Annual Report and Financial
Statements 2021
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
1
Contents
Chairman’s Statement
Directors, Officers
and Other Information
Board of Directors
Directors’ Report
Independent Auditor’s Report
Income Statement
Statement of
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to and Forming part of
the Financial Statements
2
5
6
8
17
23
24
25
26
27
28
2
Chairman’s Statement
Professor Richard Conroy
Chairman
Dear Shareholder,
I have great pleasure in
presenting your Company’s
annual report and financial
statements for the year ended
31 May 2021. The year has been
one of further progress at the
Company’s two major diamond
projects in Finland.
The process of gaining a full mining permit
to develop the company’s diamond deposit
at Lahtojoki, with its potential for pink
diamond production, continued. Work
regarding ground rental compensation
on behalf of TUKAS (The Finnish Mining
Authority) is now in its final stages and
vehicular access to the deposit has been
granted. Post period, an amended preliminary
economic assessment (“PEA”) was compiled
and showed a 77% increase on the 2017
PEA NPV.
Despite delays related to the COVID-19
pandemic, exploration has continued on
the Company’s exploration acreage in the
Kuhmo region of Finland, which the Company
believes could be a new kimberlite province
and, in Ireland, sample results suggest the
presence of nickel, copper and platinum
targets within the Karelian licence area.
During the year, as a consequence of Brexit,
an extraordinary general meeting (“EGM”)
was required to ensure that the Company’s
shares could continue to be settled
electronically on the AIM market.
The Lahtojoki Diamond
Mining Project
The Lahtojoki diamond mining project
comprises a mining concession covering
71 hectares which includes a kimberlite
pipe over a surface area of 16 hectares.
A full mining permit to enable development
of the deposit is currently being processed
although delays have occurred due to
COVID-19 restrictions. It appears that the
deposit, as well as containing high quality
colourless gem diamonds, also contains
coloured diamonds, including pink diamonds.
Pink diamonds are highly sought after and
are extremely scarce, typically commanding
a price up to 20 times that of normal
colourless diamonds.
The presence of pink diamonds in the
Lahtojoki diamond deposit could, therefore,
substantially increase the potential
profitability of any future mining operation.
An example of the financial implications
of the presence of pink diamonds is that,
although pink diamonds made up less than
5% of production volumes, revenues from
pink diamonds at the Rio Tinto-operated
Argyle diamond mine in Australia accounted
for 50% of the mine’s revenue until its closure
in late 2020. It is also relevant that production
at the Rio Tinto-operated Argyle diamond
mine in Australia accounted for 90% of global
pink diamonds, so its closure has also had
important implications on the supply side.
In relation to the Lahtojoki diamond deposit,
PEA in 2017, based on a non-JORC resource
of 2.25 million carats, estimated the deposit
contained a value of $225m, with an NPV8 of
$39m, with a nine year mine life. Post period,
the 2017 PEA was amended by First Equity
Limited, who act as broker to the Company,
assuming 3% of recovered diamonds at
Lahtojoki will be pink, with a pink diamond
price 10 times that of colourless equivalents.
Their unrisked NPV8, in the amended PEA,
came to $69m, representing a 77% increase
on the 2017 PEA PPV8 of $39 million.
The overall outlook for diamonds is
encouraging with demand currently strong in
China and the US, the two biggest diamond
markets, with supply and inventories down.
The Argyle mine is closed and the Directors
are only aware of one major new mine
currently being developed (LUAXE in Angola).
In the view of ALROSA, the leading Russian
diamond producer, a long term diamond
deficit is developing so it may well be a very
good time for the Company to be developing
a new diamond mine in an excellent location.
Diamond Exploration
Programmes
Kuhmo
The Kuhmo region of Finland, next to
the border with Russia, lies within the
Karelian Craton (or Baltic Shield) which
overlies north and eastern Finland, along with
the northwest tip of Russia. On the Russian
side of the Craton, two world class diamond
deposits, Lomonsov and the Grib Pipe, have
been discovered and ALROSA, the world’s
largest diamond miner, has indicated that, in
its view, this diamond region will represent
almost all its future growth.
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 3
UAV ready for a take-off for Anomaly 5 magnetic survey.
Stream Sediment Sampling – Fermanagh.
The Board of Karelian believes that given
the similar geology on the Finnish side of
the Craton to that on the Russian side,
the presence already demonstrated in Finland
of the Company’s Lahtojoki diamond deposit
and the discoveries which the Company has
made, the potential exists for similar world
class diamond discoveries in Finland.
To date, Karelian has discovered a new
kimberlite body at Riihivaara and a series
of kimberlite anomalies, including Anomaly 5,
where the Company has discovered a green
diamond, together with numerous kimberlite
indicator minerals in till.
Immediately post year end, an Unmanned
Aerial Vehicle (“UAV”) geophysical survey
was completed in the Anomaly 5 target area.
The results are now undergoing analysis and
a follow up drilling programme is planned.
Lahtojoki
The Company is also carrying out
exploration in the vicinity of the Lahtojoki
diamond deposit. Kimberlites tend to occur
in clusters and kimberlite boulders have
been discovered to the south of Lahtojoki
which cannot be derived from the Lahtojoki
kimberlite. This encourages the belief that
further diamondiferous kimberlites may
exist adjacent to Lahtojoki.
Brookeborough, Ireland
The Colebrook River in County Fermanagh
in Northern Ireland was the reported location
of the discovery in 1816 of a diamond
which became known as the Brookeborough
diamond. No serious exploration for the
source of this diamond was carried out
until 1996, when a regional heavy mineral
sediment sampling survey was carried out
in Counties Fermanagh and Tyrone. The
recovery of some chromites was reported.
Such chromites could indicate the possible
presence of kimberlite source rocks in
the vicinity of where the Brookeborough
diamond was discovered. However, no
follow up work was ever conducted.
Following a review of these regional
sampling survey results, together with
analysis of airborne geophysical data from
the Tellus survey in Northern Ireland and an
overall geological assessment, it was decided
by the Company that a detailed heavy mineral
stream sediment survey at sample sites on the
Colebrook River around the reported discovery
location of the diamond was merited.
Sediment samples were taken and have
been dispatched to Canada for mineral
concentrating, picking and analysis. The
results of the sediment sample analysis
showed highly anomalous amounts of
chromite in all samples. Forsterite olivine
and metamorphic massive sulphide indicator
minerals (“MMSIM’s”) were also reported.
Initial interpretation suggests a non-
kimberlite source rock which is indicative
of additional targets for mineralisation –
nickel, copper and platinum, within Karelian’s
licence area. Relating the results with other
sampling programmes in known areas of
Nickel–Copper–Platinum mineralisation
globally indicates the Company’s data
should be considered as highly anomalous.
Platinum Group Metals are classified
as critical metals. Nickel and copper are
important metals in the energy transition.
These exciting results heighten
the prospectivity of the Company’s
exploration programme in Northern
Ireland and add an additional dimension
to the Company’s exploration interests.
COVID-19
The Company has taken necessary measures
in accordance with government guidelines
to protect the health, safety, and wellbeing
of its employees, contractors, and partners in
Finland and Ireland. COVID-19 continues to
limit field and laboratory work but, despite
these restrictions on operations, work has
continued in relation to the Company’s
exploration and development programmes.
COVID-19 has also delayed the due
process in relation to the granting of a
mining permit over the Lahtojoki diamond
process. In relation to COVID-19, Directors
and executives took a reduction in salaries
and fees in line with technical and field staff
taking a reduction in salaries over a 9 month
period.
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 4
Chairman’s Statement continued
Lahtojoki Diamond.
Green Diamond – Anomaly 5.
Environmental, Social,
and Governance issues
Great emphasis is placed by the Company on
Environmental, Social and Governance issues.
The Company is committed to high standards
of corporate governance and integrity in
all of its activities and operations including
rigorous health and safety compliance and
environmental consciousness and promotes a
culture of good ethical values and behaviour.
The Company conducts its business with
integrity, honesty and fairness and requires
its partners, contractors and suppliers to meet
similar ethical standards. Individual staff
members must ensure that they apply and
maintain these standards in all their actions.
It is a requirement that the Chairman of
the Board regularly monitors and reviews
the Company’s ethical standards and cultural
environment and where necessary takes
appropriate action to ensure proper standards
are maintained. The Company is fully
committed to complying with all relevant
health, safety and environment rules and
regulations as these apply to its operations
and all individuals working for the Company
are aware of their responsibilities in providing
a safe and secure working environment.
Extraordinary General Meeting
and Migration to Euroclear
An EGM was held on the 17th February
2021 to maintain electronic trading in
the Company’s shares post-Brexit. The
settlement system relating to the Company’s
shares needed, as a consequence of Brexit,
to move from CREST in London to Euroclear
Bank in Belgium. At the EGM, the necessary
resolutions were passed enabling the
Company’s shares to continue to be settled
electronically on the AIM market in London.
This will be the Company’s first AGM since
migration of the holding and settlement
of uncertificated shares in the Company
from CREST to the Euroclear Bank system.
The processes and timelines for submitting
proxy appointments or voting instructions
for the AGM will differ from the comparable
processes and timelines that applied in
CREST for previous shareholder meetings.
Additional explanatory information is
included in the Notice of Annual General
Meeting, and it will be important for relevant
shareholders to confirm the procedures
with their stockholder, custodian, or other
intermediary as they may vary depending
on the specific arrangements that are in
place for individual shareholders.
Finance
The loss after taxation from continuing
operations for the financial year ended
31 May 2021 was €422,192 (2020: €446,710)
and the net assets of the Company at 31 May
2021 were €9,495,866 (2020: €9,126,781).
In August 2020 the Company raised £420,000
through a placing of 10,500,000 ordinary
shares at a price of 4 pence per ordinary
share.
In May 2021 a further financing of £600,000
was carried out through a placing and
subscription of 13,000,000 ordinary shares at
a price of 4 pence per ordinary share, to raise
£520,000 and a further 2,000,000 shares were
issued at the same time in conjunction with
the conversion of £80,000 of existing debt
owed to the Managing Director, Maureen
Jones, and myself, also at a price of 4 pence
per ordinary share.
Directors and Staff
I would like to express my very deep
appreciation of the support and dedication
of Directors, staff, and consultants which has
made possible the continued progress and
success which the Company has achieved.
Future Outlook
I look forward to continued success both
in relation to progress in the development
of a diamond mine at Lahtojoki and in the
Company’s exploration programmes.
Professor Richard Conroy
Chairman
30 November 2021
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc Company Information
5
Directors
Professor Richard Conroy
Chairman*
Seamus P. FitzPatrick
Deputy Chairman
Non-Executive Director +§
Maureen T.A. Jones
Managing Director*
Howard M. Bird
Non-Executive Director *+§
(Appointed 17 September 2019)
Dr. Sorċa C. Conroy
Non-Executive Director *§
Brendan McMorrow
Non-Executive Director *+§
* Member of the Executive Committee
+ Member of the Remuneration Committee
§ Member of the Audit Committee
Company Registration Number
382499
Company Secretary
and Registered Office
Maureen T.A. Jones
3300 Lake Drive
Citywest Business Campus
Dublin 24, D24 TD21, Ireland
Statutory Audit Firm
Deloitte Ireland LLP
Chartered Accountants
and Statutory Audit Firm
6 Lapp’s Quay
Cork, T12 VY7W, Ireland
London Stock Exchange
AIM Symbol: KDR
SEDOL: BD09HK6
ISIN number: IE00BD09HK61
Nominated Adviser (NOMAD)
Allenby Capital Limited
5 St. Helen’s Place
5th Floor
London, EC3A 6AB, UK
Registrars
Avenir Registrars Limited
(Appointed on 15 March 2021)
No. 1 Main Street, Blessington
Co Wicklow, W91 V82T, Ireland
www.avenir-registrars.ie
Link Registrars Limited
(Ceased on 14 March 2021)
2 Grand Canal Square, Grand Canal Harbour
Dublin 2, D02 A342, Ireland
Legal Advisers
William Fry Solicitors
2 Grand Canal Square
Dublin 2, D02 A342, Ireland
Roschier, Attorneys Ltd.
Kasarmikatu 21 A
FI-00130, Helsinki, Finland
HPP Attorneys Ltd
Bulevardi 1 A
FL-00100, Helsinki, Finland
www.linkassetservices.com
enquiries@linkgroup.ie
Bankers
AIB
1-4 Lower Baggot Street
Dublin 2, D02 X342, Ireland
Nordea
Satamaradankatu 5, Helsinki, Finland
Broker
First Equity Ltd.
(Appointed on 12 April 2021)
Salisbury House, Finsbury
London, EC2 M5QQ, UK
Brandon Hill Capital Ltd.
