REG-Karelian Diamond Res.: Half-year Report
26/02/2021 17:00
26 February 2021
Karelian Diamond Resources plc
(“Karelian” or “the Company”)
Half-yearly results for the six months ended 30 November 2020
Karelian Diamond Resources plc (AIM: KDR), the diamond exploration company
focused on Finland, announces its unaudited results for the six months ended
30 November 2020. Details of these can be found below and a full copy of the
statement can be viewed on the Company’s website.
Highlights of the half-year period included:
* Process of granting a full Mining Permit to develop the Company’s diamond
deposit at Lahtojoki continued.
* Work regarding ground rental compensation on behalf of TUKES (The Finnish
Mining Authority) is now in its final stages.
* The process in relation to compensation for landowners at Lahtojoki is now
at an advanced stage. However, a public meeting is required before the process
can be completed. This will be held when COVID-19 regulations allow. A full
Mining Permit follows.
* Vehicular access to the deposit, the adjacent Lahtojoki South exploration
permit area and the surrounding reservation area granted.
* The Company’s exploration programme also continued despite the inevitable
delays related to the COVID-19 pandemic.
Professor Richard Conroy, Chairman of Karelian, said:
“We are working hard towards the development of a mine at Lahtojoki and
despite the restrictions imposed due to COVID-19 good progress continued to be
made both in relation to the Lahtojoki Diamond Deposit and the Company’s
exploration programme”.
For further information please contact:
Karelian Diamond Resources plc Tel: +353-1-479-6180
Professor Richard Conroy, Chairman
Allenby Capital Limited (Nomad) Tel: +44-20-3328-5656
Nick Athanas/Nick Harriss
Brandon Hill Capital Limited (Broker) Tel: +44-20-3463-5000
Jonathan Evans
Lothbury Financial Services Tel: +44-20-3290-0707
Michael Padley
Hall Communications Tel : +353-1-660-9377
Don Hall
Chairman’s Statement
Dear Shareholder,
I have great pleasure in presenting the Company’s half-yearly report for the
six month period ended 30 November 2020. The Company made excellent progress
during the period despite delays caused by the COVID-19 pandemic.
The process of granting a full Mining Permit to develop the Company’s
diamond deposit at Lahtojoki continued, as did its diamond exploration
programme. The work regarding ground rental compensation by the National Land
Survey of Finland (“NLSF”) on behalf of TUKES (The Finnish Mining
Authority) also continued and is now in its final stages. Under Finnish
regulations a public meeting is required before the process can be completed.
This meeting will be held when COVID-19 regulations allow. TUKES can then
proceed to issue a full Mining Permit to the Company over the Lahtojoki
diamond deposit.
The National Land Survey of Finland has in the meantime, during the half-year,
formally granted rights of way to the Company over the entire Naviskangas
private forest road, together with a side road, giving vehicular access to the
deposit, the adjacent Lahtojoki South exploration permit area and the
surrounding reservation in the Kaavi region of Finland. The granting of
vehicular rights of way will facilitate the Company in its technical
assessment of the deposit.
The Lahtojoki deposit is situated in a highly favourable location with
excellent infrastructure including good road access and power distribution,
combined with local technical and logistics availability, which significantly
reduces the likely capital and operating costs of a mine as compared with the
situation in regions of the world with less adequate infrastructure.
The Lahtojoki deposit also appears to have a significant percentage of
coloured diamonds, in particular pink diamonds, which could add to its
financial attractiveness especially with the closure of the main source of
pink diamonds - the Argyle mine in Western Australia.
The Company’s diamond exploration programme in Finland has led to the
discovery of a green diamond in till in the Kuhmo region of Finland which lies
close to the Russian border. The Company believes that the Kuhmo region could
be part of a new kimberlite province.
The Company is also engaged in exploration in the vicinity of the Lahtojoki
diamond deposit.
COVID-19 Update
The Company continued with measures in accordance with Government guidelines
to protect the health, safety and well-being of its employees, contractors and
partners in Finland and Ireland. COVID-19 continues to limit field and
laboratory work given the restrictions on operations and movement. Directors
and executives took a 50% reduction in fees and salaries during the period
while technical and field staff took a 25% reduction in salaries.
Finance
The loss after taxation for the half year ended 30 November 2020 was
€193,243 (for the six-month period ended 30 November 2019: €250,150) and
the net assets as at 30 November 2020 were €9,393,315 (30 November 2019:
€9,177,513).
