KARELIAN DIAMOND RESOURCES PLC

Interim / Quarterly Report • Feb 25, 2015

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KARELIAN DIAMOND RESOURCES PLC - Half-yearly Report

PR Newswire

London, February 24

                                                           25 February 2015Karelian Diamond Resources plc("Karelian" or "the Company")         Half-yearly results for the six months ended 30 November 2014                           SIGNIFICANT PROGRESS MADEKarelian Diamond Resources plc (AIM: KDR; ESM: KDR.I), the diamond explorationcompany focused on Finland, announces its results for the six months ended 30November 2014; a period during which the Company made excellent progress.Highlights:  \* Riihivaara samples in Eastern Finland shown to come from diamond stability    field  \* Presence of eclogitic material in samples suggests source relatively close  \* Eclogitic materials tend to be associated with richer diamond grades  \* Agreement with Rio Tinto extendedProfessor Richard Conroy, Chairman, commented:"We have successfully progressed our diamond exploration programme in Finlandwith results at Riihivaara suggesting the close proximity of a new kimberlitediscovery".Further Information:Professor Richard Conroy, Chairman/ Karelian Diamond       Tel: +353-1-661-8958Resources plcVirginia Bull/Simon Clements/ SanlamSecurities UKLimited   Tel: +44-20-7628-2200(Nomad)Jon Belliss/ Abigail Wayne/Hume CapitalSecurities PLC      Tel: +44-20-3693-1493(Broker)Ger Heffernan/IBI Corporate Finance Limited (ESM Adviser)  Tel +353-766-234-800Michael Padley/ Lothbury Financial Services                Tel: +44-20-3440-7620Don Hall/ Hall Communications                              Tel: +353-1-660-9377Visit the website at: www.kareliandiamondresources.com                             CHAIRMAN'S STATEMENTDear Shareholder,I have great pleasure in presenting your Company's Half-Yearly Report for thesix months ended 30 November 2014. During this period excellent progresscontinued to be made with the diamond exploration programme in the KarelianCraton in Finland, the objective of which is to discover a world class diamonddeposit. Also during the period your Company's confidentiality agreement (withBack in Rights) with Rio Tinto Mining and Exploration Ltd ("Rio Tinto") wasextended to 2020.Diamond Exploration ProgrammeYour Company's primary exploration area is in the Karelian Craton in NorthEastern Europe where, in the Finnish sector of the Craton, we hope to discovera diamond orebody comparable to the world class diamond deposits, Lomonosovaand the Grib Pipe, which have been discovered in the Russian sector of thecraton.The Karelian Craton, which extends across Finland and northwest Russia, iscomparable in size to the diamond rich Slave Lake Craton in Canada. The Russiandiamond company ALROSA Company Limited (Closed Joint-Stock Company), which isnow the world's largest diamond miner, has indicated recently that the KarelianCraton region will represent almost all of its future growth.Your Company's diamond exploration programme in Finland covers five regionsand, at Seitaperä in Eastern Finland, the programme has outlined the largestdiamondiferous pipe yet discovered in Finland.Recent exploration results from your Company's Riihivaara target in EasternFinland have been particularly exciting. Sample material from the target areahas been confirmed as being derived from the diamond stability field of theEarth's mantle. Eclogite mantle materials are present which is significant, asthese tend to be associated with richer diamond grades.Detailed analysis of the sample material from Riihivaara was carried out byScanning Electron Microscopy (SEM) at the Geological Survey of Finland (GTK)laboratory in Helsinki. The laboratory results have demonstrated the presenceof 27 Group 2 eclogite grains, plus 8 Harzburgitic G10 garnets including a G10(D), as well as 33 Lherzolite G9 garnets, 27 megacrysts and 1 Wehrlitic grain.The presence of what are known as Harzburgitic G10 garnets, including inparticular a G10(D), confirmed that the sample material is derived from thediamond stability field of the Earth's mantle. Follow up exploration is underway at Riihivaara.Exploration continues also on your Company's other diamond targets in Finland,particularly in the Kuhmo and Kuusamo areas of Eastern Finland.Agreement with Rio Tinto Mining & ExplorationThe existing Confidentiality Agreement (with Back in Rights), as announced on22 July 2010, with Rio Tinto Mining and Exploration Limited ("Rio Tinto") hasbeen extended until 30 June 2020.Under the agreement, Rio Tinto discloses to Karelian confidential informationand physical geological samples relating to exploration in Finland for thepurpose of the Company considering that information in relation to its ownexisting and potential exploration programmes in Finland.To date this information has included data on over 53,000 till samples, over600 analytical results, data on Kimberlite indicator minerals from over 200locations and records on the discovery of 122 diamonds. The integration of thisdata