(Ceased on 11 April 2021)
1 Tudor Street, London, EC4Y 0AH, UK
Head Office
Karelian Diamond Resources plc
3300 Lake Drive
Citywest Business Campus
Dublin 24, D24 TD21, Ireland
For further information visit
the Company’s website at:
www.kareliandiamondresources.com
or contact:
Hall Communications
1 Northumberland Road
Dublin 4, D04 F578, Ireland
Tel: +353 1 6609377
or
Lothbury Financial Services
Floor 6, 131 Cannon Street
London, EC4N 5AX, UK
Tel: +44 20 3290 0707
Professor Richard Conroy
Chairman
.
Seamus P. FitzPatrick
Deputy Chairman
Dr. Sorċa C. Conroy
Non-Executive Director
Maureen T.A. Jones
Managing Director
Howard M. Bird
Non-Executive Director
Brendan McMorrow
Non-Executive Director
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
6
Board of Directors
Karelian Diamond Resources P.L.C.
Board of Directors
Professor Richard Conroy - Chairman of the Board of Directors
Professor Richard Conroy is responsible for leading the Board and ensuring it operates in an effective manner whilst
promoting communication with shareholders. He has over 40 years’ experience of founding and growing companies in
the natural resources industry with a track record in making discoveries of global significance.
Experience
Professor Richard Conroy has been involved in natural resources for many years. He established Trans-International Oil,
which was primarily involved in Irish offshore oil exploration. Trans-International Oil initiated the Deminex Consortium
which included Deminex, Mobil, Amoco and DSM. Trans-International Oil was merged with Aran Energy P.L.C. in 1979,
which was later acquired by Statoil.
Professor Richard Conroy founded Conroy Petroleum and Natural Resources P.L.C. (“Conroy Petroleum”). Conroy
Petroleum was involved in both onshore and offshore oil production and exploration and also in mineral exploration.
Conroy Petroleum, in 1986, made the significant discovery of the Galmoy zinc deposits in County Kilkenny which was
later developed as a major zinc mine. The discovery at Galmoy led to the revival of the Irish base metal industry and to
Ireland becoming an international zinc province.
Conroy Petroleum was also a founding member of the Stoneboy consortium, which included Sumitomo Metal Mining
Co. Ltd., an exploration group which discovered the world class Pogo gold deposit in Alaska, now in production as a
major gold mine.
Conroy Petroleum acquired Atlantic Resources P.L.C. in 1992 and subsequently changed its name to ARCON
International Resources P.L.C. (“ARCON”). The oil and gas interests in ARCON were transferred to form Providence
Resources P.L.C. ARCON was later acquired by Lundin Mining Corporation.
Professor Richard Conroy was Chairman and Chief Executive of Conroy Petroleum/ARCON from 1980 to 1994. He
founded Karelian Diamond Resources P.L.C. in 1995. Since then, Professor Richard Conroy has utilised his extensive
experience in the exploration industry in his role as Chairman of the Board.
Professor Richard Conroy served in the Irish Parliament as a Member of the Senate. He was at various times front
bench spokesman for the Government party in the Upper House on Energy, Industry and Commerce, Foreign Affairs
and Northern Ireland.
Professor Richard Conroy is Emeritus Professor of Physiology in the Royal College of Surgeons in Ireland. Professor
Richard Conroy’s research included pioneering work on jet lag, shift working and decision making in business after
intercontinental flights. He co-authored the first textbook on human circadian rhythms.
Séamus P. FitzPatrick - Deputy Chairman/Non-executive Director
Séamus P. FitzPatrick is the Managing Partner and co-founder of CapVest, a private equity investment firm established
in London in 1999. He is currently chairman of Valeo Foods and is a Director of Eight Fifty Food Group. He was formerly
chairman of Findus, Vaasan & Vaasan, Mater Private, Youngs Bluecrest, and a Director of Scandi Standard and Curium
Pharma.
Experience
Prior to the founding of CapVest, Séamus P. FitzPatrick worked in M&A at Morgan Stanley in London. Thereafter, he
worked for Chase Capital Partners in New York.
Séamus P. FitzPatrick holds an honours degree in English and Psychology from Trinity College Dublin.
7
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 7
Karelian Diamond Resources P.L.C.
Board of Directors (continued)
Maureen T.A. Jones - Managing Director
Maureen T.A. Jones oversees all of the Company’s business and is responsible for formulating the Company’s objectives
and strategy. She is also the Company Secretary for the Company.
Experience
Maureen T.A. Jones joined Conroy Petroleum on its foundation in 1980 and was a Director and a member of the Board
of Directors of Conroy Petroleum/ARCON from 1986 to 1994. Maureen T.A. Jones has a medical background and
specialised in the radiographic aspects of nuclear medicine before becoming a manager of International Medical
Corporation in 1977.
Maureen T.A. Jones has over twenty years’ experience at senior level in the natural resource sector. She is Managing
Director of Karelian Diamond Resources P.L.C. and was a founding Director of the Company. Maureen T.A. Jones brings
a vast amount of managerial experience to the Board along with extensive experience of the exploration industry.
Dr. Sorċa Conroy - Non-executive Director
Dr. Sorċa Conroy brings a broad range of knowledge to bear on the Company through her capital markets experience
and her experience in the natural resources sector.
Experience
Dr. Sorċa Conroy was recruited to ING Bank in 2006 and whilst there was ranked second in the Extel Survey for
Biotechnology Specialist Sales. Dr. Sorċa Conroy had previously worked in specialist sales for life sciences and
institutional equities at Canaccord Adams (2005-2006; where she ranked fourth in the 2006 Extel survey) and Hoodless
Brennan (2004-2005). A medical graduate of The Royal College of Surgeons in Ireland, Dr. Sorċa Conroy held a number
of clinical positions between her graduation in 1995 and joining Hoodless Brennan and was a director of Conroy Gold
and Natural Resources P.L.C. for over 10 years.
Brendan McMorrow - Non-executive Director
Brendan McMorrow brings a broad range of knowledge gained through holding senior financial roles in a variety of
listed public companies in the natural resources sector. He was appointed to the Board on 15 November 2018.
Experience
Brendan McMorrow has over 25 years’ experience in a number of public companies in the oil and gas and base metals
mining sectors listed in London, Toronto and Dublin where he held senior executive finance roles. He is currently
Finance Director of Dunraven Resources P.L.C., an oil and gas exploration and development company. Prior to that he
was Chief Financial Officer of Circle Oil P.L.C. from 2005 to 2015, an AIM listed oil and gas exploration, development
and production company, with operations in North Africa and the Middle East. Brendan is a Fellow of the Chartered
Association of Certified Accountants.
Howard Bird - Non-executive Director
Howard Bird brings a broad range of knowledge gained through holding senior positions in a variety of different roles in
the natural resources sector. He was appointed to the Board on 17 September 2019.
Experience
Howard Bird is an internationally experienced Professional Geoscientist (diamonds, gold, platinum and base metals)
and has over 30 years’ diverse junior and senior mining company exploration, development and mining experience,
including over 15 years at senior executive management level. Howard has extensive worldwide experience and was
involved in programmes that have led to the discovery of over 100 kimberlites, working in Canada, Australia, Brazil,
South Africa, Angola, Zimbabwe, Democratic Republic of Congo, Botswana and Gabon.
8
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 8
Directors’ Report
Karelian Diamond Resources P.L.C.
Directors’ Report
The Board of Directors submit their annual report together with the audited financial statements of Karelian Diamond
Resources P.L.C. (the “Company”) for the financial year ended 31 May 2021.
Principal activities, business review and future developments
Information with respect to the Company’s principal activities and the review of the business and future developments
as required by Section 327 of the Companies Act 2014 is contained in the Chairman’s statement on pages 2 to 4. The
Company is a mineral exploration and development company whose objective and strategy is to discover and develop
world class diamond projects in politically stable and geographically attractive countries such as Finland and Ireland in
order to create value for shareholders. During the financial year under review, the principal focus of management was
to continue to develop the activities of the Company, concentrating particularly on diamond exploration and
evaluation.
The challenges facing the Company in achieving this strategy are world commodity prices and general economic
activity, ensuring compliance with governmental and environmental legislation and meeting work commitments under
exploration permits and licences sufficient to maintain the Company’s interest therein. To accomplish its strategy and
manage the challenges involved, the Company employs experienced individuals with a track record of success of
discovering world class ore bodies together with suitably qualified technical personnel and consultants, experienced
drilling and geophysical and other contractors and uses accredited international laboratories and technology to
interpret and assay technical results. Additionally, the Company ensures as far as possible to obtain adequate working
capital to carry out its work obligations and commitments. Please refer to the section on risks and uncertainities on
pages 14 and 15 for further details.
By co-ordinating all of the above, this should result in a satisfactory return and value for shareholders.
Results for the year and state of affairs at 31 May 2021
The income statement for the financial year ended 31 May 2021 and the statement of financial position at that date are
set out on pages 23 and 25 respectively. The loss for the financial year amounted to €422,192 (2020: a loss of €446,710)
and net assets at 31 May 2021 were €9,495,866 (2020: €9,126,781). No interim or final dividends have been or are
recommended by the Board of Directors.
The Company is not yet in a production stage and so has no income. Consequently, the Company is not expected to
report profits until it disposes of or is able to profitably develop or otherwise turn to account its exploration projects.
The Directors monitor the activities and performance of the Company on a regular basis and uses both financial and
non-financial indicators to assess the Company’s performance.
Important events since the year-end
On 6 October 2021, the Company announced that results from analysis undertaken from the Lahtojoki South
exploration area indicate potential for the presence of diamonds from the kimberlite source.
On 27 July 2021, the Company announced that it carried out a detailed heavy mineral stream sediment sampling
programme focused on the Colebrooke river in County Fermanagh in Northern Ireland.
Directors
Please refer to pages 5, 6 and 7 for a listing of Directors and further details.
Dr. Sorċa Conroy resigned from the Board of Directors by rotation and, being eligible, offered herself for re-election at
an Annual General Meeting of the Company and was successfully re-elected in the current financial year.
9
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
9
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Directors (continued)
Except as disclosed in the following tables, neither the Directors nor their families had any beneficial interest in the
share capital of the Company. Apart from Directors’ remuneration (detailed in Note 2 and Note 4) and loans from
shareholders (who are also Directors which are detailed in Note 12), there here have been no contracts or
arrangements entered into during the financial year in which a Director of the Company had a material interest. Refer
to Note 15 for further details.
Company secretary
Maureen T.A. Jones served as Company Secretary throughout the year.
Directors’ shareholdings and other interests
The interests of the Directors and their spouses and children in the share capital of the Company were as follows:
Director
Date of signing
financial
statements
Date of
signing
financial
statements
Warrants
31 May
2021
31 May
2021
Warrants
1 June 2020
(or date of
appointment
if later)
Warrants
Ordinary Shares
of €0.00025 each
10,263,912*
1,129,911
789,990
481,341
285,000
Ordinary Shares
of €0.00025 each
10,263,912
1,129,911
789,990
481,341
285,000
Professor Richard Conroy
Dr. Sorċa Conroy
Maureen T.A. Jones
Séamus P. FitzPatrick
Brendan McMorrow
220,841
-
167,651
9,288
-
* Of the 10,263,912 (2020: 8,413,912) ordinary shares beneficially held by Professor Richard Conroy at 31 May 2021, 1,232,601 (2020: 1,232,601) are held
by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest.
2,070,841
-
317,651
9,288
-
2,070,841
-
317,651
9,288
-
1 June 2020
(or date of
appointment if
later)
Ordinary Shares
of €0.00025 each
8,413,912*
1,129,911
639,990
481,341
285,000
Director
Details of warrants, all of which are exercisable currently, are as follows:
Date of
signing
financial
statements
Warrants
1,850,000
220,841
150,000
167,651
9,288
Professor Richard Conroy
Professor Richard Conroy
Maureen T.A. Jones
Maureen T.A. Jones
Séamus P. FitzPatrick
Date of
signing
financial
statements
Price £
0.08
2.20
0.08
2.20
2.20
1,850,000
220,841
150,000
167,651
9,288
31 May
2021
Warrants
31 May
2021
1 June
2020
1 June
2020
Expiry Date
Price £ Warrants
0.08
2.20
0.08
2.20
2.20
-
220,841
-
167,651
9,288
Price £
-
2.20
-
2.20
2.20
09 December 2023
16 November 2022
09 December 2023
16 November 2022
16 November 2022
Substantial shareholdings
So far as the Board of Directors are aware, no person or company, other than the shareholders listed below, held 3% or
more of the issued ordinary share capital of the Company.
