Annual Report and Financial
Statements 2023
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc
1
Contents
2
4
5
7
Chairman’s Statement
Company Information
Board of Directors
Directors’ Report
17
Independent Auditor’s Report
24
25
26
27
Statement of
profit or loss
Statement of
comprehensive income
Statement of
financial position
Statement of
changes in equity
28
Statement of cash flows
29
Notes to and forming part of
the financial statements
2
Chairman’s Statement
Professor Richard Conroy
Chairman
Dear Shareholder,
I have pleasure in presenting the
Company’s Annual Report and
Financial Statements for the year
ended 31 May 2023.
Till Sampling in Kuhmo
Excavating Kimberlite Target in Kuhmo
The year was one of significant progress
for the Company, both in relation to its
diamond exploration and development
programme in Finland and its Nickel, Copper
and Platinum group metals exploration
programme in Northern Ireland.
The Lahtojoki Diamond Deposit
A further significant step towards the
development of the Lahtojoki diamond deposit
was achieved when the National Land Survey
of Finland determined, in December
2022, the compensation to be paid by the
Company to local landowners in relation to
the establishment of the Lahtojoki mining
concession area, which has been approved
by TUKES (the Finnish mining authority).
The Survey’s decision was announced on 14
December at a public meeting held in the
Municipal Hall of Tuusniemi in Finland and the
compensation amounted in total to €162,815.
This compensation has been paid, bar for two
landowners who have appealed the amount
to be paid to them and a small boundary area,
entitling the Company to land possession over
the entire mining concession area.
The Lahtojoki diamond mining project
comprises a mining concession covering
71 hectares (c.176 acres), including
a kimberlite pipe with a surface area
of 16 hectares (c.40 acres).
The diamond deposit at Lahtojoki, based
on sampling to date, contained high quality
colourless gem diamonds and also coloured
diamonds, including pink diamonds which
are highly sought after and can command
prices up to 20 times that of normal coloured
diamonds. This is particularly relevant at a
time of low diamond prices.
Company Geologist Terhi Tulenheimo with
Excavator Operator
The development of the diamond mine
at Lahtojoki will, I believe, not only bring
significant benefits to the Company, but also
to the entire surrounding Kuopio Kaavi area
and when in production is expected to be the
first diamond mine in Europe outside Russia.
Diamond Exploration
Programme in Finland
During the year there was significant
progress made in the Company’s
diamond exploration programme in Finland.
This included a detailed high-resolution drone
based magnetic survey carried out by Radai
Oy over the Company’s diamond exploration
licence area in the Kuhmo region, up ice of
the green diamond discovery in till by the
Company previously announced. Eighty-two
flights totalling 250km were flown.
Jeremy S. Brett International Consulting
Limited (“Brett Consulting”) was retained
by the Company to interpret the drone
aeromagnetic data generated by the
survey. Mr. Brett is a senior geophysical
consultant with over 28 years of mineral
exploration experience in geophysics across
a wide variety of ore deposit settings. He
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc has explored extensively for kimberlites in
Africa, North America and South America.
The geophysical interpretation by Brett
Consulting led to the identification of
over twenty kimberlite targets in the area.
The targets ranged from 0.5 hectares to
4.7 hectares in size and “with a high ratio
of highly ranked targets” based on their
magnetic signature.
The interpretation by Brett Consulting also
highlighted potential underlying structural
controls to the emplacement of Kimberlite
bodies. This data can be applied in a wider
context to the overall Kuhmo region.
Previous work by the Company on the
Kuhmo licence area included kimberlite
indicator mineral sampling, during which
the green diamond was discovered. Further
kimberlite indicator mineral sampling in
the area encountered highly anomalous
kimberlite indicators, including G9 and G10
garnets, which are known indicators of
diamond prospectivity. Follow-up drilling
resulted in the discovery of a kimberlite dyke,
confirming the presence of kimberlites in the
immediate area.
An extensive follow-up programme, which
includes excavating and drilling on the
potential diamondiferous kimberlite targets
identified by the geophysical interpretation
and indicator till sampling, has commenced.
This includes a pitting programme over a
series of more than twenty kimberlite targets
which has been completed, post period.
Exploration for Nickel,
Copper and Platinum Group
Metals in Northern Ireland
Two additional Mineral Prospecting Licences
were granted in October 2023, which will
secure the Company’s land position in
relation to its exploration programme for
Nickel-Copper-Platinum mineralisation
in Northern Ireland.
The licence applications were made
following the discovery, on the Company’s
KDR-1 licence in Northern Ireland, of indicator
minerals, including anomalous amounts of
chromite, forsterite olivine and magmatic
massive sulphide indicator minerals, which are
indicative of the possible presence of Nickel-
Copper-Platinum mineralisation.
The licences, KDR-2 and KDR-3, are valid
for a period of six years, cover an area of
approximately 500km2 and are adjacent
to the Company’s existing KDR-1 licence,
giving an increased total exploration area
of approximately 750km2.
The Nickel-Copper-Platinum exploration
targets are based on the mafic and/or
ultramafic dyke-sill complexes in the area
which are similar to those that are known
to host the world class Noril’sk Nickel-
Copper-Platinum deposit.
Ireland is already a well-established mining
area, with a world class zinc mine, Tara, and
other major zinc/lead discoveries in the Lower
Carboniferous limestones, together with a
series of significant orogenic gold discoveries
in both Northern Ireland and the Republic
of Ireland.
3
The exploration programme for Nickel, Copper
and Platinum Group Metals is an exciting new
development for the Company with positive
results from a stream sediment sampling
programme duly announced in October 2023.
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 its activities and operations, including
rigorous health and safety compliance,
environmental consciousness and the
promotion of a culture of good ethical
values and behaviour.
Financials
The loss after taxation from continuing
operations for the financial year ended 31 May
2023 was €291,467 (31 May 2022: profit of
€13,593) and the net assets of the Company
at 31 May 2023 were €9,786,074 (31 May
2022: €9,480,803). During the year there was
a fundraising, debt capitalisation and creditor
conversion totalling £250,000 at 2.5 pence
per share together with a convertible loan of
£112,500, convertible at 5 pence per share. Post
year end a further fundraising of £250,000 at
2.5 pence per share was also concluded.
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.
Outlook
I look forward to continued success for the
Company both in diamond exploration and
development in Finland and in nickel, copper
and platinum group metals exploration in
Ireland.
