Half-yearly Report

28 February 2011 Karelian Diamond Resources plc ("Karelian" or "the Company") Half-yearly results for the six months ended 30 November 2010 DATA FROM RIO TINTO AIDS DIAMOND EXPLORATION PROGRAMME IN FINLAND Karelian Diamond Resources plc (AIM: KDR; ESM: KDR.I), the diamond exploration company focused on Finland, announces its results for the six months ended 30 November 2010. Highlights: * Confidential Data Agreement signed with Rio Tinto Mining and Exploration Limited * Initial tranche of data from Rio Tinto comprising 53,000 surface sample results, included 122 diamonds across various locations * Integration of data underway * Two further kimberlite pipe licences acquired * Exploration programme continues Post-Period * Company raised £350,000 through a share placing Professor Richard Conroy, Chairman, said: "I am delighted with the progress Karelian is making. The agreement with Rio Tinto has yielded a vast amount of information which we are reviewing and integrating with our own. This additional information will be invaluable in progressing Karelian's exploration programme. Having already delineated the largest diamoniferous kimberlite pipe yet discovered in Finland we remain confident that we will make an economic discovery in the region, hopefully as large as those on the Russian side of the border." Dear Shareholder, I have great pleasure in presenting your Company's half-yearly results for the six months ended 30 November 2010, a year of continued progress for your Company. The price of diamonds has recovered, reflecting, in particular, rising demand in Asia and insufficient supply. Your Company has continued its exploration programme in the Karelian Craton in Finland and has acquired two further known kimberlite pipes, Kimberlite 18, Havukkasuo and Kimberlite 24, Lentiira, in addition to its diamondiferous Seitaperä pipe. These pipes will now be further examined in the light of the knowledge gained at Seitaperä. The agreement with Rio Tinto Mining and Exploration Limited ("Rio Tinto"), where by Rio Tinto has provided your Company with confidential data, will be of enormous value in relation to your Company's ongoing exploration programme, the object of which is to make a major economic diamond discovery in Finland comparable to the world class discoveries already made on the Russian side of the Karelian Craton. The data received from Rio Tinto to date comprises over 53,000 surface samples and over 600 analytical probe results and other kimberlitic mineral data, with kimberlitic indicator minerals reported from over 200 locations. 122 diamonds were recovered from various locations throughout Finland. Karelian will integrate Rio Tinto's data with that gathered from its own exploration programme to assist in identifying potential targets in Finland. Finance The results for the six months ended 30 November 2010 are set out below. The loss for the period was €88,124, (2009: loss €83,636). In December 2010 the Company raised £350,000, before expenses, through a placing of 11,666,666 ordinary shares and warrants to subscribe for 3,888,888 ordinary shares of €0.01 in the capital of the Company. The shares were placed at a price of 3 pence per share and the warrants can be exercised at 5 pence per share at any time until 23 December 2012. The Company intends to use the net proceeds of the placing primarily to fund the Company's various prospects in Finland and for working capital generally. Directors and Staff I would like to thank my fellow directors, staff and consultants for their support and dedication, which has enabled the continued success of the Company. I look forward to the future with confidence. Yours faithfully, Professor Richard Conroy Chairman 28 February 2011 Further Information: Karelian Diamond Resources plc Tel: +353-1-661-8958 Professor Richard Conroy, Chairman Merchant Securities Limited (Nomad) Tel: +44-20-7628-2200 Simon Clements/Virginia Bull XCAP Securities PLC (Broker) Tel: +44-20-7101-7070 John Grant/Karen Kelly/David Lawman IBI Corporate Finance Limited (ESM Adviser) Tel +353-1-604-4968 John Tuite Lothbury Financial Services Tel: +44-20-7868-2567 Michael Padley/Michael Spriggs Hall Communications Tel: +353-1-660-9377 Don Hall Visit the website at: www.kareliandiamondresources.com UNAUDITED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 NOVEMBER 2010 Six months Six months Year ended ended ended 31 May 30 November 30 November 2010 2010 2009 (Unaudited) (Unaudited) (Audited) € € € OPERATING EXPENSES (88,124) (83,641) (173,086) Other Income - 5 5 LOSS BEFORE TAXATION (88,124) (83,636) (173,081) Taxation - - - LOSS RETAINED FOR THE PERIOD (88,124) (83,636) (173,081) Loss per ordinary share - Basic and (€0.0015) (€0.0014) (€0.0028) diluted UNAUDITED BALANCE SHEET AS AT 30 NOVEMBER 2010 30 November 30 November 31 May 2010 2009 2010 (Unaudited) (Unaudited) (Audited) € € € ASSETS Non-current Assets Intangible assets 5,456,424 5,062,451 5,250,016 Financial assets 4 4 4 Property, plant and equipment 753 1,005 837 5,457,181 5,063,460 5,250,857 Current Assets Trade and other receivables 5,804 8,378 24,875 Cash and cash equivalents 4,635 14,037 17,707 10,439 22,415 42,582 Total Assets 5,467,620 5,085,875 5,293,439 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 273,957 169,744 210,803 Retained losses (1,084,196) (906,627) (996,072) Total Equity 3,596,379 3,669,735 3,621,349 Non-current Liabilities Trade and other payables: Amounts 895,241 790,765 895,241 falling due after more than one year Total non-current liabilities 895,241 790,765 895,241 Current Liabilities Trade and other payables: Amounts 976,000 625,375 776,849 falling due within one year Total Current Liabilities 976,000 625,375 776,849 Total Liabilities 1,871,241 1,416,140 1,672,090 Total Equity and Liabilities 5,467,620 5,085,875 5,293,439 unaudited Cash Flow Statement For the six months Ended 30 november 2010 Six months Six months Year ended ended ended 30 November 30 November 31 May 2010 2009 2010 (Unaudited) (Unaudited) (Audited) € € € Cash flows from operating activities Cash generated from operations 193,336 114,185 134,006 Tax paid - - - Net cash generated by operating 193,336 114,185 134,006 activities Cash flows from investing activities Investment in mineral interest (206,408) (178,586) (299,213) Net cash used in investing activities (206,408) (178,586) (299,213) Cash flows from financing activities Shareholder loan advances - 70,772 175,248 Issue of share capital - - - Net cash from financing activities - 70,772 175,248 (Decrease)/Increase in cash and cash (13,072) 6,371 10,041 equivalents Cash and cash equivalents at beginning 17,707 7,666 7,666 of year Cash and cash equivalent at year end 4,635 14,037 17,707 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 €0.0015 (2009: loss €0.0014) is based on the loss for the half year of €88,124 (2009: loss €83,636) and the weighted average number of ordinary shares on a basic and fully diluted basis during the year of 60,541,676 (2009: 60,541,676). 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 2010. 4. Copy of half yearly report A copy of the half yearly report will be available on the Company's website www.kareliandiamondresources.com.

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