with your Company's own data has been of great benefit.In consideration of Rio Tinto disclosing the confidential information to it,Karelian has agreed that Rio Tinto will have the option to earn a 51 per cent.interest in any project identified by Karelian in Finland by Rio Tinto payingthe direct cash expenditures incurred in developing the project, subject to thefollowing conditions: 1. For diamond projects the option will be triggered if Karelian completes 10    tonnes or more of bulk sampling for diamond exploration; and 2. For all other minerals the option will be triggered if Karelian discovers a    resource with an in situ value that is equal to or greater than the in situ    value of 3 million ounces of gold in a JORC compliant resource calculation.FinanceThe loss after taxation for the half-year ended 30 November 2014 was €121,087(2013: loss of €96,610) and the net assets as at 30 November 2014 were €8,319,399 (2013: €4,363,079).At the Annual General Meeting a resolution extending the directors' warrants byfive years was passed.Directors and StaffI would like to thank my fellow directors, staff and consultants for theirsupport and dedication, which has enabled the continued success of the Company.I am also pleased to welcome Dr Sorċa Conroy to the Board with herbroad-ranging city experience. Her knowledge, skills and experience willsignificantly contribute to the Company as it moves forward.OutlookWe have made a significant amount of progress in the period and expect this tocontinue as we move forward with your Company's diamond interests in Finland.Yours faithfully,Professor Richard ConroyChairman25 February 2015                               INCOME STATEMENT                     FOR HALF-YEAR ENDED 30 NOVEMBER 2014                                        Six months      Six months         Year                                             ended           ended        ended                                       30 November     30 November       31 May                                              2014            2013         2014                                       (Unaudited)     (Unaudited)    (Audited)                                                 €               €            €OPERATING EXPENSES                       (122,808)        (89,123)    (191,139)Finance income - bank interest               1,721               -          699receivableFinance costs - interest on                      -         (7,487)      (8,451)shareholder loanLOSS BEFORE TAXATION                     (121,087)        (96,610)    (198,891)Taxation                                         -               -            -LOSS FOR THE YEAR                        (121,087)        (96,610)    (198,891)Loss per ordinary share - basic          (€0.0004)        (€0.001)    (€0.0013)and diluted                       STATEMENT OF COMPREHENSIVE INCOME                     FOR HALF-YEAR ENDED 30 NOVEMBER -2014                                        Six months      Six months         Year                                             ended           ended        ended                                       30 November     30 November       31 May                                              2014            2013         2014                                       (Unaudited)     (Unaudited)    (Audited)                                                 €               €            €LOSS FOR PERIOD                          (121,087)        (96,610)    (198,891)Total income and expense                         -               -            -recognised in other comprehensiveincomeTOTAL COMPREHENSIVE INCOME FOR THE       (121,087)        (96,610)    (198,891)PERIOD - ENTIRELY ATTRIBUTABLE TOEQUITYHOLDERS                        STATEMENT OF FINANCIAL POSITION                            AS AT 30 NOVEMBER 2014                                       30 November    30 November        31 May                                              2014           2013          2014                                        (Unaudited)    (Unaudited)     (Audited)ASSETS                                           €              €             €Non-current AssetsIntangible assets                        7,609,850      7,068,402     7,329,228Investment in Subsidiary                         4              4             4Property, plant and equipment                    0            249           165                                         7,609,854      7,068,655     7,329,397Current AssetsTrade and other receivables                307,309          7,051        55,779Cash and cash equivalents                  924,748          4,271     2,105,041                                         1,232,057         11,322     2,160,820Total Assets                             8,841,911      7,079,977     9,490,217EQUITY AND LIABILITIESCapital and ReservesCalled up share capital                  2,865,350        922,083     2,865,350Share premium                            6,786,177      4,621,158     6,786,177Share based payments reserve               559,118        487,716       