Karelian Regulatory News (KDR)

21 Feb 2008 11:48

Karelian Diamonds Resources plc ("the Company") Interim Results for the six months ended 30 November 2007

Chairman's Statement

I have great pleasure in presenting your Company's Interim Report for the six months ended November 2007. During the period your Company continued to make excellent progress in its exploration programme for diamonds in Finland. This programme is focussed on discovering a potential world-class diamond deposit in the Finnish sector of the Karelian Craton.

Two world class diamond deposits have already been discovered in the Russian sector of the Karelian Craton and your directors believe that the Finnish sector of the Craton, given its size and potential, is under-explored and, by analogy with the Russian sector, has the potential to host similar world class deposits.

A four-hole drilling programme on your Company's Seitaperƒ¤ pipe in the Kuhmo region has shown a possible increase in the surface area of the pipe to 6.9 hectares. This would represent an increase of 65 per cent. over the previous size of 4.2 hectares which itself was the largest known diamondiferous kimberlite in Finland. Kimberlite material was intersected in 224.8 metres of the 294.3m drilled and zones with potentially diamond-bearing mantle material were encountered.

Combined with previous Company drilling results (two holes for 172.8m of which 103.9m intersected kimberlite) and re-logging of archive core held by the Geological Survey of Finland (nine holes for 221.5m - all in kimberlite), drilling at Seitaperƒ¤ has now yielded total kimberlite intersections of 550m, including five wall rock contacts at depths between 45.9m and 76.6m depth (average 52.7m).

Based on the above information, your Company has calculated the minimum area of the pipe to be 5.22 hectares at 50m depth. Its total strike length exceeds 620m and pipe width varies between 40m and 160m (average 90m). When recent surface mapping and results from recent and past surface trenching (12 trenches into kimberlite) are included, and taking into account associated kimberlite dykes and a probable pipe extension to the south-west beneath Lake Kylmƒ¤lahti, a surface expression of up to 6.9 hectares is possible for Seitaperƒ¤.

Drill-hole SP4 (101.8m, of which 85.0m was in kimberlite) intersected a significant zone (+20m) of kimberlite carrying abundant garnet-peridotite xenoliths. This potentially diamond bearing mantle material represents between 20 per cent. and 40 per cent. of the total core. Detailed evaluation of this material will include a mineral chemistry study of the pyrope garnets and other diamond indicator minerals present, to determine diamond bearing potential. If the results are sufficiently positive, this will be followed by large diameter drilling of this zone to extract sufficient material for micro-diamond analysis.

The Seitaperƒ¤ pipe has been demonstrated to be of adequate size to be a feasible development target if it (or even a substantial sub-portion of it) proves to be of sufficient diamond and grade value.

It remains for the Company to determine the economic viability of the pipe (or a sufficient portion thereof) and this is the subject of ongoing exploration. This work involves demonstrating sufficient diamond grade by micro-diamond studies on mantle-rich areas, and extending such areas by drill testing. If successful, the next step will be to bulk sample these areas to confirm grade and obtain diamond size distribution and quality data, i.e. a diamond value.

Should a kimberlite with economic potential be confirmed, there should be every expectation that it can be developed as a successful and profitable mine in due course and in a realistic time frame.

In addition to making significant progress on the Seitaperƒ¤ kimberlite pipe your Company also has other diamond exploration programmes in Finland at various stages of development. These include both advanced exploration which has resulted in well defined kimberlite-indicator-mineral (KIM) trains and associated geophysical targets which now warrant drill-testing, and less-advanced regional plays. The latter are using the same geophysical techniques (airborne and ground-based magnetics) and regional till sampling for KIMs which, with further work, are expected to identify additional kimberlite targets.

To summarize, the six months to November 2007 have been a successful and encouraging period for your Company. Work to-date has paid dividends in terms of advancing our understanding and confidence in the Seitaperƒ¤ kimberlite pipe, as well as developing our regional exploration to the stage where we have identified additional drill-ready targets. Our work has been systematic and to best industry standards, involving logging of archive core, surface trenching, drilling and commissioning mineralogical, mineral chemistry and micro-diamond studies on Seitaperƒ¤.

Regionally we have acquired, processed and re-interpreted airborne magnetic data, conceived ground magnetic surveys and undertaken an extensive till sampling programme for kimberlite indicator minerals. Our results so far confirm our belief that the Seitaperƒ¤ kimberlite is a project worthy of detailed evaluation and regionally, have indicated a number of likely kimberlite bodies which we are preparing to drill-test, as well as identifying entirely new indicator mineral trains which we continue to follow-up with further work. Our land position has been maintained and strengthened in accordance with these promising results.