Team Stream Sediment Sampling in Northern Ireland
Professor Richard Conroy
Chairman
28 November 2023
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 4
Company Information
Directors
Professor Richard Conroy
Executive Chairman*
Séamus P. FitzPatrick
Deputy Chairman/Non-executive Director+§
Maureen T.A. Jones
Managing Director*
Dr. Sorċa Conroy
Non-executive Director*§
Brendan McMorrow
Non-executive Director*+§
Howard Bird
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 (resigned 22 Nov 2023)
Cathal Jones (appointed 22 Nov 2023)
3300 Lake Drive
Citywest Business Campus
Dublin 24, D24 TD21, Ireland
Nominated adviser (NOMAD)
Allenby Capital Limited
5 St. Helen’s Place
London, EC3A 6AB, United Kingdom
Broker
Peterhouse Capital Limited
3rd Floor, 80 Cheapside
London, EC2V 6EE, United Kingdom
Statutory audit firm
Deloitte Ireland LLP
Chartered Accountants and Statutory
Audit Firm
6 Lapps Quay
Cork, T12 VY7W, Ireland
Head office
Karelian Diamond Resources P.L.C.
3300 Lake Drive
Citywest Business Campus
Dublin 24, D24 TD21, Ireland
www.kareliandiamondresources.com
Public relations
Lothbury Financial Services
1st Floor, 17 St. Swithins Lane
London, EC4N 8AL, United Kingdom
Hall Communications
1 Northumberland Road
Dublin 4, D04 F578, Ireland
London Stock Exchange
AIM Market Symbol: KDR
SEDOL: BD09HK6
ISIN number: IE00BD09HK61
Bankers
AIB
1-4 Lower Baggot Street
Dublin 2, D02 X342, Ireland
Nordea Bank
Satamaradankatu 5
Helsinki, Finland
Registrar
Avenir Registrars Limited
No. 1 Main Street, Blessington
Co. Wicklow, W91 V82T, Ireland
www.avenir-registrars.ie
Legal advisers
William Fry Solicitors
2 Grand Canal Square
Dublin 2, D02 A342, Ireland
Roschier, Attorneys Ltd.
Kasarmikatu 21 A
00130 Helsinki, Finland
HPP Attorneys Ltd.
Bulevardi 1 A
FI-00100 Helsinki, Finland
Professor Richard Conroy
Chairman
.
Seamus P. FitzPatrick
Deputy Chairman
Dr. Sorc˙a 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 for the financial year ended 31 May 2023 Karelian Diamond Resources Plc
Karelian Diamond Resources P.L.C.
Board of Directors
Board of Directors
5
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
Mr FitzPatrick is the Managing Partner and a co-founder of CapVest, a private equity firm, established in London in
1999. Mr FitzPatrick has recently been actively involved in fund raising for CapVest III, IV and V, and on various substantial
co-investor entities. He was formerly Chairman of Mater Private, Youngs Bluecrest, FoodVest, Vaasan & Vaasan and
Valeo Foods, and was a director of RenoNorden, Scandi Standard, Curium and the 850 Food Group. He is currently a
director of Kerridge Commercial Systems.
Experience
Prior to co-founding CapVest, Mr FitzPatrick worked in investment banking and private equity with Morgan Stanley,
Chase, and Bankers Trust, in both London and New York.
Mr FitzPatrick holds an honours degree in English and Psychology from Trinity College Dublin.
5
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc
6
Karelian Diamond Resources P.L.C.
Board of Directors (continued)
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. Until recently, she was also the Company Secretary for the Company ensuring all filings and requirements
of the Companies Acts were fulfilled.
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 is 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.
Experience
Brendan McMorrow has over 30 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 Chief
Executive Officer of Ormonde Mining P.L.C., a natural resources exploration 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.
Together, the Directors form the Board of Directors with a gender balance of four and two. The mix of experience that
the Directors bring to the Board include financial and managerial experience, mining, development and natural resources
experience which are crucial to the business of the Company and crucial to the smooth running of a Board of Directors
and company.
6
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc
Karelian Diamond Resources P.L.C.
Directors’ Report
Directors’ Report
7
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 2023.
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 3. 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.
compliance with governmental and environmental
The challenges facing the Company in achieving this strategy are world commodity prices and general economic
activity, ensuring
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 uncertainties 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 2023
The statement of profit or loss for the financial year ended 31 May 2023 and the statement of financial position at that
date are set out on pages 24 and 26 respectively. The loss for the financial year amounted to €291,467 (31 May 2022:
profit of €13,593) and net assets at 31 May 2023 were €9,786,074 (31 May 2022: €9,480,803). 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 material 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
Post year end the Company announced the completion of a stream sampling programme in Northern Ireland where
subsequent indicator mineral and microprobe analysis results confirmed the prospectivity of the Company's licence area
for nickel, copper and platinum group metals.
The Company also announced that it has completed a pitting programme over a series of more than twenty kimberlite
target locations in the Kuhmo region of Finland. The resulting glacial till samples have been sent for kimperlite
indicator mineral testing.
The Company also raised funds of £250,000 in October 2023 (including £100,000 from Board members) with a view to
carrying out follow up exploration in Northern Ireland and to continue its ongoing work in Finland.
There were no further important events to note post year end.
7
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 8
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Directors’ Report (continued)
Directors
There directors, who served at any time during the financial year, except as noted, were as follows:
Professor Richard Conroy
Séamus P. Fitzpatrick
Maureen T.A Jones
Dr. Sorċa Conroy
Brendan McMorrow
Howard Bird
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), 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 14 for further details.
Company secretary
Maureen T.A. Jones served as Company Secretary throughout the year and resigned on 22 November 2023. Cathal Jones
was appointed as Company Secretary on that date.
Directors’ shareholdings and other interests
The interests of the Directors and their connected persons in the share capital of the Company were as follows:
Director
Professor Richard Conroy
Dr. Sorċa Conroy
Maureen T.A. Jones
Séamus P. FitzPatrick
Brendan McMorrow
Date of signing
financial
statements
Ordinary Shares
of €0.00025 each
12,263,912
3,143,165
789,990
481,341
285,000
Date of
signing
financial
statements
Warrants
3,850,000
2,000,000
150,000
-
-
31 May
2023
31 May
2023
31 May 2022
31 May 2022
2022
Ordinary Shares
of €0.00025 each
10,263,912
1,129,911
789,990
481,341
285,000
Warrants
1,850,000
-
150,000
-
-
Ordinary Shares
of €0.00025 each
10,263,912
1,129,911
789,990
481,341
285,000
Warrants
2,070,841
-
317,651
9,288
-
* Of the 10,263,912 (31 May 2022: 10,263,912) ordinary shares beneficially held by Professor Richard Conroy at 31 May 2023, 1,232,601 (31 May 2022:
1,232,601) are held by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest.