Shareholder
Date of signing
financial
statements
%
31 May
2021
31 May
2021
31 May
2020
31 May 2020
%
%
Professor Richard Conroy
Mr. Kevin Taylor
Martello Holdings Limited
Mr. Steven Coomber
Spreadex Limited
Mr. Fredrik Björnberg
19.55
7.02
9.13
4.07
-
6.97
* Of the 10,263,912 (2020: 8,413,912) ordinary shares beneficially held by Professor Richard Conroy at 31 May 2021, 1,232,601 (2020: 1,232,601) are held
by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest.
14.97
8.02
6.10
5.00
4.91
4.38
14.97
7.82
5.73
3.36
8.55
4.38
Ordinary Shares
of €0.00025 each
8,413,912*
3,022,939
3,928,571
1,750,000
-
3,000,000
Ordinary Shares
of €0.00025 each
10,263,912
5,360,000
3,928,571
2,300,000
5,861,939
3,000,000
Date of signing
financial
statements
Ordinary Shares
of €0.00025 each
10,263,912*
5,500,000
4,178,571
3,428,772
3,366,336
3,000,000
10
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 10
Directors’ Report (continued)
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Compliance policy statement of Karelian Diamond Resources P.L.C.
The Directors, in accordance with Section 225(2) of the Companies Act 2014, acknowledge that they are responsible for
securing the Company’s compliance with certain obligations specified in that section (‘relevant obligations’). The
Directors confirm that:
•
•
•
a compliance policy statement has been drawn up setting out the Company’s policies that in their opinion are
appropriate with regard to compliance with relevant obligations;
appropriate arrangements and structures have been put in place that, in their opinion, are designed to provide
reasonable assurance of compliance in all material respects with those relevant obligations; and
a review has been conducted, during the financial year, of those arrangements and structures.
It is the policy of the Company to review during the course of each financial year the arrangements and structures
referred to above which have been implemented with a view to determining if they provide a reasonable assurance of
compliance in all material respects with relevant obligations.
Statement of Directors’ responsibilities in respect of the annual report and the financial statements
The Directors are responsible for preparing the annual report, including the Directors’ Report and the financial
statements in accordance with the Companies Act 2014 and the applicable regulations. Irish Company law requires the
Directors to prepare financial statements for each financial year. Under that law, they have elected to prepare the
Company’s financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by
the EU and applicable law.
Under company law, the Directors must not approve the Company financial statements unless they are satisfied that
they give a true and fair view of the assets, liabilities and financial position of the Company and of the Company’s profit
or loss for that year and otherwise comply with the Companies Act 2014. In preparing the Company’s financial
statements, the Directors are required to:
select suitable accounting policies for the Company’s financial statements and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
state whether the financial statements have been prepared in accordance with the applicable accounting
standards, identify those standards, and note the effect and the reason for any material departure from these
standards; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
•
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any
time the assets, liabilities, financial position and profit or loss of the Company and which enable them to ensure that
the financial statements of the Company are prepared in accordance with the relevant accounting framework and
comply with the provisions of the Companies Act 2014. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other
irregularities. The Directors are also responsible for preparing a Directors’ Report that complies with the requirements
of the Companies Act 2014.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Going concern
The Company incurred a loss of €422,192 (2020: a loss of €446,710) for the financial year ended 31 May 2021. The
Company had net assets of €9,495,866 (2020: €9,126,781) at that date. The Company had net current liabilities of
€721,166 (2020: net current liabilities of €1,247,702) at that date. The Company had cash and cash equivalents of
€61,778 (2020: €15,942) at 31 May 2021. The cash figure as at 31 May 2021 does not include the net cash funds of
£520,000 received from the financing announced on 28 May 2021 which settled in June 2021.
11
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 11
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Going concern (continued)
The Directors, namely Professor Richard Conroy, Séamus P. FitzPatrick, Maureen T.A. Jones, Dr. Sorċa Conroy, Howard
Bird, Brendan McMorrow, and former Directors, namely James P. Jones and Louis J. Maguire, have confirmed that they
will not seek repayment of amounts owed to them by the Company of €921,969 (2020: €902,805) for a minimum
period of 12 months from the date of approval of the financial statements, unless the Company has sufficient funds to
repay.
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 30 November 2022. As set out in the Chairman’s
statement, the Company expects to incur capital expenditure in 2021 and 2022, consistent with its strategy as an
exploration company. In reviewing the proposed work programme for exploration and evaluation assets, 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.
Corporate governance
The Board adopted the QCA Corporate Governance Code (“QCA Code”), which is derived from the 2018 UK Corporate
Governance Code and the Guidance on Board Effectiveness (the “Code”) but adapted to the needs of smaller quoted
companies. The Company agrees that good governance contributes to sustainable success and recognises the renewed
emphasis on business building trust by forging strong relationships with key stakeholders. The Company understands
the importance of a corporate culture that is aligned with the Company’s purpose and business strategy, and which
promotes integrity and includes diversity. The Company conducts its business with integrity, honesty and fairness and
requires its partners, contractors and suppliers to meet similar ethical standards. The Board is satisfied that its
corporate culture and culture of its employees aligns the Company’s objectives, strategy and business model. It is an
objective of the Company that all individuals are aware of their responsibilities in applying and maintaining these
standards in all their actions. The Board ensures that support is available in the form of staff training and updating its
employee handbook such that staff members understand what is expected of them. The Company’s Statement of
Compliance with the QCA Code is available on the Company’s website www.kareliandiamondresources.com/corporate-
governance.
Board of Directors
The Board of Directors is made up of two executive and four non-executive Directors. Biographies of each of the
Directors are set out on pages 6 and 7.
The Board of Directors agrees a schedule of regular meetings to be held in each calendar year and also meets on other
occasions as necessary. Meetings are usually held at the head office in 3300 Lake Drive, Citywest Business Campus,
Dublin 24, D24 TD21, Ireland. Due to COVID-19 a number of these meetings were held by way of Zoom and
teleconference calls. Board of Directors’ meetings were held on 11 occasions from 1 June 2020 to 31 May 2021 and
attendance at these meetings is set out in the table below. An agenda and supporting documentation were circulated
in advance of each meeting.
Meetings held during the year
Professor Richard Conroy
Séamus P. FitzPatrick
Maureen T.A. Jones
Dr. Sorċa Conroy
Brendan McMorrow
Howard Bird
12
Board
11
11
8
11
11
11
10
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
12
Directors’ Report (continued)
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Board of Directors (continued)
There is an agreed list of matters which the Board of Directors has formally reserved to itself for decision, such as
approval of the Company’s commercial strategy, trading and capital budgets, financial statements, Board of Directors’
membership, major capital expenditure and risk management policies. Responsibility for certain matters is delegated to
Board of Directors’ committees. Executive Directors spend as much time on Company’s matters as is necessary for the
proper performance of their duties. Non-executive Directors are expected to spend a minimum of one day a month on
Company’s activities in addition to preparation for and attendance at Board and sub-committee meetings.
There is an agreed procedure for Directors to take independent legal advice.
The Company Secretary is responsible for ensuring that Board of Director’s procedures are followed, and all Directors
have direct access to the Company Secretary.
All Directors receive regular reports and full Board of Directors’ papers are sent to each Director in sufficient time
before Board of Director’s meetings, and any further supporting papers and information are readily available to all
Directors on request. The Board of Director’s papers include the minutes of all committees of the Board of Directors
which have been held since the previous Board of Director’s meeting, and, the Chairman of each committee is available
to give a report on the committee’s proceedings at Board of Director’s meetings if appropriate.
The Board of Directors has a process whereby each year every Director may meet the Chairman to review the conduct
of Board of Director’s meetings and the general corporate governance of the Company. The non-executive Directors
(other than Dr. Sorċa Conroy) are regarded as independent by the Board of Directors and have no material interest or
other relationship with the Company (Dr. Sorċa Conroy is a daughter of Professor Richard Conroy).
The Board, having fully considered the corporate needs of the Company, is satisfied that it has an appropriate balance
of experience and skills to carry out its duties. The Chairman of the Company oversees this process and reviews the
Board composition to ensure it has the necessary experience, skills and capabilities.
The current non-executive Directors have a wide range of financial and technical skills based on both qualifications and
experience; including significant fundraisings, financial management, technical expertise and the discovery and bringing
into production of operating mines. Each board member keeps their skills up to date through a combination of courses,
continuing professional development through professional bodies and reading.
The Company Secretary provides Directors with updates on key developments relating to the Company, the sector in
which the Company operates, legal and governance matters including advice from the Company’s broker, lawyers and
advisors.
Board performance
The Board, through its Chairman, will, in the coming year evaluate its ongoing performance, based on the requirements
of the business and corporate governance standards.
It is envisaged that the review process will include the use of internal reviews and periodic external facilitation. The
results of such reviews will be used to determine whether any alterations are needed at either a board or senior
management level or whether any additional training would be beneficial. It is intended that with effect from the end
of the next financial year, these evaluations will be undertaken annually, after the end of each financial year but prior
to the publication of the respective annual report and accounts.
Director’s performance will be measured by way of such matters as:
•
•
•
•
•
•
Commitment;
Independence;
Relevant experience;
Impartiality;
Specialist knowledge; and
Effectiveness on the Board.
13
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 13
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Board of Directors (continued)
Board performance (continued)
As set out in the Constitution of the Company, each year, one third of the Directors with the exception of the Chairman
and the Managing Director, retire from the Board of Directors by rotation. Effectively, therefore, each such Director will
retire by rotation within a three-year period.
Ethical values and behaviours
The Board of Directors is committed to high standards of corporate governance and integrity in all its activities and
operations and promotes a culture of good ethical values and behaviour. The Company conducts its business with
integrity, honesty and fairness and requires its partners, contractors and suppliers to meet similar ethical standards.
Individual staff members must ensure that they apply and maintain these standards in all their actions.
The Chairman of the Board of Directors regularly monitors and reviews the Company’s ethical standards and cultural
environment and where necessary takes appropriate action to ensure proper standards are maintained. Due to the size
and available resources of the Company, the Chairman of the Board of Directors carries out executive functions. The
Company is fully committed to complying with all relevant health, safety and environment rules and regulations as
these apply to its operations. It is an objective of the Company that all individuals are aware of their responsibilities in
providing a safe and secure working environment.
Board Committees
The Board of Directors has implemented an effective committee structure to assist in the discharge of its
responsibilities. The committees and their members are listed on page 5 of this report. Membership of the Audit and
Remuneration Committees is comprised exclusively of non-executive Directors. Attendance at the Audit and
Remuneration Committee meetings is set out in the table below:
Meetings held during the year
Séamus P. FitzPatrick
Brendan McMorrow**
Dr. Sorca Conroy*
Howard Bird**
Audit
Committee
3
2
3
3
n/a
Remuneration
Committee
-
-
-
n/a
-
*Dr. Sorca Conroy was appointed as a member of the Audit Committee on 28 August 2020
**Brendan McMorrow and Howard Bird were both appointed as members of the Remuneration Committee on 28 August 2020
Audit Committee
The Audit Committee’s terms of reference have been approved by the Board of Directors. The Audit Committee,
constituted in accordance with Section 1097 of the Companies Act 2014, comprises three non-executive Directors and
is chaired by Séamus P. FitzPatrick. The Audit Committee reviews the accounting principles, policies and practices
adopted, and areas of management judgement and estimation during the preparation of the interim and annual
financial statements and discusses with the Company’s Auditor the results and scope of the audit. The external auditor
has the opportunity to meet with the members of the Audit Committee alone at least once a year.
The Audit Committee also advises the Board of Directors on the appointment of the external auditor and on their
remuneration. An analysis of the fees payable to the external audit firm in respect of audit services during the financial
year is detailed in Note 3 to the financial statements. The Audit Committee also undertakes a review of any non-audit
services provided to the Company. There were no such non-audit services provided during the period under review.
The Audit Committee is responsible for monitoring the controls which are in force to ensure the information reported
to the shareholders is accurate and complete. The Audit Committee also reviews internal controls and reviews the
effectiveness of the Company’s internal controls and risk management systems. It also considers the need for an
internal audit function, which it believes is not primarily required at present because of the size of the Company’s
operations. The members of the Audit Committee have agreed to make themselves available should any member of
staff wish to make representations to them about the conduct of the affairs of the Company.
14
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
14
Directors’ Report (continued)
Karelian Diamond Resources P.L.C.
Board of Directors
Professor Richard Conroy - Chairman of the Board of Directors
Professor Richard Conroy is responsible for leading the Board and ensuring it operates in an effective manner whilst
promoting communication with shareholders. He has over 40 years’ experience of founding and growing companies in
the natural resources industry with a track record in making discoveries of global significance.