During the half-year the Company raised a total of £420,000 through a placing
of 10,500,000 ordinary shares at 4pence per ordinary share.
Directors and Staff
I would like to express my deep appreciation of the support of all the
directors, consultants and staff, which has made possible the continued
progress and success which the Company has achieved.
Future Outlook
I look forward to continued progress towards the development of a diamond mine
at Lahtojoki and further exploration success.
Yours faithfully,
____________________________
Professor Richard Conroy
Chairman
26 February 2021
Condensed income statement and condensed statement of comprehensive income for
the six month period ended 30 November 2020
Condensed income statement
Note Six month period ended 30 November 2020 (Unaudited) € Six month period ended 30 November 2019 (Unaudited) € Year ended 31 May 2020 (Audited) €
Continuing operations
Operating expenses (193,243) (250,150) (446,710)
Loss before taxation (193,243) (250,150) (446,710)
Income tax expense - - -
Loss for the financial period/year (193,243) (250,150) (446,710)
Loss per share
Basic and diluted loss per share 2 (€0.0039) (€0.0069) (€0.0111)
Six month period ended 30 November 2020 (Unaudited) € Six month period ended 30 November 2019 (Unaudited) € Year ended 31 May 2020 (Audited) €
Loss for the financial period/year (193,243) (250,150) (446,710)
Income/expense recognised in other comprehensive income - - -
Total comprehensive expense for the financial period/year (193,243) (250,150) (446,710)
Condensed statement of financial position as at 30 November 2020
Note 30 November 2020 (Unaudited) 30 November 2019 (Unaudited) Year ended 31 May 2020(Audited)
€ € €
Assets
Non-current assets
Intangible assets 3 10,710,335 10,282,861 10,523,570
Financial assets 4 4 4
Total non-current assets 10,710,339 10,282,865 10,523,574
Current assets
Cash and cash equivalents 108,393 20,901 15,942
Other receivables 26,304 13,254 118,991
Total current assets 134,697 34,155 134,933
Total assets 10,845,036 10,317,020 10,658,507
Equity
Capital and reserves
Called up share capital 13,385 10,010 10,760
Called up deferred share capital 3,174,672 3,174,672 3,174,672
Share premium 9,613,965 9,005,750 9,150,829
Share based payments reserve 474,090 456,624 456,624
Retained losses (3,882,797) (3,469,543) (3,666,104)
Total equity 9,393,315 9,177,513 9,126,781
Liabilities
Non-current liabilities
Convertible loan 154,222 - 148,945
Derivative liability 146 - 146
Trade and other payables: amounts falling due after more than one year - 93,662 -
Total non-current liabilities 154,368 93,662 149,091
Current liabilities
Trade and other payables: amounts falling due within one year 1,203,691 1,045,845 1,288,973
Related party loans 5 93,662 - 93,662
Total current liabilities 1,297,353 1,045,845 1,382,635
Total liabilities 1,451,721 1,139,507 1,531,726
Total equity and liabilities 10,845,036 10,317,020 10,658,507
Condensed statement of cash flows
for the six month period ended 30 November 2020
Six month period ended 30 November 2020 (Unaudited) € Six month period ended 30 November 2019 (Unaudited) € Year ended 31 May 2020 (Audited) €
Cash flows from operating activities
Loss for the financial period/year (193,243) (250,150) (446,710)
Adjustments for:
Expense recognised in income statement in respect of equity settled share based payments 17,466 - -
Interest expense 5,277 - 3,262
(Decrease)/increase in trade and other payables (154,744) 77,133 350,280
Decrease/(increase) in other receivables 92,687 89,735 (11,774)
Net cash used in operating activities (232,557) (83,282) (104,942)
Cash flows from investing activities
Investment in exploration and evaluation (186,765) (130,128) (370,837)
Repayments from Conroy Gold and Natural Resources P.L.C - - 40,818
Payments to Conroy Gold and Natural Resources P.L.C - - (45,046)
Net cash used in investing activities (186,765) (130,128) (375,065)
Cash flows from financing activities
Issue of share capital 465,761 238,862 320,266
Share issue costs (23,450) (978) (979)
Shareholder’s loan advances/(repayments) - 7,000 145,829
Shareholder’s loan converted - (71,425) -
Advances from/(repayments to) fromConroy Gold and Natural Resources P.L.C. 69,462 30,019 -
Net cash provided by financing activities 511,773 203,478 465,116
Increase/(decrease) in cash and cash equivalents 92,451 (9,932) (14,891)
Cash and cash equivalents at beginning of financial period/year 15,942 30,833 30,833
