Progress Report

26 FEBRUARY 2008

                        Karelian Diamond Resources plc                         

                                ("the Company")                                

     GROUND MAGNETICS IDENTIFIES SIGNIFICANT NEW ANOMALIES NEAR KARELIAN'S     
                        DIAMONDIFEROUS KIMBERLITE PIPE                         

  * Drill-Testing Planned Next Month On Multi-Lobed Magnetic Target Beneath
    Lake
   
  * Second Anomaly Covers Presumed Submerged Section Of Known Pipe
   
  * Drilling Also Scheduled For Three Further Magnetic/Indicator Mineral
    Targets
   
AIM-quoted Karelian Diamond Resources plc is pleased to announce that recently
completed ground magnetic surveys over frozen lakes in the vicinity of the
Company's Seitaperä diamondiferous kimberlite pipe in Finland have identified
significant new anomalies which the Company plans to drill-test next month, if
sufficient ice thickness is present over the lakes.

The Company has recently completed a circa 90 hectare ground magnetometer
survey over a prominent airborne magnetic anomaly identified previously as a
result of re-processing of aeromagnetic data, flown at 200m line spacing, by
the Company in mid-2007. On the basis of this, the Company commissioned GTK,
the Geological Survey of Finland, to undertake a ground-based survey at 25m
line spacing to better resolve this prominent target ahead of a decision to
drill-test it.

The ground survey, completed in January this year, has defined a substantial
(+5 hectares) target with three distinct lobes. The magnetic signature is
well-defined and shows a high contrast (up to 1,000 nanoteslars) with the
surrounding basement rocks. The target is located beneath a major lake at a
water depth of 4m-12m. Because of the location, kimberlite indicator mineral
studies are of limited value as an exploration approach, although indicator
minerals have been recovered from the general vicinity, including G9 and G10
garnets.

The second ground magnetic survey covered 9 hectares over the presumed
submerged section of the Seitaperä pipe itself. It identified further magnetic
lobes, similar to those present over the land-based portion of the pipe, and
these have been earmarked for drill-testing.

The proposed winter drilling of both these targets will depend on sufficient
ice thickness being present over each of the respective lakes.

The Company is also planning to drill-test three further magnetic targets
associated with two pronounced kimberlite indicator mineral trains in the
Riihivaara area, near Kuhmo. Work over the past two years has established two
indicator mineral trains, including numerous G9 and G10 garnets. The planned
drilling will include a series of three to five short holes on each of the
three targets.

More than 10 percent of Finland is covered by lakes, and the proportion is
significantly higher in the Kuhmo area of the country. The Company considers
this lake environment to be an important potential location for undiscovered
kimberlites. Significant kimberlite discoveries have been made under lakes in
glacial environments in the past, not least the Diavik kimberlites in Lac de
Gras, Canada.

This release has been approved by the Company's technical staff who include;
Stephen Grimmer, who holds a PhD in Geochemistry/MSc in Exploration Geology, in
accordance with the guidance note for Mining, Oil & Gas Companies issued by the
London Stock Exchange in respect of AIM Companies, which outlines standards of
disclosure for mineral projects.

Further Information:                                                           
                                                                               
Karelian Diamond Resources plc                                Tel: [phone]
                                                                           8958
Professor Richard Conroy, Chairman                                             
                                                                               
City Capital Corporation Limited                             Tel: [phone]
                                                                           5867
Charles Dampney                                                                
                                                                               
John East & Partners Limited                                 Tel: [phone]
                                                                           2200
Jeffrey Coburn/Simon Fox                                                       
                                                                               
Hall Public Relations and Corporate Affairs                Tel: [phone]
                                                                               
Don Hall                                                                       
                                                                               
City of London PR Limited                                    Tel: [phone]
                                                                           5518
Ron Marshman/John Greenhalgh