Half-yearly Report

25 February 2009

                        Karelian Diamond Resources plc                         

                                ("the Company")                                

         Half-yearly results for the six months ended 30 November 2008         

Chairman's Statement

I have great pleasure in presenting your Company's half-yearly report for the
six months ended 30 November 2008. During the period your Company continued to
progress its diamond exploration programme in Finland with the objective of
discovering a world-class diamond deposit in the Finnish sector of the Karelian
Craton.

The Kuhmo Area

To date over 1,500m of core drilling in 24 holes has accurately delineated the
Seitaperä pipe to over 115m in depth, and provided extensive intersections of
Hypabyssal Kimberlite which contain significant quantities of mantle material,
including Harzburgite and Lherzolite Mantle Peridotite containing G9 and G10
garnets. This material originates in the diamond stability zone of the Upper
Mantle and demonstrates the capacity of the Seitaperä Kimberlite to carry
diamond-bearing material. With its 6.9 hectare surface outline, Seitaperä
represents the largest known kimberlite pipe in Finland, being approximately
three times bigger than the next largest pipe.

The Seitaperä kimberlite has yielded both highly positive mineral chemistry
results (G9/G10 garnets and DI-chromites) and significant micro-diamond
results. Further analysis of core samples is ongoing.

Historical work is limited in the Kuhmo area of Eastern Finland but, when taken
together with our new results, this demonstrates the area's potential for
diamondiferous kimberlites. In addition to our existing claims and reservations
in the area, we have also applied for licenses covering the other two known
kimberlite occurrences, namely Kimberlites #18 (Havukkasuo) and #24 (Lentiira).

The Joensuu Area

Your Company also continues with its exploration programme in the Joensuu area
of Eastern Finland where kimberlite indicator minerals, including a G10
Harzburgite garnet and eight G9 Lherzolite garnets, have been identified in
recent sampling programmes. Taken in conjunction with previous results from the
area the latest data increases the likelihood that the Joensuu area could
contain a number of kimberlite pipes.

Finance and Results

The results for the six months ended 30 November 2008 are set out below. The
loss for the period was €112,612 (2007: €101,500). During this period I have
supported the working capital requirements of the Company and in the period
under review have advanced aggregate loans amounting to €582,914.

The loans have been made under normal commercial terms in accordance with a
letter of support dated 11 November 2008. This letter provides confirmation of
support from me for the current financial year ending 31 May 2009. The loans
have been and will continue to be made on normal commercial terms. The interest
on the loans is currently accruing at a rate of 8.25 per cent. per annum. The
loans may be repaid at any time but I have confirmed to the Company that I will
not request repayment, other than in exceptional circumstances, within a period
of less than one year.

The other directors consider, having consulted with the Company's Nominated
Adviser, that the terms of the loan are fair and reasonable in so far as the
Company's shareholders are concerned.

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
25 February 2009


Further enquiries:

Karelian Diamond Resources plc                           Tel: [phone]
Professor Richard Conroy                                                       
                                                                               
John East & Partners Limited                                 Tel: [phone]
Simon Clements / Virginia Bull                                                 
                                                                               
City Capital Corporation Limited                             Tel: [phone]
Charles Dampney                                                                
                                                                               
Lothbury Financial Limited                                   Tel: [phone]
Ron Marshman / Michael Padley                                                  


UNAUDITED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 NOVEMBER 2008

                                          Six months     Six months  Year ended
                                               ended          ended      31 May
                                         30 November    30 November        2008
                                                2008           2007   (Audited)
                                         (Unaudited)    (Unaudited)            
                                                                               
                                                   €              €           €
                                                                               
OPERATING EXPENSES                         (112,783)      (109,917)   (280,720)
                                                                               
Other Income                                     171          8,417      12,082
                                                                               
LOSS BEFORE TAXATION                       (112,612)      (101,500)   (268,638)
                                                                               
Taxation                                           -              -           -
                                                                               
LOSS RETAINED FOR THE PERIOD               (112,612)      (101,500)   (268,638)
                                                                               
Loss per ordinary share - Basic and        (€0.0019)      (€0.0018)   (€0.0046)
diluted                                                                        
                                                                               