Cash and cash equivalents at end of financial period/year 108,393 20,901 15,942
Condensed statement of changes in equity
for the six month period ended 30 November 2020
Share capital (including deferred share capital) Share premium Share-based payment reserve Retained losses Total equity
€ € € € €
Balance at 1 June 2020 3,185,432 9,150,829 456,624 (3,666,104) 9,126,781
Issue of share capital 2,625 463,136 - - 465,761
Share issue costs - - - (23,450) (23,450)
Sharebased payments - - 17,466 - 17,466
Loss for the financial period - - - (193,243) (193,243)
Balance at 30 November 2020 3,188,057 9,613,965 474,090 (3,882,797) 9,393,315
Balance at 1 June 2019 3,183,294 8,768,276 456,624 (3,218,415) 9,189,779
Issue of share capital 1,388 237,474 - - 238,862
Share issue costs - - - (978) (978)
Loss for the financial period - - - (250,150) (250,150)
Balance at 30 November 2019 3,184,682 9,005,750 456,624 (3,469,543) 9,177,513
Share capital
The share capital comprises the nominal value share capital issued for cash
and non-cash consideration. The share capital also comprises deferred share
capital. The deferred share capital* arose through the restructuring of share
capital which was approved at an Annual General Meeting held on 9 December
2016.
Authorised share capital:
The authorised share capital at 30 November 2020 compromised 7,301,301,041
ordinary shares of €0.00025 each, and 317,785,034 deferred shares of
€0.00999 each* (€5,000,000), (30 November 2019: 7,301,301,041 ordinary
shares of €0.00025 each, and 317,785,034 deferred shares of €0.00999 each*
(€5,000,000)).
*Capital reorganisation:
Following approval at an Annual General Meeting (“AGM”) held on 9 December
2016, the Company reorganised its share capital by subdividing and
reclassifying each issued ordinary share of €0.01 as one ordinary share of
€0.00001 each and one deferred share of €0.00999 each. The Deferred
Shares have no right to vote, attend or speak at general meetings of the
Company and have no right to receive any dividend or other distribution, and
have only limited rights to participate in any return of capital on a
winding-up or liquidation of the Company, which will be of no material value.
No application was made to the London Stock Exchange for admission of the
Deferred Shares to trading on the AIM.
Consolidated shares:
On 21 December 2017, the Company passed a Special Resolution at the
Company’s AGM, that all of the ordinary shares of €0.00001 each in the
capital of the Company, whether issued or unissued were consolidated into New
Ordinary Shares of €0.00025 each in the capital of the Company
(“consolidated shares”) on the basis of one consolidated share for every
25 existing ordinary shares. Following the consolidation of the ordinary
shares on 21 December 2017, the warrants in issue were consolidated into one
consolidated warrant for every 25 existing warrants. The exercise price in
relation to the warrants was also adjusted at this time (see Note 2).
Share issues during the period:
On 25 August 2020, the Company raised €465,761 (£420,000), (before
expenses), through the issue of 10,500,000 ordinary shares of €0.00025 in
the capital of the Company at a price of £0.04 per Subscription Share.
On 16 July 2019, the Company raised €111,377 (£100,00), (before expenses)
through the issue of 2,500,000 ordinary shares of €0.00025 in the capital of
the Company at a price of £0.04 per Subscription Share. On 8 October 2019,
the Company raised €56,060 (£50,000), (before expenses) through the issue
of 1,428,571 ordinary shares of €0.00025 in the capital of the Company at a
price of £0.035 per Subscription Share. On 4 September 2019, the Director,
Richard Conroy converted €71,425 (£65,000) of his loan into 1,625,000
shares of €0.00025 in the capital of the Company at a price of £0.04 per
Subscription Share.
Share premium
The share premium reserve comprises the excess consideration received in
respect of share capital over the nominal value of the shares issued.
Share based payment reserve
The share based payment reserve comprises of the fair value of all share
options and warrants which have been charged over the vesting period, net of
amounts relating to share options and warrants forfeited, exercised or lapsed
during the period, which are reclassified to retained earnings.
Retained losses
This reserve represents the accumulated losses incurred by the Company up to
the condensed statement of financial position date.
