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Karelian Diamond Res. PLC (KDR)

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Tuesday 28 February, 2006

Karelian Diamond Res. PLC

Interim Results


                                To be released at 7.00 a.m. on 28 February 2006

                        Karelian Diamonds Resources plc                        

                                ('the Company')                                

           Interim Results for the six months ended 30 November 2005           

Chairman's Statement

I have great pleasure in presenting your Company's report for the six months
ended November 2005. Your Company made excellent progress during the period
covered by this report, successfully applying for admission to AIM and
advancing its diamond exploration programme in Finland.

Trading on your Company's shares on AIM commenced at the beginning of
September, 2005.

Your Company's exploration programme is focussed on discovering potential
world-class diamond deposits 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 it hosts a number of
world-class diamond deposits.

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 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
Seitapera.

This pipe, which has a surface area of approximately 4 hectares, was discovered
by Malmikaivos Oy in 1993 but 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 13.3t composite sample from the
Seitapera pipe was reported to have returned a grade of 1.09 carats per hundred
tonnes.

The Seitaperä pipe shows that the right geochemical conditions exist to host
diamonds in the Kuhmo area. Karelian has discovered 16 separate indicator
mineral anomalies in the same general area as the pipe and also encountered
kimberlitic material in a preliminary trenching programme in Riihivaara that
followed a detailed magnetic survey of one of those anomalies.

Karelian 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.

The objective of Karelian's current follow-up drilling programme on the
Seitaperä pipe is to re-assess the geology, diamond potential and extent of the
pipe as well as its significance in relation to other potential sources of
kimberlitic pipes found by your Company in the Kuhmo area.

Your Company has developed a close working relationship with the Geological
Survey of Finland (GTK) and is able to draw on its expertise, its extensive
knowledge of Finnish geology and its excellent technical and laboratory
services. Your Company employs GTK staff under contract as local consultants
and to undertake fieldwork and has benefited greatly from this relationship. In
addition, your Company's senior consultant, Dr Bert Gerryts, is an
internationally respected diamond geologist who pioneered the use of indicator
minerals and geophysics in diamond exploration.

Finance

On admission to AIM your Company raised £500,000 (before expenses) through a
placing of 10,000,000 ordinary shares at 5p each, which together with the
facilities available to the Company, is financing the current phase of your
Company's activities. Your directors are considering the various options for
financing its future exploration and development programmes. These may include
bringing in a joint venture partner or the raising of further capital.

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

Professor Richard Conroy
Chairman
28 February 2006



PROFIT AND LOSS ACCOUNT
For the six months ended 30 November 2005

                                             Note       Six months   Year ended
                                                             ended       31 May
                                                       30 November         2005
                                                              2005             
                                                                               
                                                                 €            €
                                                                               
Operating expenses                                        (76,366)     (98,941)
                                                                               
Other income                                                 2,074            -
                                                                               
Loss for the financial period                             (74,292)     (98,941)
                                                                               
Profit and loss account at beginning of                   (98,941)            -
period                                                                         
                                                                               
Profit and Loss account at end of period                 (173,233)     (98,941)
                                                                               
Loss per share                                              €0.002       €0.003



BALANCE SHEET
At 30 November 2005

                                                                  At         At
                                                         30 November     31 May
                                                                2005       2005
                                                                               
                                                                   €          €
                                                                               
Fixed Assets                                                                   
                                                                               
Mineral interests                                          3,167,141  2,885,831
                                                                               
Tangible assets                                                1,593          -
                                                                               
Financial assets                                                   4          4
                                                                               
                                                           3,138,738  2,885,835
                                                                               
Current Assets                                                                 
                                                                               
Debtors                                                       10,438        660
                                                                               
Cash at bank and in hand                                     309,721          3
                                                                               
                                                             320,159        663
                                                                               
Creditors: amounts failing due within one year             (575,097)  (397,747)
                                                                               
Net Current Liabilities                                    (254,938)  (397,084)
                                                                               
Net Assets                                                 2,913,800  2,488,751
                                                                               
Capital and Reserves                                                           
                                                                               
Called up share capital                                      447,716    347,716
                                                                               
Share premium account                                      2,639,317  2,239,976
                                                                               
Profit and loss account                                    (173,233)   (98,941)
                                                                               
Shareholders' Funds                                        2,913,800  2,488,751



CASH FLOW STATEMENT
For the six months ended 30 November 2005

                                                        Six months   Year ended
                                                             ended       31 May
                                                       30 November         2005
                                                              2005             
                                                                               
                                                                 €            €
                                                                               
Net Cash Inflow from Operating Activities                   93,364      139,978
                                                                               
Capital Expenditure and Financial Investments            (282,987)    (225,835)
                                                                               
Net Cash Outflow before financing                        (189,623)     (85,857)
                                                                               
Financing                                                  499,341       85,860
                                                                               
Increase in Cash                                           309,718            3

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 €0.002 is based on the loss
for the half year of €74,292 and the weighted average number of ordinary shares
on a basic and fully diluted basis during the year of 39,771,676. 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, 2005.

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.


                                                                                                    

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