Details of warrants, all of which are exercisable currently, are as follows:
Director
Professor Richard Conroy
Professor Richard Conroy
Professor Richard Conroy
Maureen T.A. Jones
Maureen T.A. Jones
Séamus P. Fitzpatrick
Dr Sorca Conroy
Date of
signing
financial
statements
Warrants
1,850,000
2,000,000
-
150,000
-
-
2,000,000
Date of
signing
financial
statements
Price £
0.08
0.04
-
0.08
-
-
0.04
31 May
2023
31 May
2023
31 May
2022
31 May
2022
Expiry Date
Warrants
1,850,000
-
-
150,000
-
-
-
Price £
0.08
-
-
0.08
-
-
-
Warrants
1,850,000
-
220,841
150,000
167,651
9,288
-
Price £
0.08
-
2.20
0.08
2.20
2.20
-
09 December 2023
31 October 2024
16 November 2022
09 December 2023
16 November 2022
16 November 2022
31 October 2024
During the year, 397,780 warrants held by the directors exercisable at £2.20 per share lapsed on 16 November 2022.
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
9
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
31 May
2023
31 May
2023
31 May
2022
31 May
2022
Date of
signing
financial
statements
%
Date of signing
financial
statements
Ordinary Shares
of €0.00025 each
12,263,912
7,613,116
6,450,000
6,000,000
5,000,000
Ordinary Shares
of €0.00025 each
%
Ordinary Shares
of €0.00025 each
11.67% 10,263,912
7.24% 7,613,116
6.14%
6,450,000
5.71% 6,000,000
5,000,000
5.24%
10.86% 10,263,912
8.06% 4,801,690
3,000,000
6.83%
6.35% 5,500,000
-
5.29%
%
14.97%
7.01%
4.38%
8.02%
0.00%
Professor Richard Conroy
Mr. Steven Coomber
Fredrik Björnberg
Mr. Kevin Taylor
Conroy Gold
Resources plc
Martello Holdings Limited
and Natural
6.10%
3.98%
* Of the 10,263,912 (31 May 2022: 10,263,912) ordinary shares beneficially held by Professor Richard Conroy at 31 May 2023, 1,232,601 (31 May 2022:
1,232,601) are held by Conroy P.L.C., a company in which Professor Richard Conroy has a controlling interest.
4,178,571
4,178,571
4,178,571
4.42%
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.
•
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 10
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Directors’ Report (continued)
Statement of Directors’ responsibilities in respect of the annual report and the financial statements (continued)
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 recorded a loss of €291,467 (31 May 2022: profit of €13,593) for the financial year ended 31 May 2023.
The Company had net assets of €9,786,074 (31 May 2022: €9,480,803) at that date. The Company had net current
liabilities of €1,241,046 (31 May 2022: €1,429,982) at that date. The Company had cash and cash equivalents of €116,038
(31 May 2022: €117,868) at 31 May 2023.
The Directors, namely Professor Richard Conroy, Séamus P. FitzPatrick, Maureen T.A. Jones, Dr. Sorċa Conroy, Howard
Bird, Brendan McMorrow, and former Director, namely James P. Jones, have confirmed that they will not seek repayment
of amounts owed to them by the Company of €1,291,969 (31 May 2022: €1,106,970) 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 2024. As set out in the Chairman’s statement, the
Company expects to incur capital expenditure in 2023 and 2024, 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, the funds raised post year end 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 5 and 6.
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. With appropriate arrangements made to facilitate remote attendance where required by way of
teleconference calls. Board of Directors’ meetings were held on 10 occasions from 1 June 2022 to 31 May 2023 and
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
11
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
Board
Attendance
10
10
7
10
10
10
8
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.
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Karelian Diamond Resources P.L.C.
12
Directors’ Report (continued)
Directors’ Report (continued)
Board of Directors (continued)
Board performance (continued)
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.
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 1 of this report. Membership of the Audit and Remuneration
Committees is comprised exclusively of non-executive Directors. There were no Remuneration Committee meetings in
the year under review and attendance at the Audit 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
-
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
13
Board of Directors (continued)
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.
Remuneration Committee
The Remuneration Committee’s terms of reference have been approved by the Board of Directors and are in accordance
with the QCA Remuneration Committee Guide for Small and Mid-Size Quoted Companies. The Remuneration Committee
comprises three non-executive Directors and is chaired by Séamus P. FitzPatrick. Emoluments of executive Directors and
senior management are determined by the Remuneration Committee. In the course of each financial year, the
Remuneration Committee determines any contract terms, remuneration and other benefits, including share options, for
each of the executive Directors. The Remuneration Committee applies the same philosophy in determining executive
Directors’ remuneration as is applied in respect of all employees. The underlying objective is to ensure that individuals
are appropriately rewarded relative to their responsibility, experience and value to the Company. No meetings of the
Remuneration Committee were held in the period under review.
The Board of Directors itself determines the remuneration of the non-executive Directors. Details of Directors’
remuneration for the current period are detailed in Note 2 and Note 4 to the financial statements.
Executive Committee
The Executive Committee comprises Professor Richard Conroy, Dr. Sorċa Conroy, Ms. Maureen T.A. Jones, Brendan
McMorrow and Howard Bird. Its purpose is to support the Managing Director in carrying out the duties delegated to her
by the Board of Directors. It also ensures that regular financial reports are presented to the Board of Directors, that
effective internal controls are in place and functioning, and that there is an effective risk management process in
operation throughout the Company. The three non-executive directors are not involved in the daily management of the
Company.
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 14
Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
Directors’ Report (continued)
Board of Directors (continued)
Internal control
The Directors have overall responsibility for the Company’s system of internal control to safeguard shareholders’
investments and the Company assets. They operate a system of financial controls which enables the Board of Directors
to meet its responsibilities for the integrity and accuracy of the Company’s accounting records. Among the processes
applied in reviewing the effectiveness of the system of internal controls are the following:
•
•
•
The Board of Directors establishes risk policies as appropriate, for implementation by executive management;
All commitments for expenditure and payments are subject to approval by personnel designated by the Board
of Directors; and
Regular management meetings take place to review financial and operational activities.
