To be embargoed until 7.00 a.m. 15 November 2006
Karelian Diamond Resources Plc ("KDR")
Final Results for the year ended 31 May 2006
I have great pleasure in presenting your Company's Annual Report and Financial
Statements for the year ended 31 May 2006, the first results since your
Company's shares were admitted to trading on AIM in September 2005.
During the year encouraging progress has been made in the exploration of the
Company's licences in the Karelian Craton of Finland.
The Company's licences cover part of a block of ancient crustal rocks occupying
much of eastern and northern Finland, extending over the border into Russia
where the Craton hosts a number of significant diamond deposits, including the
world class Lomonosova and Grib discoveries.
Your directors believe that the Finnish sector of the Craton has the potential
to host similar world-class deposits and, given its size and potential, it is
under-explored by comparison with other diamond producing regions of the world.
In selecting exploration areas in Finland, your Company has made use of
extensive aeromagnetic and electromagnetic data available in Finland to
identify geophysical anomalies that might represent kimberlite pipes.
Interpretation of the geophysical data has been followed by regional till
sampling in the target areas, some of which have yielded kimberlitic and
diamond indicator minerals, including G9 and G10 garnets that form at similar
temperatures and pressures to diamonds.
Your Company now holds 58 diamond claims in Finland, mostly over targets that
were identified using the above strategy. The claims are grouped geographically
into four blocks, each of which has been independently assessed as "highly
prospective for diamonds". The Kuhmo block is the largest with 49 claims,
including those covering a known diamondiferous pipe at Seitaperä and the 16
other diamond indicator mineral anomalies found by your Company as a result of
The presence of the Seitaperä kimberlite pipe shows that the right geochemical
conditions to host diamonds occur in the Kuhmo area. Furthermore, because your
Company has identified other diamond indicator mineral anomalies elsewhere on
the Claim block, the significance of this pipe is now much greater than at the
time of its discovery. When linked to the fact that kimberlite pipes typically
occur in clusters, it suggests that multiple sources of diamonds may be present
at Kuhmo. For this reason, it is the focus of your Company's initial
In the current year this programme will include further drilling of the
Seitaperä pipe, which has a surface area of 4 hectares, and systematic
evaluation of the other 16 known diamond indicator mineral anomalies to
determine if they warrant drilling. Till sampling will also continue, as will
work on your Company's three other highly prospective claim blocks.
Your Company's management has established a close working relationship with the
Geological Survey of Finland (GTK) and is able to draw on its expertise,
extensive knowledge of the country's geology and excellent technical and
laboratory services. Your Company employs GTK staff as local consultants and to
undertake fieldwork, and it has benefited greatly from this relationship.
Karelian can also call on its senior consultant, Dr Bert Gerryts, an
internationally respected diamond geologist who pioneered the use of indicator
minerals and geophysics in diamond exploration.
Karelian's admission documents included an independent assessment of its
diamond exploration properties and information portfolio prepared by The CSA
Group, a worldwide exploration management consultancy. Amongst other things,
this noted that Conroy Diamonds and Gold P.l.c, and Conroy P.l.c. (whose
Finnish diamond interests were transferred into Karelian) had been active in
diamond exploration in the Karelian Craton since 1994. CSA's assessment
commented that "These companies had carried out a large amount of work and
gained extensive exploration experience in the region, and the comprehensive
data package, exclusive survey results and significant portfolio of claims
transferred into your Company will provide it with a significant advantage in
its future operations".
The Company has begun a follow up of its Kuhmo targets with a trenching
programme designed to expose bedrock in an attempt to explain the observed
This work is also being carried out by the GTK. At the same time, additional
basal till samples have been collected to further evaluate the diamond
prospectivity of the potential drilling targets.
The first phase of the trenching programme is complete and results achieved to
date are encouraging. One of the four trenches contains what is believed to be
narrow anastomosing dikelets of kimberlitic material at the edges of an 8m wide
"hole" in the bedrock surface caused by differential glacial scouring of
weathered, soft material. Two other trenches also revealed similar "holes" in
the bedrock which are further examples of preferential glacial removal of
intensely altered rock types.
The bedrock surface in these "holes" is too deep for the excavator to reach,
but information gained from the trenching has considerably improved the
selection of drill sites to test for the presence of wider kimberlite bodies.
The loss after taxation for the year ended 31 May 2006 was €135,952 (1 March
2004 to 31 May 2005: €98,941) and the net assets as at 31 May 2006 were €
2,742,471 (2005: €2,488,751).
On 2 June 2006 Deloitte & Touche were appointed as auditors to the Company.
Directors, Consultants and Staff.
I would like to express my deep appreciation of the support and dedication of
the directors, consultants and staff, which has made possible the continued
progress and success which your Company has achieved.
The Company will continue with its exploration programme with a view to
developing the diamond interests in Finland in order to generate shareholder
Professor Richard Conroy
15 November 2006
Profit and Loss Account
For the year ended 31 May 2006
Year 15 month
ended 31 May
31 May 2005
Operating Expenses (139,599) (98,941)
Other Income 3,647 -
Loss for the Financial Year/Period (135,952) (98,941)
Loss per ordinary share €0.0032 €0.0028
There are no recognised gains or losses other than the loss for the year. The
above all result from continuing operations.
As at 31 May 2006
Mineral interests 3,541,406 2,885,831
Tangible fixed assets 1,509 -
Financial assets 4 4
Debtors 13,661 660
Cash at bank and in hand 112,791 3
Creditors: Amounts falling due within one year (442,117) (397,747)
Net Current Liabilities (315,665) (397,084)
Total Assets less Current Liabilities 3,227,254 2,488,751
Creditors: Amounts falling due after more than one (484,783) -
Net Assets 2,742,471 2,488,751
Capital and Reserves
Called up share capital 447,716 347,716
Share premium account 2,529,648 2,239,976
Profit and loss account (234,893) (98,941)
Shareholders' Funds - all equity 2,742,471 2,488,751
Cash Flow Statement
For the year ended 31 May 2006
Year 15 month
ended 31 May
31 May 2005
Net Cash Inflow from Operating Activities 53,753 139,978
Capital Expenditure and Financial Investments (657,252) (225,835)
Net cash Outflow before Financing (603,499) (85,857)
Financing 716,287 85,860
Increase in Cash 112,788 3
Notes to the Financial Statements
1. Publication of non-statutory accounts
The financial information set out in this preliminary announcement are
abbreviated accounts as defined in Section 19 of the Companies (Amendment) Act
The financial information for the period ended 31 May 2005 have been extracted
from the Company's financial statements to that date which have received an
unqualified auditors' report but have not yet been delivered to the Registrar
2. Loss per share
The calculation of the loss per ordinary share of €0.0032 (2005 - €0.0028) is
based on the loss for the financial year of €135,952 (2005 - €98,941) and the
weighted average number of ordinary shares on a basic and fully diluted basis
during the year of 42,271,676 (2005 - 34,771,676). Share options and warrants
are not included in the calculation of fully diluted shares since the Company
incurred a loss in 2006 and 2005 which results in these potential shares being
No dividends were paid or are proposed in respect of the period ended 31 May,
4. Copy of Accounts
A copy of the Annual Report and Accounts will be sent to all shareholders
shortly and will be available from the Company's registered office, 10 Upper
Pembroke Street, Dublin 2.