Experience
Professor Richard Conroy has been involved in natural resources for many years. He established Trans-International Oil,
which was primarily involved in Irish offshore oil exploration. Trans-International Oil initiated the Deminex Consortium
which included Deminex, Mobil, Amoco and DSM. Trans-International Oil was merged with Aran Energy P.L.C. in 1979,
which was later acquired by Statoil.
Professor Richard Conroy founded Conroy Petroleum and Natural Resources P.L.C. (“Conroy Petroleum”). Conroy
Petroleum was involved in both onshore and offshore oil production and exploration and also in mineral exploration.
Conroy Petroleum, in 1986, made the significant discovery of the Galmoy zinc deposits in County Kilkenny which was
later developed as a major zinc mine. The discovery at Galmoy led to the revival of the Irish base metal industry and to
Ireland becoming an international zinc province.
Conroy Petroleum was also a founding member of the Stoneboy consortium, which included Sumitomo Metal Mining
Co. Ltd., an exploration group which discovered the world class Pogo gold deposit in Alaska, now in production as a
major gold mine.
Conroy Petroleum acquired Atlantic Resources P.L.C. in 1992 and subsequently changed its name to ARCON
International Resources P.L.C. (“ARCON”). The oil and gas interests in ARCON were transferred to form Providence
Resources P.L.C. ARCON was later acquired by Lundin Mining Corporation.
Professor Richard Conroy was Chairman and Chief Executive of Conroy Petroleum/ARCON from 1980 to 1994. He
founded Karelian Diamond Resources P.L.C. in 1995. Since then, Professor Richard Conroy has utilised his extensive
experience in the exploration industry in his role as Chairman of the Board.
Professor Richard Conroy served in the Irish Parliament as a Member of the Senate. He was at various times front
bench spokesman for the Government party in the Upper House on Energy, Industry and Commerce, Foreign Affairs
and Northern Ireland.
Professor Richard Conroy is Emeritus Professor of Physiology in the Royal College of Surgeons in Ireland. Professor
Richard Conroy’s research included pioneering work on jet lag, shift working and decision making in business after
intercontinental flights. He co-authored the first textbook on human circadian rhythms.
Séamus P. FitzPatrick - Deputy Chairman/Non-executive Director
Séamus P. FitzPatrick is the Managing Partner and co-founder of CapVest, a private equity investment firm established
in London in 1999. He is currently chairman of Valeo Foods and is a Director of Eight Fifty Food Group. He was formerly
chairman of Findus, Vaasan & Vaasan, Mater Private, Youngs Bluecrest, and a Director of Scandi Standard and Curium
Pharma.
Experience
Prior to the founding of CapVest, Séamus P. FitzPatrick worked in M&A at Morgan Stanley in London. Thereafter, he
worked for Chase Capital Partners in New York.
Séamus P. FitzPatrick holds an honours degree in English and Psychology from Trinity College Dublin.
7
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 15
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Risks and uncertainties (continued)
General Industry Risk
The Company’s business may be affected by the general risks associated with all companies in the diamond exploration
industry. These risks (the list of which is not exhaustive) include: general economic activity, the world diamond prices,
government and environmental regulations, permits and licenses, fluctuating metal prices, the requirement and ability
to raise additional capital through future financings and price volatility of publicly traded securities. As such there is no
guarantee that future market conditions will permit the raising of the necessary funds by way of issue of new equity,
debt financing or farming out of interests. To mitigate this risk, the Board regularly reviews Company cash flow
projections and considers different sources of funds.
Environmental Risk
Environmental and safety legislation may change in a manner that may require stricter or additional standards than
those now in effect. These could result in heightened responsibilities for the Company and could cause additional
expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be
predicted. The primary area that is expected to impact the Company is in the area of climate change. Management will
continue to closely monitor this area and its potential impact on the Company. The Company employs staff experienced
in the requirements of the relevant environmental authorities and seeks, through their experience, to mitigate the risk
of non-compliance with accepted best practice.
Exploration Risk
All drilling to establish productive diamond resources is inherently speculative, and, therefore, a considerable amount
of professional judgement is involved in the selection of any prospect for drilling. In addition, in the event drilling
successfully encounters diamonds, unforeseeable operating problems may arise which render it uneconomic to exploit
such finds. Estimates of potential resources include substantial proportions which are undeveloped. These resources
require further capital expenditure in order to bring them into production. No guarantee can be given as to the success
of drilling programmes in which the Company has an interest. The Company employs highly competent experienced
staff and uses a range of techniques to minimise risk prior to drilling and utilises independent experts to assess the
results of exploration activity.
Financial Risk
Refer to Note 17 in relation to the use of financial instruments by the Company, the financial risk management
objectives of the Company and the Company’s exposure to inflation, interest rate risk, foreign currency risk, liquidity
risk and credit risk. Management is authorised to achieve best available rates in respect of each forecast currency
requirement.
Pandemic Risk
The COVID-19 pandemic impacted on the the Company’s activities during the financial year. Since the outbreak of the
COVID-19 pandemic, the Company has taken necessary measures in accordance with Government’s guidelines to
protect the health, safety and wellbeing of its employees, contractors and partners in Finland and Ireland including for
a period, staff working remotely. COVID-19 continues to limit field and laboratory work given the restrictions on
operations and movement. However, the Company’s exploration and development programme has nonetheless
continued.
Communication with shareholders
The Company gives high priority to communication with both shareholders and all other stakeholder groups. This is
achieved through publications such as the annual and interim report, and news releases on the Company’s website
www.kareliandiamondresources.com, which is regularly updated.
The Company encourages shareholders to attend the Annual General Meeting (AGM) to meet, exchange views and
discuss the progress of the Company. The Directors are available after the conclusion of the formal business of the
AGM to meet, listen to shareholders and discuss any relevant matters arising.
16
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 16
Directors’ Report (continued)
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Political donations
There were no political donations during the financial year (2020: €Nil).
Accounting records
The Board of Directors are responsible for ensuring adequate accounting records, as outlined in Sections 281 to 285 of
the Companies Act 2014, are kept by the Company. The Board of Directors, through the use of appropriate procedures
and systems and the employment of competent persons have ensured that measures are in place to secure compliance
with these requirements.
The accounting records are maintained at the Company’s business address, 3300 Lake Drive, Citywest Business Campus,
Dublin 24, D24 TD21, Ireland.
Disclosure of information to auditor
So far as each of the Directors in office at the date of approval of the financial statements is aware:
•
•
There is no relevant audit information of which the Company’s auditor are unaware; and
The Directors have taken all steps that they ought to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish that the Company’s auditor are aware of that
information.
This information is given and should be interpreted in accordance with the provisions of Section 330 of the Companies
Act 2014.
Auditor
Deloitte Ireland LLP will continue in office in accordance with Section 383 (2) of the Companies Act 2014. Shareholders
will be asked to authorise the Directors to fix their remuneration.
On behalf of the Directors:
Professor Richard Conroy (Chairman)
Maureen T.A. Jones (Managing Director)
30 November 2021
17
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc Independent Auditor’s Report
Deloitte Ireland LLP
Chartered Accountants &
Statutory Audit Firm
17
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc
RReeppoorrtt oonn tthhee aauuddiitt ooff tthhee ffiinnaanncciiaall ssttaatteemmeennttss
OOppiinniioonn oonn tthhee ffiinnaanncciiaall ssttaatteemmeennttss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc ((tthhee ‘‘ccoommppaannyy’’))
In our opinion the financial statements:
•
•
give a true and fair view of the assets, liabilities and financial position of the company as at 31 May 2021
and of the loss of the company for the financial year then ended; and
have been properly prepared in accordance with the relevant financial reporting framework and, in
particular, with the requirements of the Companies Act 2014.
The financial statements we have audited comprise:
•
•
•
•
•
•
the Income Statement;
the Statement of Comprehensive Income;
the Statement of Financial Position;
the Statement of Changes in Equity;
the Statement of Cash Flows; and
the related notes 1 to 19, including a summary of significant accounting policies as set out in note 1.
The relevant financial reporting framework that has been applied in their preparation is the Companies Act 2014
and International Financial Reporting Standards (IFRS) as adopted by the European Union (“the relevant financial
reporting framework”).
BBaassiiss ffoorr ooppiinniioonn
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and
applicable law. Our responsibilities under those standards are described below in the “Auditor's responsibilities
for the audit of the financial statements” section of our report.
We are independent of the company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting
Supervisory Authority, as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
MMaatteerriiaall uunncceerrttaaiinnttyy rreellaatteedd ttoo ggooiinngg ccoonncceerrnn
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
We draw your attention to Note 1 in the financial statements, which indicates that the company incurred a net
loss of €422,192 during the financial year ended 31 May 2021 and, as of that date, the Company had net
current liabilities of €721,166.
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis
of accounting included:
• Obtained an understanding of the company’s controls over the preparation of cash flow forecasts and
approval of the projections and assumptions used in cash flow forecasts to support the going concern
assumption, assessed the design and determined the implementation of these controls;
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
18
Independent Auditor’s Report (continued)
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc
•
Evaluated directors’ plans and their feasibility by challenging the key assumptions used in the cash flow
forecast provided by agreeing the inputs to expenditure commitments and other supporting
documentation;
• Obtained an understanding of directors’ plans to enable the company to raise the funds required to
•
meet the expenditure commitments of the company;
Inspected confirmations received by the company from the directors and former directors that they
will not seek repayment of amounts owed to them by the Company within 12 months of the date of
approval of the financial statements, unless the Company has sufficient funds to repay;
• Assessed the mechanical accuracy of the cash flow forecast model;
• Assessed the adequacy of the disclosures made in the financial statements
As stated in Note 1, these events or conditions along with other matters as set forth in Note 1 indicate that a
material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
SSuummmmaarryy ooff oouurr aauuddiitt aapppprrooaacchh
KKeeyy aauuddiitt mmaatttteerrss
The key audit matters that we identified in the current year were:
• Going concern (see material uncertainty related to going concern section).
• Valuation of Intangible Assets.
MMaatteerriiaalliittyy
SSccooppiinngg
Within this report, any new key audit matters are identified with
and any key
audit matters which are the same as the prior year identified with
.
The materiality that we used in the current year was €300,000 which was
determined on the basis of approximately 3% of Shareholder’s Equity.
We determined the scope of our audit by obtaining an understanding of the
company and its environment and assessing the risks of material misstatement.
SSiiggnniiffiiccaanntt cchhaannggeess
oouurr aapppprrooaacchh
iinn
There were no significant changes in our approach.
KKeeyy AAuuddiitt MMaatttteerrss
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current financial year and include the most significant assessed risks
of material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter
described in the material uncertainty relating to going concern section, we have determined the matters
described below to be the key audit matters to be communicated in our report.
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
19
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc
VVaalluuaattiioonn ooff IInnttaannggiibbllee AAsssseettss
KKeeyy
aauuddiitt mmaatttteerr
ddeessccrriippttiioonn
As at 31 May 2021, the carrying value of Exploration and evaluation assets included
in Intangible assets in the Statement of financial position amounted to €10,766,576
We draw your attention to the disclosures made in Notes 1 and 7 to the financial
statements concerning the valuation of Intangible assets held. The valuation of
intangible assets by the company is dependent on the 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.
The valuation of Intangible assets in the Statement of financial position was assessed
as a significant risk and is therefore considered a key audit matter.
HHooww tthhee ssccooppee ooff oouurr
aauuddiitt rreessppoonnddeedd ttoo
tthhee kkeeyy aauuddiitt mmaatttteerr
We performed the following procedures:
• We evaluated the directors’ procedures for assessing indicators of
impairment of intangible assets in line with the accounting policies;
• We evaluated the design and determined the implementation of controls in
place over the capitalisation and subsequent valuation of Intangible assets.
• We inspected documentation in respect of licences held and considered
and challenged the directors’ assessment of indicators of impairment in
relation to exploration and evaluation assets;
• We performed a review of the proposed exploration programme in respect
of the Company’s assets; including:
-
discussing and challenging the allocation of capitalised costs for their
reasonableness,
assessing the reasonableness of the assets capitalised in the current
year, and
reviewing and considering indicators of impairment.
-
-
• We obtained a listing of intangible asset additions in the financial year and
selected a sample of additions to ensure the capitalisation was in line with
accounting policies.
• We performed a review of Board of Directors Meeting Minutes and press
releases issued by the company in relation to the status of exploration and
evaluation assets;
• We performed a review of budgeted expenditure for the next 12 months;
and
• We also considered the adequacy of the disclosure in the financial
statements.
KKeeyy oobbsseerrvvaattiioonnss
A significant uncertainty exists in relation to the ability of the company to realise the
exploration and evaluation assets capitalised to intangible assets.