The Board of Directors has considered the requirement for an internal audit function. Based on the scale of the
Company’s operations and close involvement of the Board of Directors, the Directors have concluded that an internal
audit function is not currently required.
Risks and uncertainties
The Company is subject to a number of potential risks and uncertainties, which could have a material impact on the long-
term performance of the Company and could cause actual results to differ materially from expectation. The management
of risk is the collective responsibility of the Board of Directors and is considered as part of all Board meetings. An ongoing
process for identifying, evaluating and managing or mitigating the principal risks faced by the Company has been in place
throughout the financial year and has remained in place up to the approval date of the report and accounts. The Board
intends to keep its risk control procedures under constant review, particularly with regard to the need to embed internal
control and risk management procedures further into the operations of the business and to deal with areas of
improvement which come to management’s and the Board’s attention.
As might be expected in a Company of this size, a key control procedure is the day-to-day supervision of the business by
the Executive Directors, supported by the senior managers with responsibility for key operations. The Board has
considered the impact of the values and culture of the Company and ensures that, through staff communication and
training, the Board’s expectations and attitude to risk and internal control are embedded in the business. The Board of
Directors consider the following risks to be the principal risks affecting the business.
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 and Climate Change
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 where related
legislation and regulations are evolving in pursuit of national and international climate change objectives. There will
cause any applicable standards to be more stringent and the impact of this risk will continue to be monitored
by the Directors and management. Management will continue to closely monitor any regulatory updates in this area
and its potential impact on the Company. The Company employs staff and consultants 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.
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Karelian Diamond Resources P.L.C.
Directors’ Report (continued)
15
Risks and uncertainties (continued)
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 16 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 continued to have some impact on 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. The field and laboratory work were not impacted as much in this financial
year end. The Company’s exploration and development programme continued.
Russia/Ukraine war Risk
Since February 2022, the world has been watching closely the situation between Russia and the Ukraine and the impact
on Europe and the rest of the world. The main impacts seen to date are on the energy prices and any supply issues that
may occur in the energy sector as a result of restrictions imposed. Directors and management will continue to closely
monitor the situation and in particular the impact which it may have on the operations of the business.
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.
Political donations
There were no political donations during the financial year (31 May 2022: €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.
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Karelian Diamond Resources P.L.C.
16
Directors’ Report (continued)
Directors’ Report (continued)
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 is 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 is 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)
27 November 2023
15
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc Independent Auditor’s Report
17
IInnddeeppeennddeenntt aauuddiittoorr’’ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff KKaarreelliiaann DDiiaammoonnddss 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 2023
and of the loss 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 Statement of profit or loss;
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 18, 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 attention to Note 1 in the financial statements, which indicates that as at 31 May 2023 the company
had net current liabilities of €1,241,046.
As stated in Note 1, these events or conditions 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 evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis
of accounting included:
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 18
Independent Auditor’s Report (continued)
•
•
•
•
•
•
•
obtaining an understanding of the company’s relevant 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;
assessing the design and determining the implementation of these relevant controls;
evaluating directors’ plans and their feasibility by agreeing the inputs used in the cash flow forecast to
expenditure commitments and other supporting documentation;
challenging the reasonableness of the assumptions applied by the directors in their going concern
assessment;
obtaining confirmations received by the company from the directors and former directors evidencing
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;
assessing the mechanical accuracy of the cash flow forecast model; and
assessing the adequacy of the disclosures made in the financial statements.
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
MMaatteerriiaalliittyy
SSccooppiinngg
The key audit matters that we identified in the current year were:
• Going concern (see material uncertainty related to going concern section); and
• Valuation of Intangible Assets.
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 €280,000 which was
determined on the basis of approximately 2.8% 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 for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 19
VVaalluuaattiioonn ooff IInnttaannggiibbllee AAsssseettss
KKeeyy
aauuddiitt mmaatttteerr
ddeessccrriippttiioonn
As at 31 May 2023, the carrying value of exploration and evaluation assets included
in intangible assets in the statement of financial position amounted to €11,265,894.
HHooww tthhee ssccooppee ooff oouurr
aauuddiitt rreessppoonnddeedd ttoo
tthhee kkeeyy aauuddiitt mmaatttteerr
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 given the balance constitutes the majority of the total assets
in the statement of financial position, we considered it a key audit matter.
We performed the following procedures:
• We evaluated the design and determined the implementation of relevant
controls in place over the capitalisation and subsequent valuation of
intangible assets;
• We inspected documentation in respect of new and current licenses held (as
relevant);
• We challenged the directors’ assessment of indicators of impairment in
relation to exploration and evaluation assets. We also performed a review of
the proposed exploration programme in respect of the company’s asset to
consider indicators of impairment;
• 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
from the date of approval of the financial statements; 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 release 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 dependant on
the successful renewal of certain
licenses, 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.
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.
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 20
Independent Auditor’s Report (continued)
OOuurr aapppplliiccaattiioonn ooff mmaatteerriiaalliittyy
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that
the economic decisions of a reasonably knowledgeable person 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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
MMaatteerriiaalliittyy
BBaassiiss ffoorr
ddeetteerrmmiinniinngg
mmaatteerriiaalliittyy
RRaattiioonnaallee ffoorr
tthhee bbeenncchhmmaarrkk
aapppplliieedd
€280,000 (2022: €280,000)
2.8% of Shareholder’s Equity (2022: 3% of Shareholder’s Equity)
We have considered the 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 reliability of
control environment.
Shareholder's
Equity €10m
Shareholder's Equity
Materiality
Materiality €280,000
Audit Committee
Reporting Threshold
€14,000
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.
Performance materiality was set at 64% of materiality for the 2023 audit. In determining performance
materiality, we considered the following factors:
a.
b.
c.
our understanding of the company;
the quality of the company’s internal control environment and whether we were able to rely on
controls;
the nature and extent of misstatements (corrected and/or uncorrected) identified in previous
audits; and
d. our expectations in relation to misstatements in the current period.
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 21
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of
€14,000 (2022: €14,000), as well as differences below that threshold that, 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 within the company. We did not identify any significant changes in
the company in the current year therefore there has been no change in audit scope compared with the prior year.
The key audit matters we identified have remained consistent with prior year.
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.
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.
A further description of our responsibilities for the audit of the financial statements is located on IAASA’s
website at: https://iaasa.ie/publications/description-of-the-auditors-responsibilities-for-the-audit-of-the-
financial-statements/. This description forms part of our auditor’s report.