525,275Retained losses                        (1,891,246)    (1,667,878)   (1,770,159)Total Equity                             8,319,399      4,363,079     8,406,643Non-current LiabilitiesFinancial Liabilities                      309,589      1,212,404       309,589Total Non-current Liabilities              309,589      1,212,404      309,-589Current LiabilitiesTrade and other payables                   212,923      1,504,494       773,985Total Current Liabilities                  212,923      1,504,494       773,985Total Liabilities                          522,512      2,716,898     1,083,574Total Equity and Liabilities             8,841,911      7,079,977     9,490,217                        STATEMENT OF CHANGES IN EQUITY                   FOR THE HALF-YEAR ENDED 30 NOVEMBER 2014                                             Share-based     Retained                          Share        Share      Payment    Earnings     Total                        Capital      Premium      Reserve   (Deficit)    Equity                              €            €            €           €         €At 1 June 2014        2,865,350    6,786,177      525,275 (1,770,159) 8,406,643Share-based payments          -            -       33,843           -    33,843Loss for the period           -            -            -   (121,087) (121,087)At 30 November -2014  2,865,350    6,786,177      559,118 (1,891,246) 8,319,399                                             Share-based     Retained                          Share        Share      Payment    Earnings     Total                        Capital      Premium      Reserve   (Deficit)    Equity                              €            €            €           €         €At 1 June 2013          922,083    4,621,158      450,157 (1,571,268) 4,422,130Share-based payments          -            -       37,559           -    37,559Loss for the period           -            -            -    (96,610)  (96,610)At 30 November 2013     922,083    4,621,158      487,716 (1,667,878) 4,363,079                              CASH FLOW STATEMENT                   FOR THE HALF-YEAR ENDED 30 NOVEMBER 2014                                           Six months     Six months       Year                                                ended          ended      ended                                          30 November    30 November     31 May                                                 2014           2013       2014                                          (Unaudited)    (Unaudited)  (Audited)                                                    €              €          €Cash flows from operating activitiesCash (used in)/generated by operations      (930,224)        197,602  (147,489)Tax paid                                            -              -          -Net cash (used in)/generated by             (930,224)        197,602  (147,489)operating activitiesCash flows from investing activitiesInvestment in exploration and               (251,790)      (236,273) (-432,548)evaluationNet cash used in investing activities       (251,790)      (236,273) (-432,548)Cash flows from financing activitiesIssue of share capital (net of                      -              -  3,025,788expenses)Advances/(Repayment) of shareholder                 -         40,436  (343,915)loanBank interest received                          1,721              -        699Net cash generated from financing               1,721         40,436  2,682,572activities(Decrease)/Increase in cash and cash      (1,180,293)          1,765  2,102,535equivalentsCash and cash equivalents at beginning      2,105,041          2,506      2,506of periodCash and cash equivalents at end of           924,748          4,271  2,105,041period                       NOTES TO THE FINANCIAL STATEMENTS                   FOR THE HALF-YEAR ENDED 30 NOVEMBER 20141. Basis of preparationThe half-yearly financial statements have been prepared on the basis of therecognition and measurement requirements of International Financial ReportingStandards (IFRS) as adopted by the European Union (EU), and theirinterpretations adopted by the International Accounting Standards Board (IASB).The accounting policies used in the preparation of the half-yearly financialinformation are the same as those used in the Company's audited financialstatements for the year ended 31 May 2014.2. Earnings per shareThe calculation of the loss per ordinary share of €0.0004 (2013: loss €0.001)is based on the loss for the financial period of €121,087 (2013: loss €96,610)and the weighted average number of ordinary shares in issue during the periodof 286,535,034 (2013: 92,308,242).Since the Company incurred a loss the effect of share options and warrantswould be anti-dilutive.3. DividendsNo dividends were paid or are proposed in respect of the half-year ended 30November 2014.4. Copy of half-yearly reportA copy of the half- yearly report will be available on the Company's websitewww.kareliandiamondresources.com and will be available from the Company'sregistered office, 10 Upper Pembroke Street, Dublin 2.