As noted above, we draw your attention to the disclosures made in Notes 1 and 7 to
the financial statements concerning the valuation of intangible assets. The valuation
of intangible assets by the company is dependent on the 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.
The financial statements do not include any adjustments in relation to these
uncertainties and the ultimate outcome cannot, at present, be determined. Our
opinion is not modified in respect of this matter.
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
20
Independent Auditor’s Report (continued)
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc
Our audit procedures relating to these matters were designed in the context of our audit of the financial
statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the
financial statements is not modified with respect to any of the risks described above, and we do not express an
opinion on these individual matters.
OOuurr aapppplliiccaattiioonn ooff mmaatteerriiaalliittyy
We define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a
reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the results of our work.
We determined materiality for the Company to be €300,000 which is approximately 3% of Shareholder’s Equity.
We have considered Shareholder’s Equity to be the critical component for determining materiality as we
determined the Shareholder’s Equity position to be of most importance to the principal external users of the
financial statements. Raising equity funding is of key importance to the company in continuing its current
operations and is reflective of the current business life cycle of the company. We have considered quantitative
and qualitative factors such as understanding the entity and its environment, history of misstatements,
complexity of the company and reliabity of control environment.
Shareholder's
Equity
€10mln
Shareholder's
Equity
Materiality
Materialty
€300,000
Audit Committee
Reporting
Threshold
€15,000
We agreed with the Audit Committee that we would report to them any audit differences in excess of €15,000,
as well as differences below that threshold which, in our view, warranted reporting on qualitative grounds. We
also report to the Audit Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
AAnn oovveerrvviieeww ooff tthhee ssccooppee ooff oouurr aauuddiitt
We determined the scope of our audit by obtaining an understanding of the company and its environment and
assessing the risks of material misstatement.
OOtthheerr iinnffoorrmmaattiioonn
The other information comprises the information included in the Annual Report and Financial Statements, other
than the financial statements and our auditor’s report thereon. The directors are responsible for the other
information contained within the Annual Report and Financial Statements.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
21
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc
RReessppoonnssiibbiilliittiieess ooff ddiirreeccttoorrss
As explained more fully in the Directors’ Report, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view and otherwise comply with the
Companies Act 2014, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the company or to cease operations,
or have no realistic alternative but to do so.
AAuuddiittoorr’’ss rreessppoonnssiibbiilliittiieess ffoorr tthhee aauuddiitt ooff tthhee ffiinnaanncciiaall ssttaatteemmeennttss
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future
events or conditions may cause the entity (or where relevant, the group) to cease to continue as a going
concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that the
auditor identifies during the audit.
For listed entities and public interest entities, the auditor also provides those charged with governance with a
statement that the auditor has complied with relevant ethical requirements regarding independence, including
the Ethical Standard for Auditors (Ireland), and communicates with them all relationships and other matters that
may reasonably be thought to bear on the auditor’s independence, and where applicable, related safeguards.
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
22
Independent Auditor’s Report (continued)
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonndd RReessoouurrcceess PPllcc
Where the auditor is required to report on key audit matters, from the matters communicated with those charged
with governance, the auditor determines those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. The auditor describes these matters in
the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, the auditor determines that a matter should not be communicated in the auditor’s report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
RReeppoorrtt oonn ootthheerr lleeggaall aanndd rreegguullaattoorryy rreeqquuiirreemmeennttss
OOppiinniioonn oonn ootthheerr mmaatttteerrss pprreessccrriibbeedd bbyy tthhee CCoommppaanniieess AAcctt 22001144
Based solely on the work undertaken in the course of the audit, we report that:
• We have obtained all the information and explanations which we consider necessary for the purposes of our
•
•
•
audit.
In our opinion the accounting records of the company were sufficient to permit the financial statements to
be readily and properly audited.
The financial statements are in agreement with the accounting records.
In our opinion the information given in the directors’ report is consistent with the financial statements and
the directors’ report has been prepared in accordance with the Companies Act 2014.
MMaatttteerrss oonn wwhhiicchh wwee aarree rreeqquuiirreedd ttoo rreeppoorrtt bbyy eexxcceeppttiioonn
Based on the knowledge and understanding of the company and its environment obtained in the course of the
audit, we have not identified material misstatements in the directors' report
We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to
you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by law are not made.
UUssee ooff oouurr rreeppoorrtt
This report is made solely to the company’s members, as a body, in accordance with Section 391 of the Companies
Act 2014. Our audit work has been undertaken so that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
KKeevviinn BBuuttlleerr
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
No. 6 Lapp’s Quay
Cork
Date: 30 November 2021
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 23
Karelian Diamond Resources P.L.C.
Income statement
for the financial year ended 31 May 2021
Continuing operations
Operating expenses - other
Operating expenses - Share-based payment expense
Movement in fair value of warrants
Loss before finance costs and taxation
Interest expenses
Net finance cost
Loss before taxation
Income tax expense
Loss for the financial year
Loss per share
Basic and diluted loss per share
Note
2
16
16
3
11
5
6
2021
€
(370,370)
(46,519)
5,250
(411,639)
(10,553)
(10,553)
(422,192)
-
2020
€
(443,448)
-
-
(443,448)
(3,262)
(3,262)
(446,710)
-
(422,192)
(446,710)
(0.0082)
(0.0111)
The total loss for the financial year is entirely attributable to equity holders of the Company.
______________________
Professor Richard Conroy
Chairman
___________________
Maureen T.A. Jones
Managing Director
24
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 24
Karelian Diamond Resources P.L.C.
Statement of comprehensive income
for the financial year ended 31 May 2021
Loss for the financial year
2021
€
2020
€
(422,192)
(446,710)
Income recognised in other comprehensive income
-
-
Total comprehensive loss for the financial year
(422,192)
(446,710)
The total comprehensive loss for the financial year is entirely attributable to equity holders of the Company.
25
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
Karelian Diamond Resources P.L.C.
Statement of financial position
as at 31 May 2021
25
Assets
Non-current assets
Intangible assets
Financial assets
Total non-current assets
Current assets
Cash and cash equivalents
Other receivables
Total current assets
Total assets
Equity
Capital and reserves
Share capital presented as equity
Share premium
Share-based payments reserve
Retained deficit
Total equity
Liabilities
Non-current liabilities
Warrant liabilities
Convertible loan
Derivative liability
Total non-current liabilities
Current liabilities
Trade and other payables
Related party loans
Total current liabilities
Total liabilities
Total equity and liabilities
Note
7
8
9
10
13
13
16
11
11
12
12
31 May
2021
€
10,766,576
4
10,766,580
61,778
652,957
714,735
31 May
2020
€
10,523,570
4
10,523,574
15,942
118,991
134,933
11,481,315
10,658,507
3,191,807
9,959,181
450,658
(4,105,780)
9,495,866
389,904
159,498
146
549,548
1,435,901
-
1,435,901
1,985,449
3,185,432
9,150,829
456,624
(3,666,104)
9,126,781
-
148,945
146
149,091
1,288,973
93,662
1,382,635
1,531,726
11,481,315
10,658,507
The financial statements were approved by the Board of Directors on 30 November 2021 and authorised for issue on 30
November 2021. They are signed on its behalf by:
______________________
Professor Richard Conroy
Chairman
__________________
Maureen T.A. Jones
Managing Director
26
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 26
Karelian Diamond Resources P.L.C.
Statement of changes in equity
for the financial year ended 31 May 2021
Balance at 1 June 2020
Share issue
Warrant issue
Share issue costs
Transfer from share-
based payment reserve to
retained deficit
Loss for the financial year
Balance at 31 May 2021
Balance at 1 June 2019
Share issue
Share issue costs
Loss for the financial year
Balance at 31 May 2020
Share
capital
€
3,185,432
6,375
-
-
-
-
3,191,807
3,183,294
2,138
-
-
3,185,432
Share
premium
€
9,150,829
1,156,987
(348,635)
-
-
-
9,959,181
8,768,276
382,553
-
-
9,150,829
Share-based
payment reserve
€
456,624
-
-
-
Retained
deficit
€
(3,666,104)
-
-
(23,450)
(5,966)
-
450,658
5,966
(422,192)
(4,105,780)
456,624
-
-
-
456,624
(3,218,415)
-
(979)
(446,710)
(3,666,104)
Total
equity
€
9,126,781
1,163,362
(348,635)
(23,450)
-
(422,192)
9,495,866
9,189,779
384,691
(979)
(446,710)
9,126,781
Share capital
The share capital comprises of 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 the Annual General Meeting held on 9 December 2016. A detailed breakdown of the
share capital figure is included in Note 13.
Share premium
The share premium reserve comprises of the excess consideration received in respect of share capital over the nominal
value of 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 or lapsed during the
year, which are reclassified to retained deficit.
Retained deficit
This reserve represents the accumulated losses absorbed by the Company to the statement of financial position date.
27
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 27
Karelian Diamond Resources P.L.C.
Statement of cash flows
for the financial year ended 31 May 2021
Cash flows from operating activities
Loss for the financial year
Adjustments for:
Expense recognised in income statement in respect of
equity settled share-based payments
Movement in fair value of warrants
Interest expense
Increase in trade and other payables
Increase in other receivables
Advances from/(repayments to) Conroy Gold and Natural Resources P.L.C.
Net cash used in operating activities
Cash flows from investing activities
Investment in exploration and evaluation
Net cash used in investing activities
Cash flows from financing activities
Issue of share capital
Share issue costs
Repayment on loans
Proceeds from convertible loan issue
Net cash provided by financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
2021
€
2020
€
(422,192)
(446,710)
46,519
(5,250)
10,553
(370,370)
146,927
(762,367)
228,402
(757,408)
(243,006)
(243,006)
1,068,988
(23,450)
712
-
1,046,250
45,836
15,942
61,778
-
-
3,262
(443,448)
350,280
(11,774)
(4,228)
(109,170)
(370,837)
(370,837)
320,266
(979)
-
145,829
465,116
(14,891)
30,833
15,942
28
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 28
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
1
Accounting policies
Reporting entity
Karelian Diamond Resources P.L.C. (the “Company”) is a company domiciled in Ireland. The Company is a public
limited company incorporated in Ireland under registration number 382499. The registered office is located at
3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland.
Basis of preparation
The financial statements are presented in Euro (“€”). The € is the functional currency of the Company. The financial
statements are prepared under the historical cost basis except for derivative financial instruments which, if any,
are measured at fair value at each reporting date.
The preparation of 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 period in which the
estimate is revised and in any future periods affected. Details of significant judgements are disclosed in the
accounting policies.
The financial statements were authorised for issue by the Board of Directors on 30 November 2021.
Going concern
The Company incurred a loss of €422,192 (2020: a loss of €446,710) for the financial year ended 31 May 2021. The
Company had net assets of €9,495,866 (2020: €9,126,781) at that date. The Company had net current liabilities of
€721,166 (2020: net current liabilities of €1,247,702) at the statement of financial position date.
The Directors, Professor Richard Conroy, Séamus P. FitzPatrick, Maureen T.A. Jones, Dr. Sorċa Conroy, Brendan
McMorrow, Howard Bird and former Directors James P. Jones and Louis J. Maguire, have confirmed that they will
not seek repayment of amounts owed to them by the Company of €921,969 (2020: €902,805) within 12 months of
the date of approval of the financial statements, unless the Company has sufficient funds to repay.
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 30 November 2022. As set out further in the
Chairman’s statement, the Company expects to incur capital expenditure in 2021 and 2022, consistent with its
strategy as an exploration company. The Directors recognise that net current liabilities of €721,166 is a material
uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern and,
therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. In
reviewing the proposed work programme for exploration and evaluation assets and, on the basis of the equity
raised during the financial year, 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.
The financial statements do not include any adjustments to the carrying value and classification of assets and
liabilities that would arise if the Company was unable to continue as going concern.
Statement of compliance
The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European
Union (“EU”) and the requirements of the Companies Act 2014.
29
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
29
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
1
Accounting policies (continued)
Recent accounting pronouncements
(i) New and amended standards adopted by the Company
The Company has adopted the following amendments to standards for the first time for its annual reporting year
commencing 1 June 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;
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; and
Amendments to IAS 1 and IAS 8 regarding definition of material used in the Conceptual Framework – Effective
date 1 January 2020.
The adoption of the above amendments to standards had no significant impact on the financial statements of the
Company either due to being not applicable or immaterial.
(ii) New standards and interpretations not yet adopted by the Company
Certain new accounting standards and interpretations have been published that are not mandatory for 31 May
2021 reporting periods and have not been early adopted by the Company.