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 22
Independent Auditor’s Report (continued)
EExxtteenntt ttoo wwhhiicchh tthhee aauuddiitt wwaass ccoonnssiiddeerreedd ccaappaabbllee ooff ddeetteeccttiinngg iirrrreegguullaarriittiieess,, iinncclluuddiinngg ffrraauudd
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is
detailed below.
IIddeennttiiffyyiinngg aanndd aasssseessssiinngg ppootteennttiiaall rriisskkss rreellaatteedd ttoo iirrrreegguullaarriittiieess
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, we considered the following:
•
•
•
•
the nature of the industry and sector, control environment and business performance including the
design of the company’s remuneration policies, key drivers for directors’ remuneration, bonus levels
and performance targets;
results of our enquiries of management and the audit committee about their own identification and
assessment of the risks of irregularities;
any matters we identified having obtained and reviewed the company’s documentation of their
policies and procedures relating to:
o
o
o
identifying, evaluating and complying with laws and regulations and whether they were aware of
any instances of non-compliance;
detecting and responding to the risks of fraud and whether they have knowledge of any actual,
suspected or alleged fraud;
the internal controls established to mitigate risks of fraud or non-compliance with laws and
regulations;
the matters discussed among the audit engagement team and relevant internal specialists, including
valuation specialists, regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud.
In common with all audits under ISAs (Ireland), we are also required to perform specific procedures to respond
to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the company operates in,
focusing on provisions of those laws and regulations that had a direct effect on the determination of material
amounts and disclosures in the financial statements. The key laws and regulations we considered in this context
included the Companies Act 2014, Alternative Investment Market Rules, Irish Tax legislation and Pension
Regulations.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the
financial statements but compliance with which may be fundamental to the company’s ability to operate or to
avoid a material penalty. These included regulations as applicable to the environment, health and safety, and
exploration and mining activities.
AAuuddiitt rreessppoonnssee ttoo rriisskkss iiddeennttiiffiieedd
As a result of performing the above, we did not identify any key audit matters related to the potential risk of
fraud or non-compliance with laws and regulations.
Our procedures to respond to risks identified included the following:
•
•
•
reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect on the
financial statements;
enquiring of management, the audit committee and external legal counsel concerning actual and
potential litigation and claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate
risks of material misstatement due to fraud;
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 23
•
•
reading minutes of meetings of those charged with governance; and
in addressing the risk of fraud through management override of controls, testing the appropriateness
of journal entries and other adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement
team members including internal specialists, and remained alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
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: 28 November 2023
Notes: An audit does not provide assurance on the maintenance and integrity of the website, including controls
used to achieve this, and in particular on whether any changes may have occurred to the financial statements
since first published. These matters are the responsibility of the directors but no control procedures can provide
absolute assurance in this area.
Legislation in Ireland governing the preparation and dissemination of financial statements differs from
legislation in other jurisdictions.
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 24
Karelian Diamond Resources P.L.C.
Statement of profit or loss
as at 31 May 2023
Continuing operations
Operating expenses
Movement in fair value of warrants
(Loss)/profit before finance costs and taxation
Interest expense
Net finance costs
(Loss)/profit before taxation
Income tax expense
(Loss)/profit for the financial year
(Loss)/ earnings per share
Basic and diluted (loss)/earnings per share
Note
2
15
3
11
5
6
2023
€
(297,386)
9,565
(287,821)
(3,646)
(3,646)
(291,467)
-
(291,467)
(0.0038)
2022
€
(369,019)
389,904
20,885
(7,292)
(7,292)
13,593
-
13,593
0.0002
The total (loss)/profit for the financial year is entirely attributable to equity holders of the Company.
______________________ ___________________
Professor Richard Conroy
Chairman
Maureen T.A. Jones
Managing Director
22
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc
Karelian Diamond Resources P.L.C.
Statement of comprehensive income
as at 31 May 2023
(Loss)/profit for the financial year
Income recognised in other comprehensive income
Total comprehensive (loss)/profit for the financial year
25
2023
€
(291,467)
-
(291,467)
2022
€
13,593
-
13,593
The total comprehensive (loss)/profit for the financial year is entirely attributable to equity holders of the
Company.
23
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 26
Karelian Diamond Resources P.L.C.
Statement of financial position
as at 31 May 2023
Assets
Non-current assets
Intangible 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
Derivative liability
Convertible loan
Warrant liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Convertible loan
Total current liabilities
Total liabilities
Total equity and liabilities
Note
7
8
9
12
12
15
10
10
10
11
10,11
31 May
2023
€
31 May
2022
€
11,265,894
11,265,894
10,910,931
10,910,931
116,038
79,003
195,041
117,868
60,178
178,046
11,460,935
11,088,977
3,200,882
10,546,844
450,658
(4,412,310)
9,786,074
10,304
119,246
109,224
238,774
1,436,087
-
1,436,087
3,191,807
9,959,181
450,658
(4,120,843)
9,480,803
146
-
-
146
1,441,238
166,790
1,608,028
1,664,859
1,608,174
11,460,935
11,088,977
The financial statements were approved by the Board of Directors on 27 November 2023 and authorised for issue on 28
November 2023. They are signed on its behalf by:
______________________
Professor Richard Conroy
Chairman
__________________
Maureen T.A. Jones
Managing Director
24
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 27
Karelian Diamond Resources P.L.C.
Statement of changes in equity
for the financial year ended 31 May 2023
Note
12
12
Share
capital
€
3,191,807
9,075
-
-
-
3,200,882
3,191,807
-
-
3,191,807
Share
premium
€
9,959,181
610,824
(23,161)
-
Share-based
payment
reserve
€
450,658
-
-
-
Retained
deficit
€
(4,120,843)
-
-
-
Total
equity
€
9,480,803
619,899
(23,161)
-
-
10,546,844
-
450,658
(291,467)
(4,412,310)
(291,467)
9,786,074
9,959,181
-
-
9,959,181
450,058
-
(4,105,780)
(28,656)
9,495,866
(28,656)
-
450,658
13,593
(4,120,843)
13,593
9,480,803
Balance at 1 June 2022
Share issue
Share issue costs
Share-based payments
(Loss) for the financial
year
Balance at 31 May 2023
Balance at 1 June 2021
Share issue costs
Profit for the financial
year
Balance at 31 May 2022
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 12.
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.
25
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 28
Karelian Diamond Resources P.L.C.