Notes
to and forming part of the condensed financial statements for the six month
period ended 30 November 2020
1 Accounting policies
Reporting entity
Karelian Diamond Resources plc (the “Company”) is a company domiciled in
Ireland.
Basis of preparation and statement of compliance
The condensed financial statements for the six months ended 30 November 2020
are unaudited.
The condensed financial statements have been prepared in accordance with
International Accounting Standard (“IAS”) 34:Interim Financial Reporting.
The condensed financial statements do not include all the information and
disclosures required in the annual financial statements, and should be read in
conjunction with the Company’s annual financial statements as at 31 May
2020, which are available on the Company’s website -
www.kareliandiamondresources.com. The accounting policies adopted in the
presentation of the condensed financial statements are consistent with those
followed in the preparation of the Company’s annual financial statements for
the year ended 31 May 2020.
The condensed financial statements have been prepared under the historical
cost convention, except for derivative financial instruments which are
measured at fair value at each reporting date.
The condensed financial statements are presented in Euro (“€”). € is
the functional currency of the Company.
The preparation of condensed financial statements requires the Board of
Directors and management to use judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets,
liabilities, income and expenses. Actual results may differ from those
estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the financial
period in which the estimate is revised and in any future financial periods
affected. Details of critical judgements are disclosed in the accounting
policies detailed in the annual financial statements.
The financial information presented herein does not amount to statutory
financial statements that are required by Chapter 4 part 6 of the Companies
Act 2014 to be annexed to the annual return of the Company. The statutory
financial statements for the financial year ended 31 May 2020 were annexed to
the annual return and filed with the Registrar of Companies. The audit report
on those financial statements was unqualified.
These condensed financial statements were authorised for issue by the Board of
Directors on 26 February 2021.
Going concern
The Company incurred a loss of €193,243 (30 November 2019: €250,150) for
the six month period ended 30 November 2020. The Company had net current
liabilities of €1,162,656 (30 November 2019: €1,011,690) at that date.
The Board of Directors have considered carefully the financial position of the
Company and in that context, have prepared and reviewed cash flow forecasts
for the period to 31 January 2022. As set out further in the Chairman’s
statement, the Company expects to incur capital expenditure in 2021,
consistent with its strategy as an exploration company. In reviewing the
proposed work programme for exploration and evaluation assets and, on the
basis of the equity raised during the financial period, the results obtained
from the exploration programme and the prospects for raising additional funds
as required, the Board of Directors are satisfied that it is appropriate to
prepare the financial statements on a going concern basis.
Statement of compliance
The Company’s financial statements have been prepared in accordance with
IFRS as adopted by the European Union (“EU”).
Recent accounting pronouncements
The following new standards, amendments to standards and interpretations
adopted and endorsed by the EU have been issued but were not effective for the
financial year ended 31 May 2020:
* Amendments to references to the Conceptual Framework in IFRS Standards –
Effective date 1 January 2020;
* Amendments to IFRS 3 Business Combinations – Definition of a Business –
Effective date 1 January 2020;
* Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform
– Effective date 1 January 2020; and
* Amendment to IFRS 16 about providing lessees with an exemption from
assessing whether a COVID-19-related rent concession is a lease modification
– Effective date 1 June 2020.
The adoption of the above amendments to standards and interpretations has been
considered for the purposes of these interim financial statements and is not
considered material.
The following new standard and amendments to standards have been issued by the
International Accounting Standards Board but have not yet been endorsed by the
EU, accordingly none of these standards have been applied in the current year.
The Board of Directors are currently assessing whether these standards once
endorsed by the EU will have any impact or a material impact on the financial
statements.
* Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an
investor and its associate or joint venture – Postponed indefinitely;
* IFRS 1 amendments resulting from Annual Improvements to IFRS Standards
2018–2020 (subsidiary as a first-time adopter) – Effective date 1 January
2022;
* IFRS 3 amendments updating a reference to the Conceptual Framework –
Effective date 1 January 2022;
* IFRS 4 amendments regarding the expiry date of the deferral approach –
Effective date 1 January 2023;
* Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16, and IAS 39 regarding
replacement issues in the context of the IBOR reform – Effective date 1
January 2021;
* IFRS 9 amendments resulting from Annual Improvements to IFRS Standards
2018–2020 (fees in the ‘10 per cent’ test for derecognition of financial
liabilities) – Effective date 1 January 2022;
* IFRS 17: Insurance contracts – Effective date deferred to 1 January 2023;
* IAS 1 amendments regarding the classification of liabilities - Effective
date 1 January 2023;
* IAS 16 amendments prohibiting a company from deducting from the cost of
property, plant and equipment amounts received from selling items produced
while the company is preparing the asset for its intended use –Effective
date 1 January 2022; and
* IAS 37 amendments regarding the costs to include when assessing whether a
contract is onerous – Effective date 1 January 2022.
