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Karelian Diamond Res. PLC (KDR)

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Thursday 21 February, 2008

Karelian Diamond Res. PLC

Half-yearly Report

                        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

A four-hole drilling programme on your Company's Seitaperä 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 Seitaperä 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 Kylmälahti, a
surface expression of up to 6.9 hectares is possible for Seitaperä.

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

The Seitaperä 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 Seitaperä 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

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 Seitaperä 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 Seitaperä.

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 Seitaperä 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 €1,429,254, net of expenses, by placing
15,770,000 ordinary shares if €0.01 each at 6.5p sterling

The results for the half-year are set out below. The loss for the period was €
101,500 (€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 faithfully
Professor Richard Conroy
21 February 2007

At 30 November 2007

                                           30 November  30 November      31 May
                                                  2007         2006        2007
                                           (Unaudited)  (Unaudited)   (Audited)
                                                     €            €           €
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)
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   2,641,737

For 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)
                                                      €            €          €
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)
Profit and Loss account at end of period      (461,727)    (332,382)  (360,227)
Loss per share                                  €0.0018       0.0019     0.0028

For 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) 
                                                     €            €           €
Net Cash Outflow from Operating               (37,529)    (408,205)   (305,458)
Capital Expenditure and Financial            (241,063)    (163,182)   (263,046)
Net Cash Outflow before financing            (278,591)    (571,387)   (568,504)
Financing                                      765,543      482,200     571,115
Increase/(Decrease) in Cash                    486,952    (€89,187)      €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 €0.0018 (2006 - €0.0019) is
based on the loss for the half year of €101,500 (2006 - €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 Conroy
Karelian Diamond Resources plc 00 353 (1) 661 8958

Jeffrey Coburn
John East & Partners Limited 020 7628 2200

Charles Dampney
City Capital Limited 020 7822 7107


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