Statement of cash flows
for the financial year ended 31 May 2023
Cash flows from operating activities
(Loss)/profit for the financial year
Adjustments for:
Movement in fair value of warrants
Interest expense
Increase in trade and other payables
(Increase) in other receivables
Advances/(repayment to) from 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
Net cash provided by financing activities
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
Note
2023
€
2022
€
(291,467)
13,593
10
11
9
7
12
12
109,224
3,646
(178,597)
1,361
(18,825)
119,246
(76,815)
(389,904)
7,292
(369,019)
75,340
(11,872)
(70,000)
(375,550)
(354,963)
(354,963)
(144,355)
(144,355)
453,109
(23,161)
429,948
(1,830)
117,868
116,038
604,651
(28,656)
575,995
56,090
61,778
117,868
26
Annual report and financial statements for the financial year ended 31 May 2023 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 2023
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.
The principal activity of the Company during the financial year is a mineral exploration and development company.
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 28 November 2023.
Going concern
The Company recorded a loss of €291,467 (31 May 2022: profit of €13,593) for the financial year ended 31 May
2023. The Company had net assets of €9,786,074 (31 May 2022: €9,480,803) at that date. The Company had net
current liabilities of €1,241,046 (31 May 2022: net current liabilities of €1,429,982) 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 Director James P. Jones, have confirmed that they will not seek repayment of
amounts owed to them by the Company of €1,291,969 (31 May 2022: €1,106,970) 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 2024. As set out further in the Chairman’s
statement, the Company expects to incur capital expenditure in 2023 and 2024, consistent with its strategy as an
exploration company. The Directors recognise that net current liabilities of €1,241,046 (31 May 2022: €1,429,982)
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, 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.
27
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
1
Accounting policies (continued)
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.
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 2022:
•
•
•
•
•
•
•
•
•
IFRS 4 amendments regarding the expiry date of the deferral approach – Effective date 1 January 2023;
IAS 8 amendments regarding the definition of accounting estimates – Effective date 1 January 2023;
IAS 1 amendments regarding the disclosure of accounting policies - Effective date 1 January 2023;
IFRS 17 Insurance contracts – Effective date deferred to 1 January 2023.
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 3 amendments updating a reference to the Conceptual Framework – Effective date 1 January 2022;
IAS 37 amendments regarding the costs to include when assessing whether a contract is onerous – Effective date
1 January 2022.
IFRS 1 amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (subsidiary as a first-time
adopter) – Effective date 1 January 2022; and
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;
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 2023
reporting periods and have not been early adopted by the Company.
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;
Amendments to IFRS 16 Leases: Lease liability in a sale and leaseback – Effective date 1 January 2024; and
Amendments to IAS 1 Presentation of Financial Statements: Classification of liabilities as current or non-current
– Effective date 1 January 2024.
28
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
1
Accounting policies (continued)
(a) Intangible assets
The Company accounts for mineral expenditure in accordance with IFRS 6: Exploration for and Evaluation of
Mineral Resources.
(i) Capitalisation
All costs related to acquiring the legal rights to explore will be capitalised. All other costs incurred prior to
acquiring the rights to explore are charged directly to the consolidated statement of profit or loss . Exploration,
appraisal and development expenditure incurred 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
statement of profit or loss 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.
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.
29
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
1
Accounting policies (continued)
(a) Intangible assets (continued)
(ii) Impairment (continued)
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 (where material) basis. The
carrying value of the CGU is compared to its recoverable amount and any resulting impairment loss is written off
to the statement of profit or loss. The recoverable amount of the CGU is assessed as the higher of its fair value, less
costs to sell, and its value in use.
Income taxation expense
(b)
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the statement of profit
or loss 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 and meet the other necessary conditions, 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 statement of profit or loss . Any incremental direct costs associated
with the issuance of warrants are taken as an immediate charge to finance costs through the statement of profit or
loss . 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).
(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.
30
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
33
1
Accounting policies (continued)
(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 statement of profit or loss 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 statement of profit or loss .
(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.
(k) Ordinary shares
Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares and share warrants
are recognised as a deduction from retained earnings, net of any tax effects. Effective 6 July 2022, share issue costs
can be deducted from share premium.
30
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
1
Accounting policies (continued)
(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 as adopted by the European Union.
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) Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or
when the financial asset and substantially all the risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the
transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for
transaction costs (where applicable).
Impairment of financial assets
IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses – the
‘expected credit loss (ECL) model’. Instruments within the scope of the requirements included loans and other debt-
type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and
measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not
measured at fair value through profit or loss.The Group considers a broader range of information when assessing
credit risk and measuring expected credit losses, including past events, current conditions, reasonable and
supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
Subsequent measurement of financial assets
Financial assets held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are
categorised at FVTPL. Further, irrespective of the business model used, financial assets whose contractual cash flows
are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall
into this category, except for those designated and effective as hedging instruments, for which the hedge accounting
requirements apply (see below). The category also contains an equity investment. The Group accounts for the
investment at FVTPL and did not make the irrevocable election to account for the investment in XY Ltd and listed
equity securities at FVOCI. The fair value was determined in line with the requirements of IFRS 13 ‘Fair Value
Measurement’. Assets in this category are measured at fair value with gains or losses recognised in profit or loss.
32
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 35
Karelian Diamond Resources P.L.C.
Notes
to and forming part of the financial statements for the financial year ended 31 May 2023 (continued)
1 Accounting policies (continued)
(m) Financial instruments (continued)
The fair values of financial assets in this category are determined by reference to active market transactions or using
a valuation technique where no active market exists.
Classification and measurement of financial liabilities
The Company’s financial liabilities include trade and other payables and derivative financial instruments. Financial
liabilities are initially measured at fair value, and, where applicable. Subsequently, financial liabilities are measured
at amortised cost using the effective interest method except for derivatives and financial liabilities designated at
FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than
derivative financial instruments that are designated and effective as hedging instruments). All interest-related
charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within
finance costs or finance income.
(n) 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.
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.
32
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
1
Accounting policies (continued)
(n) Significant accounting judgements and key sources of estimation uncertainty (continued)
Significant judgements in applying the Company’s accounting policies (continued)
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 29 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 €11,265,894 (31 May 2022: €10,910,931) at 31 May
2023. 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. While
uncertainty exists, primarily due to the nature of the mining and exploration business, the Directors will continue to
assess the carrying amounts of the exploration and evaluation assets. This assessment includes an assessment of
the possible outcomes that can be reasonably expected in the forthcoming financial period.
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 Black Scholes 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.