UNAUDITED BALANCE SHEET

AS AT 30 NOVEMBER 2008

                                        30 November    30 November       31 May
                                               2008           2007         2008
                                        (Unaudited)    (Unaudited)    (Audited)
                                                                               
                                                  €              €            €
                                                                               
ASSETS                                                                         
                                                                               
Non-current Assets                                                             
                                                                               
Intangible assets                         4,614,881      3,858,785    4,221,785
                                                                               
Financial assets                                  4              4            4
                                                                               
Property, plant and equipment                 1,089          1,333        1,173
                                                                               
                                          4,615,974      3,860,122    4,222,962
                                                                               
Current Assets                                                                 
                                                                               
Trade and other receivables                  46,708          4,146       50,441
                                                                               
Cash and cash equivalents                   108,614        602,354       35,430
                                                                               
                                            155,322        606,500       85,871
                                                                               
Total Assets                              4,771,296      4,466,622    4,308,833
                                                                               
EQUITY AND LIABILITIES                                                         
                                                                               
Capital and Reserves                                                           
                                                                               
Called up share capital                     605,416        605,416      605,416
                                                                               
Share premium                             3,801,202      3,801,202    3,801,202
                                                                               
Share based payments reserve                128,685         62,320       87,626
                                                                               
Retained losses                           (741,477)      (461,727)    (628,865)
                                                                               
Total Equity                              3,793,826      4,007,211    3,865,379
                                                                               
Non-current Liabilities                                                        
                                                                               
Trade and other payables: Amounts           582,914        329,867      271,135
falling due after more than one year                                           
                                                                               
Total non-current liabilities               582,914        329,867      271,135
                                                                               
Current Liabilities                                                            
                                                                               
Trade and other payables: Amounts           394,556        129,544      172,319
falling due within one year                                                    
                                                                               
Total Current Liabilities                   394,556        129,544      172,319
                                                                               
Total Liabilities                           977,470        459,411      443,454
                                                                               
Total Equity and Liabilities              4,771,296      4,466,622    4,308,833


UNAUDITED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 NOVEMBER 2008

                                          Six months    Six months   Year ended
                                               ended         ended       31 May
                                         30 November   30 November         2008
                                                2008          2007    (Audited)
                                         (Unaudited)   (Unaudited)             
                                                                               
                                                   €             €            €
                                                                               
Cash generated/(used by) from                121,032           191    (196,010)
operations                                                                     
                                                                               
Tax paid                                           -             -            -
                                                                               
Net cash generated from/ (used in)           121,032           191    (196,010)
operating activities                                                           
                                                                               
Cash flows from investing activities                                           
                                                                               
Investment in mineral interest             (359,626)     (241,062)    (553,053)
                                                                               
Net cash used in investing activities      (359,626)     (241,062)    (553,053)
                                                                               
Cash flows from financing activities                                           
                                                                               
Shareholder loan advances                    311,778     (701,431)    (760,163)
                                                                               
Issue of share capital                             -     1,429,254    1,429,254
                                                                               
Net cash from financing activities           311,778       727,823      669,091
                                                                               
Increase/(Decrease) in cash and cash          73,184       486,952     (79,972)
equivalents                                                                    
                                                                               
Cash and cash equivalents at beginning        35,430       115,402      115,402
of year                                                                        
                                                                               
Cash and cash equivalent at year end         108,614       602,354       35,430

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. Earnings per share

The calculation of the loss per ordinary share of €0.0019 (2007: loss €0.0018)
is based on the loss for the half year of €112,612 (2007: loss €101,500) and
the weighted average number of ordinary shares on a basic and fully diluted
basis during the year of 60,541,676 (2007: 55,285,009). Share options and
warrants are not included in the calculation of fully diluted shares since the
Company incurred a loss in both periods 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 2008.

4. Copy of half yearly report

A copy of the half yearly report will be available on the Company's website
www.kareliandiamondresources.com and will be available from the Company's
registered office, 10 Upper Pembroke Street, Dublin 2. It will also be
forwarded to shareholders who requested a hard copy.