Karelian Regulatory News (KDR)

27 Feb 2007 07:01

To be embargoed until Tuesday 27 February at 7.00am.

Karelian Diamonds Resources plc ("the Company") Interim Results for the six months ended 30 November 2006

Chairman's Statement

I have great pleasure in presenting your Company's Interim Report for the six months ended 30 November 2006. During the period your Company made 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. This is a block of ancient crustal rocks which occupies much of eastern and northern Finland, extending over the border into Russia where two world class diamond deposits, Lomonosova and the Grib pipe, have been discovered.

Your Company believes 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.

Your Company's claims in Finland are grouped on a geographical basis into four blocks, all of which lie within the Karelian Craton. The Kuhmo block is the largest and includes claims covering a proven diamondiferous kimberlite pipe at Seitaperƒ¤.

The Seitaperƒ¤ pipe, which has a surface area of approximately 4 hectares, was discovered by Malmikaivos Oy in 1993 but was never fully explored. Only a very limited number of shallow vertical drill holes were completed by Malmikaivos Oy and its partner Ashton before the latter withdrew from the area to focus on other Finnish claims some 120km away. However, a 13.3 tonne composite sample from the Seitaperƒ¤ pipe was reported to have returned a grade of 1.09 carats per hundred tonnes. As the Seitaperƒ¤ pipe covers a large surface area which had previously been the subject of only limited drilling, your Company is carrying out a drilling programme as part of a comprehensive reassessment of the diamond potential of the pipe.

The presence of diamonds in the Seitaperƒ¤ pipe indicates that the right geochemical conditions exist to host diamonds in the Kuhmo area. Your Company has discovered 18 separate indicator mineral anomalies in the same general area as the Seitaperƒ¤ pipe. It has also encountered kimberlitic material in a preliminary trenching programme that followed a detailed magnetic survey of one of these anomalies.

Your Company believes that these developments, together with the fact that kimberlites typically occur in clusters, suggest that multiple sources of diamonds may exist in the Kuhmo area in which your Company is conducting an active exploration programme to locate these sources.

Award of 41 Additional Diamond Licences in Eastern Finland

Your Company has recently been awarded all 41 additional claim reservations for which it had applied to augment the diamond claims already held.. The applications followed detailed analysis of the recent release of data by the Geological Survey of Finland (GTK) from an extensive sampling programme carried out by them in eastern Finland where your Company has carried out limited regional exploration.

The GTK programme comprised nearly 500 roadside sites from which samples, mostly representing basal tills, were collected by an excavator. The sampling results, made available by the GTK on 15 October 2006, included the recovery of a number of G9 and G10 pyrope garnet diamond indicator minerals, as well as large quantities of chromite grains.

Your Company is delighted to have been awarded the new claim reservations over ground which complements our existing diamond claims in Finland. The GTK sampling data clearly shows that the new ground has potential to host diamond deposits and will form an integral part of our ongoing exploration programme.

Results

The results for the half-year are set out below. The loss for the period was ¢â€š¬ 79,989 (¢â€š¬74,292 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 success of the Company possible. I look forward to the future with confidence.

Yours faithfullyProfessor Richard ConroyChairman27 February 2007PROFIT AND LOSS ACCOUNTFor the six months ended 30 November 2006 Six months Six months Year ended ended ended 31 May 30 November 30 November 2006 2006 2005 (Unaudited) (Unaudited) (Audited) ¢â€š¬ ¢â€š¬ ¢â€š¬ Operating expenses (80,047) (76,366) (139,599) Other income 58 2,074 3,647 Loss for the financial period (79,989) (74,292) (135,952)

Profit and loss account at beginning of (234,893) (98,941) (98,941) period

Profit and Loss account at end of period (¢â€š¬314,882) (¢â€š¬173,233) (¢â€š¬234,893)

Loss per share ¢â€š¬0.0018 ¢â€š¬0.0017 ¢â€š¬0.0032BALANCE SHEETAt 30 November 2006 30 November 30 November 31 May 2006 2005 2006 (Unaudited) (Unaudited) (Audited) ¢â€š¬ ¢â€š¬ ¢â€š¬ Fixed Assets Mineral interests 3,704,588 3,167,141 3,541,406 Tangible assets 1,425 1,593 1,509 Financial assets 4 4 4 3,706,017 3,168,738 3,542,919 Current Assets Debtors 8,966 10,438 13,661 Cash at bank and in hand 23,604 309,721 112,791 32,570 320,159 126,452

Creditors: amounts falling due within one (109,122) (575,097) (442,117) year

Net Current Liabilities (76,552) (254,938) (315,665)

Total Assets less Current Liabilities 3,629,465 2,913,800 3,227,254

Creditors: amounts falling due after more (966,983) - (484,783)than one year Net Assets ¢â€š¬2,662,482 ¢â€š¬2,913,800 ¢â€š¬2,742,471 Capital and Reserves Called up share capital 447,716 447,716 447,716 Share premium account 2,529,648 2,639,317 2,529,648 Profit and loss account (314,882) (173,233) (234,893) Shareholders' Funds - all equity ¢â€š¬2,662,482 ¢â€š¬2,913,800 ¢â€š¬2,742,471CASH FLOW STATEMENTFor the six months ended 30 November 2006 Six months Six months Year ended ended ended 31 May 30 November 30 November 2006 2006 2005 (Unaudited) (Unaudited) (Audited) ¢â€š¬ ¢â€š¬ ¢â€š¬

Net Cash (Outflow) Inflow from Operating (408,205) 93,364 53,753 Activities

Capital Expenditure and Financial (163,182) (282,987) (657,252)Investments Net Cash Outflow before financing (571,387) (189,623) (603,499) Financing 482,200 499,341 716,287 Increase/(Decrease) in Cash (¢â€š¬89,187) ¢â€š¬309,718 ¢â€š¬112,788

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 is based on the loss for the half year of ¢â€š¬79,989 and the weighted average number of ordinary shares on a basic and fully diluted basis during the period of 47,771,676. 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, 2006.

4. 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