33
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
37
2 Operating expenses
Analysis of operating expenses
Operating expenses
Transfer to intangible assets
Operating expenses are analysed as follows:
Professional fees
Wages and salaries
Personnel costs
Other operating expenses
Auditor’s remuneration
2023
€
383,035
(85,649)
297,386
113,408
140,558
79,244
9,826
40,000
383,035
2022
€
503,260
(134,241)
369,019
151,043
187,469
77,722
68,026
19,000
503,260
Of the above costs, a total of €85,649 (31 May 2022: €134,241) 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. €57,500 (31 May 2022: €57,500) is charged to the Statement of profit or loss in
relation to Directors’ salaries.
Wages, salaries and personnel costs as disclosed above is analysed as follows:
Wages and salaries and personnel costs
Social insurance costs
2023
€
216,978
2,824
219,802
2022
€
258,044
7,147
265,191
The amount of wages, salaries and related costs capitalised to intangible assets during the financial year was
€83,058 (31 May 2022: €129,969).
The average number of persons employed during the year (including executive Directors) by activity was as follows:
Corporate management and administration
Exploration and evaluation
2023
2022
2
-
2
2
-
2
35
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (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
€
20,000
10,000
10,000
10,000
10,000
10,000
70,000
Salary
€
65,000
50,000
-
-
-
-
115,000
Share-based
payment €
-
-
-
-
-
-
-
Pension
contributions €
-
-
-
-
-
-
-
Total
€
85,000
60,000
10,000
10,000
10,000
10,000
185,000
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
Fees
€
20,000
10,000
10,000
10,000
10,000
10,000
70,000
Salary
€
65,000
50,000
-
-
-
-
115,000
Share-based
payment €
-
-
-
-
-
-
-
Pension
contributions €
-
-
-
-
-
-
-
Total
€
85,000
60,000
10,000
10,000
10,000
10,000
185,000
3 (Loss)/profit before taxation
The (loss)/profit 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
2023
€
2022
€
40,000
19,000
No fees were incurred for other assurance; tax advisory or other non-audit services in respect of the current or prior
financial years.
36
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
4
Directors’ remuneration
Aggregate emoluments paid to or receivable by Directors in respect of
qualifying services
2023
€
2022
€
185,000
185,000
During the year ended 31 May 2023 and 31 May 2022, 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 (31 May 2022: €Nil).
5
Income tax expense
No taxation charge arose in the current or prior financial year due to losses incurred in prior years and this year.
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)/profit on ordinary activities before taxation
Irish standard tax rate
Tax credit at the Irish standard rate
Effects of:
Losses carried forward utilised
Losses carried forward for future utilisation
Tax charge for the financial year
2023
€
(291,467)
12.50%
(36,433)
-
36,433
-
2022
€
13,593
12.50%
1,699
(1,699)
-
-
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 €12,567,676 at 31 May
2023 and €12,859,143 at 31 May 2022.
37
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
6
(Loss)/profit per share
Basic (loss)/profit per share
(Loss)/profit for the year attributable to equity holders of the
Company
2023
€
(291,467)
2022
€
13,593
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
68,542,749
25,950,000
94,492,749
68,542,749
68,542,749
Weighted average number of ordinary shares for the purposes of
basic and diluted loss per share
76,460,146
68,542,749
Basic and diluted (loss)/profit per ordinary share
(0.0038)
0.0002
Diluted (loss)/profit per share
The effect of share options and warrants is anti-dilutive.
7
Intangible assets
Exploration and evaluation assets
Cost
At 1 June
Expenditure during the financial year:
•
• Other operating expenses (Note 2)
At 31 May
Licence and appraisal costs
31 May
2023
€
10,910,931
269,314
85,649
11,265,894
31 May
2022
€
10,766,576
10,114
134,241
10,910,931
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.
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
8
Cash and cash equivalents
Cash held in bank accounts
31 May
2023
€
116,038
116,038
31 May
2022
€
117,868
117,868
During the year ended 31 May 2022, four new Nordea Bank accounts were opened for the purpose of holding
collateral deposits related to the Finnish licenses. As at 31 May 2023, a total amount of €24,500 (31 May 2022:
€24,500) relates to these collateral deposits and are treated as restricted cash balances.
9
Other receivables
VAT receivable
Other receivables
10 Non-current liabilities
Warrant liabilities
31 May
2023
€
35,341
43,662
79,003
31 May
2022
€
43,664
16,514
60,178
During the year ended 31 May 2023, 18,500,000 warrants were issued with a sterling exercise price and expiry of
between 18 and 24 months. No new warrants were issued in the prior year.The fair value amount at grant date was
valued using the Black Scholes Model and recorded as warrant liabilities. At 31 May 2023, the warrants in issue were
fair valued with the movement in fair value being recorded in the statement of profit or loss . See Note 15 for further
details.
Convertible loan
On 26 May 2023, the Company entered into a convertible loan note agreement for a total amount of €129,550
(£112,500) with Conroy Gold and Natural Resources P.L.C. which is both a shareholder in the company and has a
number of other connections as noted in Note 15. The convertible loan note is unsecured, has a term of 18 months
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 5 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.
The amount of €10,304 relates to derivative liability attached to the total convertible loan note above and the net
amount of €119,246 is recorded as the value of the convertible loan at 31 May 2023. As the loan note was entered
close to the year end, no interest was accrued due to it being immaterial.
The convertible loan amounted to €129,550 at 31 May 2023 and is classified as a non-current liability.
Opening Balance
Interest payable
Derivative liability
Convertible loan
48
31 May
2023
€
-
-
10,304
119,246
129,550
31 May
2022
€
-
-
-
-
-
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
11 Current liabilities
Trade and other payables
Accrued Directors’ remuneration
Fees and other emoluments
Pension contributions
Amount due to related party (see note 14 (b))
Other creditors and accruals
31 May
2023
€
1,028,718
263,250
5,023
139,096
1,436,087
31 May
2022
€
843,720
263,250
199,806
134,462
1,441,238
As at 31 May 2023, director fees amounting to €44,167 (31 May 2022: €34,167) due to Brendan McMorrow are
included in Fees and other emoluments. As at 31 May 2023, an amount of €NIL (31 May 2022: €2,500) payable to
Brendan McMorrow for other services rendered by him is included in other creditors and accruals.
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.
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 total amount outstanding as at 31 May 2022 including accrued interest
was €166,790. This agreement was varied in December 2022 and the loan note holder exercised their conversion
rights to convert the loan and all accrued interest (totalling £138,000) into 3,450,000 new ordinary shares in the
company on 20 December 2022.