The following amendments to standards adopted and endorsed by the EU have been issued by the International
Accounting Standards Board to date and are not yet effective for the financial year from 1 June 2020. The Board of
Directors is currently assessing whether these standards once adopted by the Company will have any impact on
the financial statements of the Company.
•
•
Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16, and IAS 39 regarding replacement issues in the context of the
IBOR reform – Phase 2 - Effective date 1 January 2021; and
IFRS 4 amendments regarding the expiry date of the deferral approach – Effective date 1 January 2023.
The following new standards 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 is currently assessing whether these standards once endorsed
by the EU will have any impact on the financial statements of the Company.
•
•
•
•
•
•
•
•
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 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;
Amendment to IFRS 16 about providing lessees with an extension of one year to exemption from assessing
whether a COVID-19-related rent concession is a lease modification – Effective date 1 April 2021;
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 1 amendments regarding the disclosure of accounting policies - Effective date 1 January 2023;
30
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 30
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
1 Accounting policies (continued)
Recent accounting pronouncements (continued)
(ii) New standards and interpretations not yet adopted by the Company (continued)
•
•
IAS 8 amendments regarding the definition of accounting estimates – Effective date 1 January 2023;
Amendments to IAS 12 Income taxes: Deferred tax related to assets and liabilities arising from a single transac-
tion – 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.
•
•
(a) Intangible assets
The Company accounts for mineral expenditure in accordance with IFRS 6: Exploration for and Evaluation of
Mineral Resources.
(i) Capitalisation
Certain costs (other than payments to acquire the legal rights to explore) incurred prior to acquiring the rights to
explore are charged directly to the income statement. Exploration, appraisal and development expenditure in-
curred on exploring, and testing exploration prospects are accumulated and capitalised as intangible exploration
and evaluation (“E&E”) assets.
E&E capitalised costs include geological and geophysical costs, and other direct costs of exploration (drilling,
trenching, sampling and technical feasibility and commercial viability activities). In addition, E&E capitalised costs
include an allocation from operating expenses, including share-based payments. All such costs are necessary for
exploration and evaluation activities.
E&E capitalised costs are not amortised prior to the conclusion of appraisal activities.
At completion of appraisal activities if technical feasibility is demonstrated and commercial resources are
discovered, then the carrying amount of the relevant E&E asset will be reclassified as a development and
production asset, once the carrying value of the asset has been assessed for impairment. If following completion of
appraisal activities in an area, it is not possible to determine technical feasibility and commercial viability, or if the
right to explore expires, then the costs of such unsuccessful exploration and evaluation are written off to the
income statement in the period in which the event occurred.
(ii) Impairment
If facts and circumstances indicate that the carrying value of an E&E asset may exceed its recoverable amount, an
impairment review is performed. The following are considered to be key indicators of impairment in relation to
E&E assets:
•
•
•
The period for which the entity has the right to explore in the specific area has expired or will expire in the near
future and is not expected to be renewed.
Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is
neither budgeted nor planned.
Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of
commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in
the specific area.
31
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 31
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
1
Accounting policies (continued)
(a) Intangible assets (continued)
(ii) Impairment (continued)
•
Sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
For E&E assets, where the above indicators exist or on an annual basis, an impairment test is carried out. The E&E
assets are categorised into Cash Generating Units (“CGU”) on a country-by-country basis (31 May 2021 and 31 May
2020). The carrying value of the CGU is compared to its recoverable amount and any resulting impairment loss is
written off to the income statement. The recoverable amount of the CGU is assessed as the higher of its fair value,
less costs to sell, and its value in use.
(b) Income taxation expense
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income
statement except to the extent that it relates to items recognised directly in other comprehensive loss, in which
case it is recognised in the statement of comprehensive income. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax
assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities on a net basis or their tax assets and liabilities will be settled
simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will
be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be
realised.
(c) Share-based payments
The Company classifies instruments issued as financial liabilities or equity instruments in accordance with the
substance of the contractual terms of the instruments. When the warrants issued (see note 16 for details) have an
exercise price in sterling, they are derivative in nature and are liability classified. They do not qualify for equity
classification as any cash settlement on exercise of these warrants will be received in a foreign currency. Where
warrants are issued in the functional currency of the Company they are recognised as equity instruments. The
warrant liabilities are recognised at their fair value on initial recognition and subsequently are measured at fair
value through profit or loss. Any incremental direct costs associated with the issuance of warrants are taken as an
immediate charge to finance costs through the income statement. See note 11 for further details.
For equity-settled share-based payment transactions (i.e. the granting of share options and share warrants), the
Company measures the services and the corresponding increase in equity at fair value at the measurement date
(which is the grant date) using a recognised valuation methodology for the pricing of financial instruments
(Binomial Lattice Model or Black Scholes Model).
32
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 32
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
1 Accounting policies (continued)
(d) Trade and other receivables and payables
Trade and other receivables are measured at their transaction price and subsequently measured at amortised cost.
Trade and other payables are measured at initial recognition at fair value, and subsequently measured at
amortised cost.
(e) Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the
effects of all potentially dilutive ordinary shares.
(f) Cash and cash equivalents
Cash and cash equivalents consist of cash at bank held by the Company and short-term bank deposits with a
maturity of three months or less. Cash and cash equivalents are held for the purpose of meeting short-term cash
commitments.
(g) Pension costs
The Company provides for pensions for certain employees through a defined contribution pension scheme. The
amount charged to the income statement is the contribution payable in that financial year. Any difference
between amounts charged and contributions paid to the pension scheme is included in receivables or payables in
the statement of financial position.
(h) Foreign currencies
Transactions denominated in foreign currencies relating to costs and non-monetary assets are translated into € at
the rates of exchange ruling on the dates on which the transactions occurred. Monetary assets and liabilities
denominated in foreign currencies are translated into € at the rate of exchange ruling at the statement of financial
position date. The resulting profits or losses are dealt with in the income statement.
(i) Directors’ Loans
The Directors’ loans are initially measured at fair value, net of transaction costs and subsequently measured at
amortised cost using the effective interest method, with interest expense recognised on the effective interest rate
method. The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial liability.
(j) Convertible loan
As the convertible loan is made up of both liability and derivative components, it is considered to be a compound
financial instrument. At initial recognition, the carrying amount of a compound financial instrument is allocated to
its liability and derivative components. The fair value of the liability, which is the difference between the
transaction price and the fair value of the conversion feature, and derivative is recognised as a liability in the
statement of financial position. The conversion feature is subsequently measured at fair value with changes
recognised in profit or loss. The liability is subsequently measured at amortised cost. The Company accounts for
the interest expense of the convertible loan note at the effective interest rate. The difference between the
effective interest rate and interest rate attached to the convertible loan increases the carrying amount of the
liability so that, on maturity, the carrying amount is equal to the capital cash repayment that the Company may be
required to pay.
33
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 33
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
1 Accounting policies (continued)
(k) Ordinary shares
Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from retained earnings, net of any tax effects.
(l) Impairment - financial assets are measured at amortised cost
Financial assets measured at amortised cost are reviewed for impairment loss at each reporting date. The
Company applies the simplified approach in accordance with IFRS 9.
The Company measures the loss allowance at an amount equal to the lifetime expected credit losses as required
under a simplified approach for trade receivables that do not contain a financing component.
The Company’s approach to expected credit losses (“ECL”) reflects a probability-weighted outcome, the time value
of money and reasonable and supportable information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts of future economic conditions. Significant
financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial re-
organisation and default in payments are all considered indicators for increases in credit risks.
If the credit risk increases to the point that it is considered to be credit impaired, interest income will be calculated
based on the gross carrying amount adjusted for the loss allowance. Any contractual payment which is more than
90 days past due is considered credit impaired.
(m) Significant accounting judgements and key sources of estimation uncertainty
Significant judgements in applying the Company’s accounting policies
The preparation of the financial statements requires the Board of Directors to make judgements and estimates and
form assumptions that affect the amounts of assets, liabilities, contingent liabilities, revenues and expenses
reported in the financial statements. On an ongoing basis, the Board of Directors evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. The Board of Directors bases
its judgements and estimates on historical experience and on other factors it believes to be reasonable under the
circumstances, the results of which form the basis of the reported amounts that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions and conditions. In the
process of applying the Company’s accounting policies above, the Board of Directors have identified the
judgemental areas that have the most significant impact on the amounts recognised in the financial statements
(apart from those involving estimations), which are dealt with as follows:
Exploration and evaluation assets
The assessment of whether operating costs and salary costs are capitalised to exploration and evaluation costs or
expensed involves judgement. The Board of Directors consider the nature of each cost incurred and whether it is
deemed appropriate to capitalise it within exploration and evaluation assets. Given that the activity of
management and the resultant administration and salary costs are primarily focused on the Company’s diamond
prospects, the Board of Directors consider it appropriate to capitalise a portion of such costs. These costs are
reviewed on a line by line basis with the resultant calculation of the amount to be capitalised being specific to the
activities of the Company in any given year.
Cash generating units
As outlined in the intangible assets accounting policy, the exploration and evaluation assets should be allocated to
CGUs. The determination of what constitutes a CGU requires judgement.
34
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 34
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
1
Accounting policies (continued)
(m) Significant accounting judgements and key sources of estimation uncertainty (continued)
Significant judgements in applying the Company’s accounting policies (continued)
The carrying value of each CGU is compared to its recoverable amount. The recoverable amount of the CGU is
assessed as the higher of its fair value less costs to sell and its value in use. The determination of value in use
requires the following judgements:
• Estimation of future cash flows expected to be derived from the asset.
• Expectation about possible variations in the amount or timing of the future cash flows.
• The determination of an appropriate discount rate.
Going concern
The preparation of financial statements requires an assessment on the validity of the going concern assumption.
The validity of the going concern assumption is dependent on the successful further development and ultimate
production of the mineral resources and the availability of sufficient finance to bring the resources to economic
maturity and profitability. The Board of Directors have reviewed the proposed programme for exploration and
evaluation assets and, on the basis of the equity raised after the financial year, the results from the exploration
programme and the prospects for raising additional funds as required, consider it appropriate to prepare the
financial statements on the going concern basis. Refer to page 28 for further details.
Deferred tax
No deferred tax asset has been recognised in respect of tax losses as it is not considered probable that future
taxable profit will be available against which the related temporary differences can be utilised.
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Exploration and evaluation assets
The carrying value of exploration and evaluation assets was €10,766,576 (2020: €10,523,570) at 31 May 2021. The
Board of Directors carried out an assessment, in accordance with IFRS 6: Exploration for and Evaluation of Mineral
Resources relating to the remaining licence or claim terms, likelihood of renewal, likelihood of further expenditure,
possible discontinuation of activities over specific claims and available data which may suggest that the
recoverable value of an exploration and evaluation asset is less than its carrying amount. Based on this
assessment, the Board of Directors is satisfied as to the carrying value of these assets and is satisfied that these are
recoverable, acknowledging however that their recoverability is dependent on future successful exploration
efforts.
Employee benefits – Share-based payment transactions
The Company operates equity-settled share-based payment arrangements with non-market performance
conditions which fall within the scope of and are accounted for under the provisions of IFRS 2: Share-based
Payment. Accordingly, the grant date fair value of the options under these schemes is recognised as an operating
expense with a corresponding increase in the “Share-based payment reserve”, within equity, where the exercise
price is granted in EUR or recognised as a liability where a different currency is quoted as the exercise price over
the vesting period. The estimation of share-based payment costs requires the selection of an appropriate valuation
model and consideration as to the inputs necessary for the valuation model chosen. The Company has made
estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of
those options. The model used by the Company is the Binomial Lattice Model. The fair value of these options is
measured using an appropriate option pricing model, taking into account the terms and conditions upon which the
options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share
options that vest, except where forfeiture is only due to share prices not achieving the threshold for vesting.
35
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
35
2 Operating expenses
Analysis of operating expenses
Operating expenses
Transfer to intangible assets
Operating expenses are analysed as follows:
Professional fees
Wages and salaries
Other operating expenses
Personnel costs
Auditor’s remuneration
2021
€
449,671
(79,301)
370,370
184,846
99,721
97,056
49,048
19,000
449,671
2020
€
605,907
(162,459)
443,448
209,407
161,113
129,108
80,144
26,135
605,907
Of the above costs, a total of €79,301 (2020: €162,459) is capitalised to intangible assets based on a review of the
nature and quantum of the underlying costs. Refer to Note 1(a)(i) for further details. The costs capitalised to
intangible assets mainly relate to the costs of geological and on-site personnel together with an appropriate
portion of executive management salaries. €54,039 is charged to the Statement of Comprehensive Income in
relation to Directors’ salaries.