Finance and Results

In July 2007 your Company raised ¢â€š¬1,429,254, net of expenses, by placing 15,770,000 ordinary shares if ¢â€š¬0.01 each at 6.5p sterling

The results for the half-year are set out below. The loss for the period was ¢â€š¬ 101,500 (¢â€š¬86,989 for the corresponding period last year).

Directors and Staff

I would like to thank my fellow directors, staff and consultants for their support and dedication. They have made the outstanding progress of the Company possible. I look forward to the future with confidence.

Yours faithfullyProfessor Richard ConroyChairman21 February 2007UNAUDITED BALANCE SHEETAt 30 November 2007 30 November 30 November 31 May 2007 2006 2007 (Unaudited) (Unaudited) (Audited) ¢â€š¬ ¢â€š¬ ¢â€š¬Fixed Assets Mineral interests 3,858,785 3,704,588 3,617,723 Tangible assets 1,333 1,425 1,341 Financial assets 4 4 4 3,860,122 3,706,017 3,619,068 Current Assets Debtors 4,146 8,966 2,324 Cash at bank and in hand 602,354 23,604 115,402 606,500 32,570 117,726

Creditors: amounts falling due within one (129,544) (109,122) (63,759) year

Net Current Assets/(Liabilities) 476,956 (76,552) 53,967

Total Assets less Current Liabilities 4,337,077 3,629,465 3,673,035

Creditors: amounts falling due after more (329,869) (966,983) (1,031,298)than one year Net Assets 4,007,210 2,662,482 2,641,737 Capital and Reserves Called up share capital 605,416 447,716 447,716 Share premium account 3,801,202 2,529,648 2,529,648 Share based payments reserve 62,320 17,500 24,600 Profit and loss account (461,727) (332,382) (360,227) Shareholders' Funds - all equity 4,007,211 2,662,482 2,641,737UNAUDITED PROFIT AND LOSS ACCOUNTFor the six months ended 30 November 2007 Six months Six months Year ended ended ended 31 May 30 November 30 November 2007 2007 2006 (Unaudited) (Unaudited) (Audited) ¢â€š¬ ¢â€š¬ ¢â€š¬ Operating expenses (109,917) (87,047) (125,404) Other income 8,417 58 70 Loss for the financial period (101,500) (86,989) (125,334)

Profit and loss account at beginning of (360,227 (245,393) (234,893) period

Profit and Loss account at end of period (461,727) (332,382) (360,227)

Loss per share ¢â€š¬0.0018 0.0019 0.0028UNAUDITED CASH FLOW STATEMENTFor the six months ended 30 November 2007 Six months Six months Year ended ended ended 31 May 30 November 30 November 2007 2007 2006 (Unaudited) (Unaudited) (Audited) ¢â€š¬ ¢â€š¬ ¢â€š¬ Net Cash Outflow from Operating (37,529) (408,205) (305,458)Activities Capital Expenditure and Financial (241,063) (163,182) (263,046)Investments Net Cash Outflow before financing (278,591) (571,387) (568,504) Financing 765,543 482,200 571,115 Increase/(Decrease) in Cash 486,952 (¢â€š¬89,187) ¢â€š¬2,611

Notes to the Financial Statements

1. Publication of non-statutory accounts

The financial information set out in this document does not comprise the statutory accounts of the Company.

2. Loss per share

The calculation of the loss per ordinary share of ¢â€š¬0.0018 (2006 - ¢â€š¬0.0019) is based on the loss for the half year of ¢â€š¬101,500 (2006 - ¢â€š¬86,989) and the weighted average number of ordinary shares on a basic and fully diluted basis during the period of 55,285,009 (2006 - 44,771,676). Share options and warrants are not included in the calculation of fully diluted shares since the Company incurred a loss which results in these potential shares being anti-dilutive.

3. Dividends

No dividends were paid or are proposed in respect of the period ended 30 November, 2007.

4. Copy of Interims

A copy of the Interim Report will be sent to all shareholders shortly and will be available from the Company's registered office, 10 Upper Pembroke Street, Dublin 2.

Further enquiries:Professor Richard ConroyKarelian Diamond Resources plc 00 353 (1) 661 8958Jeffrey CoburnJohn East & Partners Limited 020 7628 2200Charles DampneyCity Capital Limited 020 7822 7107