2 Loss per share
Basic earnings per share
Six month period ended 30 November 2020 (Unaudited) € Six month period ended 30 November 2019 (Unaudited)€ Year ended 31 May 2020 (Audited)€
Loss for the financial period/year attributable to equity holders of the Company (193,243) (250,150) (446,710)
Number of ordinary shares for the purposes of earnings per share 49,042,750 40,042,749 40,243,826
Loss per ordinary share (€0.0039) (€0.0069) (€0.0111)
Diluted earnings per share
The effect of share options and warrants is anti-dilutive.
3 Intangible assets
Exploration and evaluation assets
Cost 30 November 2020 (Unaudited)€ 30 November 2019 (Unaudited)€ 31 May 2020 (Audited) €
At 1 June 10,523,570 10,152,733 10,152,733
Expenditure during the financial period/year
· License and appraisal costs 56,195 2,978 208,378
· Other operating expenses 130,570 127,150 162,459
· Equity settled share based payments - - -
At30 November/31 May 10,710,335 10,282,861 10,523,570
Exploration and evaluation assets relate to expenditure incurred in the
development of mineral exploration opportunities. These assets are carried at
historical cost and have been assessed for impairment in particular with
regard to the requirements of IFRS 6: Exploration for and Evaluation of
Mineral Resources relating to remaining licence or claim terms, likelihood of
renewal, likelihood of further expenditure, possible discontinuation of
activities as a result of specific claims and available data which may suggest
that the recoverable value of an exploration and evaluation asset is less than
its carrying amount.
The Board of Directors have considered the proposed work programmes for the
underlying mineral resources. They are satisfied that there are no indications
of impairment.
The Board of Directors note that the realisation of the intangible assets is
dependent on further successful development and ultimate production of the
mineral resources and the availability of sufficient finance to bring the
resources to economic maturity and profitability.
4 Commitments and Contingencies
At 30 November 2020, there were no capital commitments or contingent
liabilities (31 May 2020: No capital commitments or contingencies
liabilities). Should the Company decide to develop the Lahtojoki project, an
amount of €60,000 is payable by the Company to the vendors of the Lahtojoki
mining concession.
5 Related party transactions
(a) Shareholders’ loans 30 November 2020 (Unaudited)€ 30 November 2019 (Unaudited) € 31 May 2020 (Audited) €
Opening balance 1 June 93,662 158,087 158,087
Loan advances - 7,000 7,000
Loan converted into shares - (71,425) (71,425)
Closing balance 30 November/31 May 93,662 93,662 93,662
Prior to the various placings of shares, the immediate funding requirements of
the Company had been financed by advances from Professor Richard Conroy
(executive chairman and major shareholder).
(b) Apart from Directors’ remuneration, and loans from shareholders, (who
are also Directors), there here have been no contracts or arrangements entered
into during the six monthperiod in which a Director of the Company had a
material interest.
(c) The Company shares accommodation with Conroy Gold and Natural Resources
plc which have certain common Directors and shareholders. For the six month
period ended 30 November 2020, Conroy Gold and Natural Resources plc incurred
costs totalling €39,388(30 November 2019: €54,034) on behalf of the
Company. These costs were recharged to the Company by Conroy Gold and Natural
Resources plc. At30 November 2020 Conroy Gold and Natural Resources plc owed
€50,381 to the Company. At 30 November 2019, Conroy Gold and Natural
Resources plc was owed €29,812 by the Company.
6 Subsequent events
COVID-19 continues to limit field and laboratory work given the restrictions
on operations and movement and other work also continues in relation to the
Company’s exploration and development programme.
There were no other material events subsequent to the reporting date which
necessitate revision of the figures or disclosures included in the financial
statements.
7 Approval of the condensed financial statements
These condensed financial statements were approved by the Boardof Directors on
26 February 2021. A copy of the condensed financial statements will be
available on the Company’s website www.kareliandiamondresources.com on 26
February 2021.
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