Wages, salaries and related costs as disclosed above is analysed as follows:
Wages and salaries and personnel costs
Social insurance costs
2021
€
144,111
4,658
148,769
2020
€
237,512
7,007
244,519
The amount of wages, salaries and related costs capitalised to intangible assets during the financial year was
€72,369 (2020: €131,280).
The average number of persons employed during the year (including executive Directors) by activity was as
follows:
Corporate management and administration
Exploration and evaluation
2021
2020
2
-
2
2
-
2
36
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 36
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
2 Operating expenses (continued)
An analysis of remuneration for each Director of the Company in the current financial year (prior to amounts
transferred to intangible assets) is as follows:
Professor Richard Conroy
Maureen T.A. Jones
Brendan McMorrow
Séamus P. FitzPatrick
Dr. Sorċa Conroy
Howard Bird
Fees
€
12,500
6,250
6,250
6,250
6,250
6,250
43,750
Salary
€
40,625
31,250
-
-
-
-
71,875
Share-based
payment €
-
-
-
-
-
-
-
Pension
contributions €
-
-
-
-
-
-
-
Total
€
53,125
37,500
6,250
6,250
6,250
6,250
115,625
An analysis of remuneration for each Director of the Company in the prior financial year (prior to amounts
transferred to intangible assets) is as follows:
Professor Richard Conroy
Maureen T.A. Jones
Brendan McMorrow
Séamus P. FitzPatrick
Dr. Sorċa Conroy
Howard Bird
Louis J. Maguire
Fees
€
17,500
8,750
8,750
8,750
8,750
5,833
5,417
63,750
Salary
€
56,875
43,750
-
-
-
-
-
100,625
Share-based
payment €
-
-
-
-
-
-
-
-
Pension
contributions €
-
-
-
-
-
-
-
-
Total
€
74,375
52,500
8,750
8,750
8,750
5,833
5,417
164,375
37
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 37
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
3 Loss before taxation
The loss before taxation is arrived at after charging the following items:
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
•
Audit of financial statements
2021
€
2020
€
19,000
26,135
No fees were incurred for other assurance; tax advisory or other non-audit services in respect of the current or prior
financial years.
4 Directors’ remuneration
Aggregate emoluments paid to or receivable by Directors in respect of
qualifying services
2021
€
2020
€
115,625
164,376
During the year ended 31 May 2021 and 31 May 2020, one Director was a member of a defined contribution
scheme but no amounts were paid and accordingly, no other disclosures are required by Section 305 of the
Companies Act 2014.
No compensation has been paid or is payable for the loss of office or other termination benefit in respect of the
loss of office of Director or other offices (2020: €Nil).
5
Income tax expense
No taxation charge arose in the current or prior financial year due to losses incurred.
Factors affecting the tax charge for the financial year:
The total tax charge for the financial year is different to the standard rate of Irish corporation tax. This is due to the
following:
Loss on ordinary activities before taxation
Irish standard tax rate
Tax credit at the Irish standard rate
Effects of:
Losses carried forward for future utilisation
Tax charge for the financial year
2021
€
(422,192)
12.50%
(52,774)
52,774
-
2020
€
(446,710)
12.50%
(55,839)
55,839
-
No deferred tax asset has been recognised on accumulated tax losses as it cannot be considered probable that
future taxable profit will be available against which the deferred tax asset can be utilised.
Unutilised losses may be carried forward from the date of the origination of the losses but may only be offset
against taxable profits earned from the same trade. Unutilised losses carried forward amounted to €12,450,544 at
31 May 2020 and €12,003,834 at 31 May 2019.
38
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 38
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
6
Loss per share
Basic loss per share
Loss for the year attributable to equity holders of the Company
Number of ordinary shares at start of the financial year
Number of ordinary shares issued during the financial year
Number of ordinary shares at end of the financial year
2021
€
(422,192)
43,042,749
25,500,000
68,542,749
2020
€
(446,710)
34,489,178
8,553,571
43,042,749
Weighted average number of ordinary shares for the purposes of
basic and diluted loss per share
51,434,530
40,243,826
Basic and diluted loss per ordinary share
(0.0082)
(0.0111)
Diluted loss per share
The effect of share options and warrants is anti-dilutive.
7
Intangible assets
Exploration and evaluation assets
Finland
Cost
At 1 June
Expenditure during the financial year:
•
• Other operating expenses (Note 2)
At 31 May
Licence and appraisal costs
31 May
2021
€
10,523,570
163,705
79,301
10,766,576
31 May
2020
€
10,152,733
208,378
162,459
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.
39
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 39
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
8
Financial assets
Investment in subsidiaries
31 May
2021
€
4
31 May
2020
€
4
Financial assets represent investments of €2 in each of the Company’s wholly owned subsidiary undertakings,
Karelian Diamonds Limited and Nordic Diamonds Limited. The net asset of each entity is €2. Certain diamond
claims in Finland are held in the name of the Company’s subsidiaries. The registered office of both non-trading
subsidiaries is 3300 Lake Drive, Citywest Business Campus, Dublin 24, D24 TD21, Ireland.
The above subsidiaries have not been consolidated on the basis that they are immaterial as the net asset of each
entity is €2. The subsidiaries are not trading and have no contingencies or commitments other than intercompany
balances of €2.
9
Cash and cash equivalents
Cash held in bank accounts
10 Other receivables
Share subscriptions receivable
Vat receivable
Other receivables
PAYE receivable
Amount due from related party
31 May
2021
€
61,778
61,778
31 May
2021
€
604,651
31,283
16,838
185
-
652,957
31 May
2020
€
15,942
15,942
31 May
2020
€
-
37,957
22,379
186
58,469
118,991
Share subscriptions receivable at year end relate to the share issue that took place on 27 May 2021. All monies
were received shortly after year end. See note 13 for further details of this share issue and allotment.
11 Non-current liabilities
Warrant liabilities
During the year ended 31 May 2021, 16,775,000 warrants were issued with a sterling exercise price and expiry of
thirty months. The fair value amount at grant date was valued using the Black Scholes Model and recorded as
warrant liabilities. At 31 May 2021, the warrants in issue were fair valued with the movement in fair value being
recorded in the income statement.
Convertible loan
On 10 December 2019, the Company entered into a convertible loan note agreement for a total amount of
€145,829 (£120,000) with one of its shareholders. The convertible loan note is unsecured, has a term of three
years and attracts interest at a rate of 5% per annum which is payable on the maturity or conversion of the
convertible loan. The conversion price is 10 pence. The shareholder has the right to seek conversion of the
principal amount outstanding on the convertible loan note and all interest accrued at any time during the term.
40
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
40
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
11 Non-current liabilities (continued)
Convertible loan (continued)
Any conversion of the convertible loan note will be a for a minimum of €60,761 (£50,000) of loan notes. The
amount of €146 (2020: €146) relates to derivative liability attached to the convertible loan note. The convertible
loan amounting to €159,498 (2020: €148,945) at 31 May 2021.
Opening Balance
Loan issued on 10 December 2019
Derivative liability element
Interest payable
12 Current liabilities
Trade and other payables
Accrued Directors’ remuneration
Fees and other emoluments
Pension contributions
Other creditors and accruals
Amount due to related party (see note 15 (c))
31 May
2021
€
148,945
-
-
10,553
159,498
31 May
2021
€
658,720
263,250
343,998
169,933
1,435,901
31 May
2020
€
-
145,829
(146)
3,262
148,945
31 May
2020
€
639,555
263,250
386,168
-
1,288,973
It is the Company’s practice to agree terms of transactions, including payment terms with suppliers. It is the
Company’s policy that payment is made according to the agreed terms. The carrying value of the trade and other
payables approximates to their fair value.
Related party loans
Opening balance 1 June
Loan conversion to equity*
Loan repayment
Loan advances**
Closing balance 31 May
31 May
2021
€
93,662
(92,950)
(712)
-
-
31 May
2020
€
158,087
(71,425)
-
7,000
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 (Director, executive chairman and major shareholder) and Maureen T.A.
Jones (Director, Managing Director and shareholder). There is no interest payable in respect of these loans, no
security has been attached to these loans and there is no repayment or maturity terms.
*On 27 May 2021, Professor Richard Conroy capitalised loans amounting to €85,979 (£74,000) into 1,850,000 new
ordinary shares of nominal value €0.00025 each. On 27 May 2021, Maureen Jones capitalised loans amounting to
€6,971 (£6,000) into 150,000 new ordinary shares of nominal value €0.00025 each.
**This amount relates to a loan provided by Maureen T.A. Jones to the Company.
41
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc
41
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
13 Called up share capital and share premium
Authorised:
182,532,751,034 ordinary shares of €0.00001 each
7,301,310,041 consolidated ordinary shares of €0.00025 each
317,785,034 deferred shares of €0.00999 each
31 May
2021
€
-
1,825,328
3,174,672
5,000,000
31 May
2020
€
-
1,825,328
3,174,672
5,000,000
The deferred shares do not entitle the holder to receive a dividend or other distribution. Furthermore, the
deferred shares do not entitle the shareholder to receive notice of or vote at any general meeting of the Company,
and do not entitle the shareholder to any proceeds on a return of capital or winding up of the Company.
Issued and fully paid – Current financial year
Number of
ordinary shares
Called up
share capital
€
Called up deferred
share capital
€
Share
premium
€
Start of current financial year –
shares of €0.00025 each
43,042,749
10,760
3,174,672
9,150,829
Share issue (a)
Share issue (b)
10,500,000
13,000,000
Warrants issued (see note 16)
-
Loan conversion into shares (c)
2,000,000
2,625
3,250
-
500
-
-
-
-
463,136
601,401
(348,635)
92,450
End of current financial year
68,542,749
17,135
3,174,672
9,959,181
Issued and fully paid – Prior financial year
Start of prior financial year –
shares of €0.00025 each
Share issue (d)
Loan conversion into shares (e)
Share issue (f)
Share issue (g)
Number of
ordinary shares
Called up
share capital
€
Called up deferred
share capital
€
Share
premium
€
34,489,178
8,622
3,174,672
8,768,276
2,500,000
1,625,000
1,428,571
3,000,000
625
405
358
750
-
-
-
-
110,752
71,019
55,703
145,079
End of prior financial year
43,042,749
10,760
3,174,672
9,150,829
42
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 42
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
13
Called up share capital and share premium (continued)
(a) On 25 August 2020, the Company raised €465,761 (£420,000) 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.
(b) On 27 May 2021, the Company raised €604,651 (£520,000), through the issue of 13,000,000 ordinary shares of
€0.00025 in the capital of the Company at a price of £0.04 per Subscription Share.
(c) On 27 May 2021, Professor Richard Conroy capitalised loans amounting to €85,979 (£74,000) into 1,850,000
new ordinary shares of nominal value €0.00025 each. On 27 May 2021, Maureen Jones capitalised loans
amounting to €6,971 (£6,000) into 150,000 new ordinary shares of nominal value €0.00025 each.
(d) On 16 July 2019, the Company raised €111,377 (£100,000), 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 resulting in a total premium of
€110,752 per issue.
(e) On 3 September 2019, Professor Richard Conroy capitalised loans amounting to €71,424 into 1,625,000 new
ordinary shares of nominal value €0.00025 each resulting in a total premium of €71,019 per issue.
(f) On 7 October 2019, the Company raised €56,061 (£50,000), 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 resulting in a total premium of
€55,703 per issue.
(g) On 10 December 2019, the Company raised €291,659 (£240,000), through the issue of 3,000,000 ordinary
shares of €0.00025 in the capital of the Company and the issue of an unsecured convertible loan note resulting in a
total premium of €145,079 per issue.
Warrants: At 31 May 2021, warrants over 17,286,250 (31 May 2020: 900,139) shares exercisable at prices varying
from £0.04 to £0.08 and €0.10 at any time up to 27 November 2023 were outstanding. There were 16,775,000
warrants issued during the year ended 31 May 2021.
Options: At 31 May 2021 and 31 May 2020, there are no options outstanding.
Share price: The share price at 31 May 2021 was £0.0475 (2020: £0.0395). The share price ranged from £0.0230 to
£0.0650 (2020: £0.0172 to £0.0470) during the year under review.
14 Commitments and contingencies
At 31 May 2021, there were no capital commitments or contingent liabilities (2020: €Nil) recognised at the
reporting date. Should the Company decide to further develop the Lahtojoki project, an amount of €40,000 is
payable by the Company to the vendors of the Lahtojoki mining concession.
15 Related party transactions
(a) Details of Directors’ loans advanced by Professor Richard Conroy and Maureen T.A. Jones are outlined in Note
12 of the financial statements.
