financial period/year attributable to equity holders of the Company | (193,243) | (250,150) | (446,710) | ||||||
| Number of ordinary shares for the purposes of earnings per share | 49,042,750 | 40,042,749 | 40,243,826 | ||||||
| Loss per ordinary share | (€0.0039) | (€0.0069) | (€0.0111) | ||||||
Diluted earnings per share
The effect of share options and warrants is anti-dilutive.
3 Intangible assets
| Exploration and evaluation assets | ||||||||
| Cost | 30 November 2020 (Unaudited)€ | 30 November 2019 (Unaudited)€ | 31 May 2020 (Audited) € | |||||
| At 1 June | 10,523,570 | 10,152,733 | 10,152,733 | |||||
| Expenditure during the financial period/year | ||||||||
| · License and appraisal costs | 56,195 | 2,978 | 208,378 | |||||
| · Other operating expenses | 130,570 | 127,150 | 162,459 | |||||
| · Equity settled share based payments | - | - | - | |||||
| At30 November/31 May | 10,710,335 | 10,282,861 | 10,523,570 | |||||
Exploration and evaluation assets relate to expenditure incurred in the development of mineral exploration opportunities. These assets are carried at historical cost and have been assessed for impairment in particular with regard to the requirements of IFRS 6: Exploration for and Evaluation of Mineral Resources relating to remaining licence or claim terms, likelihood of renewal, likelihood of further expenditure, possible discontinuation of activities as a result of specific claims and available data which may suggest that the recoverable value of an exploration and evaluation asset is less than its carrying amount.
The Board of Directors have considered the proposed work programmes for the underlying mineral resources. They are satisfied that there are no indications of impairment.
The Board of Directors note that the realisation of the intangible assets is dependent on further successful development and ultimate production of the mineral resources and the availability of sufficient finance to bring the resources to economic maturity and profitability.
4 Commitments and Contingencies
At 30 November 2020, there were no capital commitments or contingent liabilities (31 May 2020: No capital commitments or contingencies liabilities). Should the Company decide to develop the Lahtojoki project, an amount of €60,000 is payable by the Company to the vendors of the Lahtojoki mining concession.
5 Related party transactions
| (a) Shareholders’ loans | 30 November 2020 (Unaudited)€ | 30 November 2019 (Unaudited) € | 31 May 2020 (Audited) € | ||
| Opening balance 1 June | 93,662 | 158,087 | 158,087 | ||
| Loan advances | - | 7,000 | 7,000 | ||
| Loan converted into shares | - | (71,425) | (71,425) | ||
| Closing balance 30 November/31 May | 93,662 | 93,662 | 93,662 |
Prior to the various placings of shares, the immediate funding requirements of the Company had been financed by advances from Professor Richard Conroy (executive chairman and major shareholder).
(b) Apart from Directors’ remuneration, and loans from shareholders, (who are also Directors), there here have been no contracts or arrangements entered into during the six monthperiod in which a Director of the Company had a material interest.
(c) The Company shares accommodation with Conroy Gold and Natural Resources plc which have certain common Directors and shareholders. For the six month period ended 30 November 2020, Conroy Gold and Natural Resources plc incurred costs totalling €39,388(30 November 2019: €54,034) on behalf of the Company. These costs were recharged to the Company by Conroy Gold and Natural Resources plc. At30 November 2020 Conroy Gold and Natural Resources plc owed €50,381 to the Company. At 30 November 2019, Conroy Gold and Natural Resources plc was owed €29,812 by the Company.
6 Subsequent events
COVID-19 continues to limit field and laboratory work given the restrictions on operations and movement and other work also continues in relation to the Company’s exploration and development programme.
There were no other material events subsequent to the reporting date which necessitate revision of the figures or disclosures included in the financial statements.
7 Approval of the condensed financial statements
These condensed financial statements were approved by the Boardof Directors on 26 February 2021. A copy of the condensed financial statements will be available on the Company’s website www.kareliandiamondresources.com on 26 February 2021.