(b) The Company shares office accommodation with Conroy Gold and Natural Resources P.L.C. which has certain
common Directors and shareholders. For the financial year ended 31 May 2021, Conroy Gold and Natural
Resources P.L.C. incurred costs totalling €54,872 (2020: €40,818) on behalf of the Company. These costs were
recharged to the Company by Conroy Gold and Natural Resources P.L.C.
These costs are analysed as follows:
Office salaries
Other operating expenses
Rent and rates
*This amount is rechargeable to Conroy Gold and Natural Resources P.L.C.
2021
€
49,048
5,824
-
54,872
2020
€
80,144
9,851
(49,177)*
40,818
43
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 43
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
15 Related party transactions (continued)
(c) At 31 May 2021, the Company owed €169,933 to Conroy Gold and Natural Resources P.L.C. (2020: €58,469
owed from). Amounts owed to Conroy Gold and Natural Resources P.L.C. were included within trade and other
payables during the current year. Amounts owed from Conroy Gold and Natural Resources P.L.C. were included
within other receivables in the prior year. During the financial year ended 31 May 2021, €173,530 was received
from (2020: €45,046 was paid to) Conroy Gold and Natural Resources P.L.C. During the financial year ended 31
May 2021, the Company was charged €54,872 (2020: €40,818) by Conroy Gold and Natural Resources P.L.C. in
respect of the allocation of certain costs as detailed in Note 15(b).
(d) At 31 May 2021, Brendan McMorrow was owed €24,167 (2020: €20,417) in respect of his services and also an
amount of €13,700 (2020: €10,200) payable to him for other services rendered. These amounts are included in the
trade and other payables balance in the statement of financial position.
(e) An analysis of remuneration for each Director of the Company in the current financial year (prior to amounts
transferred to intangible assets) is as follows:
Professor Richard Conroy
Maureen T.A. Jones
Brendan McMorrow
Séamus P. FitzPatrick
Dr. Sorċa Conroy
Howard Bird
Fees
€
12,500
6,250
6,250
6,250
6,250
6,250
43,750
Salary
€
40,625
31,250
-
-
-
-
71,875
Total
€
53,125
37,500
6,250
6,250
6,250
6,250
115,625
An analysis of remuneration for each Director of the Company in the prior financial year (prior to amounts
transferred to intangible assets) is as follows:
Professor Richard Conroy
Maureen T.A. Jones
Brendan McMorrow
Séamus P. FitzPatrick
Dr. Sorċa Conroy
Howard Bird
Louis J. Maguire
Fees
€
17,500
8,750
8,750
8,750
8,750
5,833
5,417
63,750
Salary
€
56,875
43,750
-
-
-
-
-
100,625
Total
€
74,375
52,500
8,750
8,750
8,750
5,833
5,417
164,375
(f) Details of share capital transactions with the Directors are disclosed in the Directors’ Report.
(g) Apart from Directors’ remuneration (detailed in Note 2 and Note 4), loans from two shareholders (who are also
Directors which is detailed in Note 12), convertible loan from a shareholder (which is detailed in Note 11) and
share capital transactions (which are detailed within the Directors’ Report), there have been no contracts or
arrangements entered into during the financial year in which a Director of the Company had a material interest.
44
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 44
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
16 Share-based payments
Warrants granted generally have a vesting period of two and half years. Details of the warrants outstanding during
the financial year are as follows:
2021
No. of Share
Warrants
900,139
16,775,000
(388,889)
17,286,250
2021
Weighted
Average
Exercise Price
€
0.0815
0.09
(0.06)
0.0918
2020
No. of Share
Warrants
900,139
-
-
900,139
2020
Weighted
Average
Exercise Price
€
0.0815
-
-
0.0815
At 1 June
Granted during the financial year
Lapsed during the financial year
At 31 May
The Company estimated the fair value of options and warrants awards using the Binomial Lattice Model. The
determination of the fair value of share-based payment awards on the date of grant and on revaluation at each
year end using the Binomial Lattice Model is affected by Karelian Diamond Resources P.L.C. stock price, share
price volatility as well as assumptions regarding a number of subjective variables.
These variables include the expected term of the awards, the expected stock price volatility over the term of the
awards, the risk-free interest rate associated with the expected term of the awards and the expected dividends.
The Company’s Binomial Lattice Model included the following weighted average assumptions for the Company’s
warrants:
Dividend yield
Expected volatility
Risk free interest rate
Expected life (in years)
2021
Warrants
0%
90%
0.1%
2.0
2020
Warrants
0%
50%
0.7%
2.5
During the year, warrants were granted to the broker as part of the share issuances in August 2020 and May 2021.
An amount of €46,519 was recognised in the income statement based on the fair value of these warrants at grant
date. Amounts relating to share warrants which lapsed during the year and which are reclassified to retained
deficit were €5,966 (2020: €Nil).
17 Financial instruments
Financial risk management objectives, policies and processes
The Company has exposure to the following risks from its use of financial instruments:
(a) Inflation;
(b) Interest rate risk;
(c) Foreign currency risk;
(d) Liquidity risk; and
(e) Credit risk.
45
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 45
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
17 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company,
to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the
Company’s activities.
The Company’s Audit Committee oversees how management monitors compliance with the Company’s risk
management policies and procedures and framework in relation to the risks faced.
(a) Inflation
The Company is exposed to the risk associated with inflation such as the impact of increased operating expenses
including rent, light & heat and wages and salaries. The Chairman and Managing Director monitor costs on an
ongoing basis.
(b) Interest rate risk
The Company currently finances its operations through shareholders’ funds and loan finance. Short term cash
funds are invested, if appropriate, in short-term interest-bearing bank deposits at 31 May 2021 and 2020. The
Company did not enter into any hedging transactions with respect to interest rate risk.
(c) Foreign currency risk
The Company is exposed to currency risk on purchases, loans and bank deposits that are denominated in a
currency other than the functional currency of the Company. As the exercise prices for warrants are denominated
in sterling, the risk-free rate assumption is based on a sterling gilts zero-coupon yield curve at the date of issue.
It is the Company’s policy to ensure that foreign currency risk is managed wherever possible by matching foreign
currency income and expenditure. During the years ended 31 May 2021 and 31 May 2020, the Company did not
utilise foreign currency forward contracts or other derivatives to manage foreign currency risk.
The Company’s foreign currency risk exposure in respect of the principal foreign currencies in which the Company
operates was as follows at 31 May 2021:
Cash and cash equivalents
Subscriptions receivable
Amount due to related party
Other receivables
Convertible loan
Derivative liability
Trade and other payables
Total exposure
Sterling exposure
denominated in €
10,294
604,651
-
-
(159,498)
(146)
(30,132)
425,169
46
Not at risk
€
51,484
-
(169,933)
16,838
-
-
(1,405,769)
(1,507,380)
Total
€
61,778
604,651
(169,933)
16,838
(159,498)
(146)
(1,435,901)
(1,082,211)
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 46
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
17 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
(c) Foreign currency risk (continued)
The Company’s foreign currency risk exposure in respect of the principal foreign currencies in which the Company
operates was as follows at 31 May 2020:
Cash and cash equivalents
Amount due from related party
Other receivables
Convertible loan
Derivative liability
Related party loans
Trade and other payables
Total exposure
Sterling exposure
denominated in €
409
-
-
(148,945)
(146)
-
(41,493)
(190,175)
Not at risk
€
15,533
58,469
22,379
-
-
(93,662)
(1,247,480)
(1,244,761)
Total
€
15,942
58,469
22,379
(148,945)
(146)
(93,662)
(1,288,973)
(1,434,936)
The following are the significant exchange rates that applied against €1 during the financial year:
Average Rate
2021
Average Rate
2020
Spot Rate
31 May
2021
Spot Rate
31 May
2020
GBP
0.888
0.875
0.860
0.899
Sensitivity analysis
A 10% strengthening of the Euro against Sterling, based on outstanding financial assets and liabilities at 31 May
2021 would have decreased the reported loss by €17,930 (2020 decreased by: €19,018) as a consequence of the
retranslation of foreign currency denominated financial assets at those dates. A weakening of 10% of the Euro
against Sterling would have had an equal and opposite effect.
It is assumed that all other variables, especially interest rates, remain constant in the analysis.
(d) Liquidity risk
Liquidity is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and adverse conditions, without incurring
unacceptable losses or risking damage to the Company’s reputation.
The Company manages liquidity risk by regularly monitoring cash flow projections. The nature of the Company’s
exploration and appraisal activities can result in significant differences between expected and actual cash flows.
47
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 47
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
17 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
(d) Liquidity risk (continued)
Contractual maturities of financial liabilities as at 31 May 2021 were as follows:
Trade and other
payables (including
amounts owed to
related party)
Derivative liability
Convertible loan
Carrying
amount €
Contractual
cash flows €
6 months or
less €
6-12 months
€
1-2 years
€
2-5 years
€
1,435,901
146
159,498
1,435,901
146
167,835
1,595,545
1,603,882
513,932*
-
-
513,932*
-
-
-
-
921,969**
-
- 159,498***
-
146***
921,969** 159,644***
Contractual maturities of financial liabilities as at 31 May 2020 were as follows:
Carrying
amount €
Contractual
cash flows €
6 months or
less €
6-12 months
€
1-2 years
€
2-5 years
€
Trade and other
payables (including
related party loans)
Derivative liability
Convertible loan
1,382,635
146
148,945
1,382,635
146
167,835
386,168*
-
-
-
93,662** 902,805**
-
146***
- 148,945***
-
-
1,531,726
1,550,616
386,168*
93,662** 902,805** 149,091***
*The amount of €513,932 (2020: €386,168) relates to other creditors and accruals (including amounts owed to
Conroy Gold and Natural Resources plc).
**The Directors, Professor Richard Conroy, Séamus P. FitzPatrick, Maureen T.A. Jones, Dr. Sorċa Conroy, Howard
Bird and Brendan McMorrow, and former Directors James P. Jones and Louis J. Maguire, have confirmed that they
will not seek repayment of amounts owed to them by the Company of €921,969 (2020: €902,805) within 12
months of the date of approval of the financial statements, unless the Company has sufficient funds to repay. The
related party loans amounts consist of monies owed to Professor Richard Conroy amounting to €Nil (2020:
€86,583) and Maureen T.A. Jones amounting to €Nil (2020: €7,079).
***On 10 December 2019, the Company has entered into a convertible loan note agreement for a total amount of
€145,829 (£120,000) with one of its shareholders. Please refer to Note 11 for further details.
The Company had cash and cash equivalents of €61,778 at 31 May 2021 (2020: €15,942).
48
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 48
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
17 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
(e) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing
to discharge its obligation.
Credit risk is the risk of financial loss to the Company if a cash deposit is not recovered. Company deposits are
placed only with banks with appropriate credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk was as follows:
Cash and cash equivalents
Share subscriptions receivable
Other receivables
Amount due from related party
2021
€
61,778
604,651
16,838
-
683,267
2020
€
15,942
-
22,379
58,469
96,790
The Company’s cash and cash equivalents are held at AIB Bank which has a credit rating of “BBB” as determined
by Fitch.
Expected credit loss
The Company measures credit risk and expected credit losses on financial assets measured at amortised cost using
probability of default, exposure at default and loss given default. Management consider both historical analysis
and forward-looking information in determining any expected credit loss. At 31 May 2021 and 31 May 2020, all
cash is accessible on demand and held with counterparties with a credit rating of BBB or higher. Management
consider the probability of default to be close to zero as these instruments have a low risk of default and the
counterparties have a strong capacity to meet their contractual obligations in the near term.
(f) Fair values versus carrying amounts
Due to the short-term nature of the majority of the Company’s financial assets and liabilities at 31 May 2021 and
31 May 2020, the fair value equals the carrying amount in each case. The carrying value of non-current financial
assets and liabilities is a reasonable approximation of fair value.
(g) Capital management
The principal activities of the Company are concentrating particularly on diamond exploration and evaluation.
The Company has historically funded its activities through share issues and placings and loans. The Company’s
capital structure is kept under review by the Board of Directors and it is committed to capital discipline and
continues to maintain flexibility for future growth.
The capital structure of the Company consists of equity of the Company (refer to the statement of changes in
equity and Note 13). The Company is not subject to any externally imposed capital requirements.
49
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc 49
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2021
(continued)
18 Post balance sheet 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.
19 Approval of the audited financial statements for the financial year ended 31 May 2021
These audited financial statements were approved by the Board of Directors on 30 November 2021. A copy of the
audited financial statements will be available on the Company’s website www.kareliandiamondresources.com and
will be available from the Company’s registered office at 3300 Lake Drive, Citywest Business Campus, Dublin 24,
D24 TD21, Ireland.
50
Annual Report and Financial Statements 2021 Karelian Diamond Resources Plc