Opening Balance
Interest payable
Conversion to ordinary equity
12 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
2023
€
166,790
3,646
(170,436)
-
31 May
2023
€
-
1,825,328
3,174,672
5,000,000
31 May
2022
€
159,498
7,292
-
166,790
31 May
2022
€
-
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.
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
12 Called up share capital and share premium (continued)
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
68,542,749
17,135
3,174,672
9,959,181
Share issue (a)
Share issue (b)
12,500,000
10,000,000
Warrants issued (see note 15)
-
Loan conversion into shares (c)
3,450,000
End of current financial year
94,492,749
3,125
2,500
-
3,450
26,210
-
-
-
-
269,254
280,182
(118,789)
157,016
3,174,672
10,546,844
Issued and fully paid – Prior financial year
Number of
ordinary shares
Called up
share capital
€
Called up deferred
share capital
€
Share
premium
€
Start of prior financial year –
shares of €0.00025 each
68,542,749
17,135
3,174,672
9,959,181
End of prior financial year
68,542,749
17,135
3,174,672
9,959,181
(a) On 29 November 2022, the Company raised €286,639 (£250,000) before share issue costs of €17,385 through
the issue of 12,500,000 ordinary shares of €0.00025 in the capital of the Company at a price of £0.02 per Subscription
Share.
(b) On 19 May 2023, the Company raised €285,958 (£250,000), before share issue costs of €5,776 through the issue
of 10,000,000 ordinary shares of €0.00025 in the capital of the Company at a price of £0.25 per Subscription Share.
(c) As set out in more detail in Note 10, on 20 December 2022, a loan holder exercised their conversion rights to
convert their loan and all accrued interest (totalling £138,000) into 3,450,000 new ordinary shares in the company.
Warrants: At 31 May 2023, warrants over 34,750,000 shares exercisable at prices varying from £0.04 to £0.08 and
€0.10 at any time up to 5 December 2024 were outstanding. 18,500,000 new warrants were issued during the year
ended 31 May 2023 (31 May 2022: no warrants were issued).
Options: At 31 May 2022 and 31 May 2021, there are no options outstanding.
Share price: The share price at 31 May 2023 was £0.027 (31 May 2022: £0.025). The share price ranged from £0.0235
to £0.0285 (31 May 2022: £0.0205 to £0.0475) during the year under review.
13 Commitments and contingencies
At 31 May 2023, there were no capital commitments or contingent liabilities (31 May 2022: €Nil) recognised at the
balance sheet 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.
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
14 Related party transactions
(a) 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 2023, Conroy Gold and Natural Resources
P.L.C. incurred costs totalling €46,178 (31 May 2022: €100,313) 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
Rent and rates
Other operating expenses
2023
€
25,558
10,145
10,475
46,178
2022
€
72,469
15,850
11,994
100,313
(b) At 31 May 2023, the Company owed €5,023 to Conroy Gold and Natural Resources P.L.C. (31 May 2022: €199,806
owed to). Amounts owed to Conroy Gold and Natural Resources P.L.C. were included within trade and other
payables during the current year. During the financial year ended 31 May 2023, the Company received €32,500 from
(31 May 2022: €70,000 was paid to) Conroy Gold and Natural Resources P.L.C. During the financial year ended 31
May 2023, the Company was charged €46,178 (31 May 2022: €100,313) by Conroy Gold and Natural Resources
P.L.C. in respect of the allocation of certain costs as detailed in Note 15(a). In May 2023, Conroy Gold and Natural
Resources P.L.C. converted amounts owing to it equivalent to €143,943 (£125,000) into ordinary equity as detailed
as part of the “share issue (b)” detailed in Note 12 and a further €129,550 (£112,500) into a convertible loan
instrument as detailed in Note 10.
(c) At 31 May 2023, Brendan McMorrow was owed €44,167 (31 May 2022: €34,167) in respect of his services as a
director. He invoiced the company an amount of €9,000 (31 May 2022: €2,500) during the year for other services
rendered of which €Nil (31 May 2022: €2,500) was outstanding at 31 May 2023. These amounts are included in the
trade and other payables balance in the statement of financial position.
(d) Key management personnel are considered to be the Board of Directors and other key management. The
compensation of all key management personnel during the year was €199,824 (2022: €185,000). Further analysis
of remuneration for each Director of the Company is set out in note 2.
(e) Details of share capital transactions with the Directors are disclosed in the Directors’ Report.
(f) Apart from Directors’ remuneration (detailed in Note 2 and Note 4), 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.
15 Share-based payments
Warrants granted generally have a vesting period of one and half or two years. Details of the warrants outstanding
during the financial year are as follows:
2023
No. of Share
Warrants
17,286,250
18,500,000
(1,036,250)
34,750,000
2023
Weighted
Average
Exercise Price
€
0.0918
0.04173
1.1057
0.05963
2022
No. of Share
Warrants
17,286,250
-
-
17,286,250
2022
Weighted
Average
Exercise Price
€
0.0918
-
-
0.0918
At 1 June
Granted during the financial year
Lapsed during the financial year
At 31 May
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
15 Share based payments (continued)
The company issued 18,500,000 sterling based warrants during the year, with an estimated fair value at date of
grant of €118,789. As a result of the valuation performed at year end, the fair value of the sterling based warrants
was €109,224 at 31 May 2023 (31 May 2022: €Nil) and accordingly €9,565 credited to the Statement of profit or
loss as a movement in the fair value of warrants.
The Company estimated the fair value of warrants awards using the Black Scholes 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 Black
Scholes 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 stock price volatility, the risk-free interest rate and the expected dividends.
The following key input assumptions were used to calculate the fair value of the sterling based warrants:
Dividend yield
Share price volatility
Risk free interest rate
Expected life (in years)
2023
Warrants
0%
66.395%
4.183%
1.5 or 2.0
2022
Warrants
0%
61%
1.24%
2.0
During the prior year, no warrants were granted or lapsed and an amount of €389,904 was recognised in the
statement of profit or loss based on the fair value of these warrants at grant date. While 1,036,250 share warrants
lapsed during the current year, as they has no value at 31 May 2022 no adjustment was required to be made to
retained deficit.
16 Financial instruments
Financial risk management objectives, policies and processes
The Company has exposure to the following risks from its use of financial instruments:
Inflation;
(a)
(b)
Interest rate risk;
(c) Foreign currency risk;
(d) Liquidity risk; and
(e) Credit risk.
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.
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
16 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
(b) Interest rate risk
The Company currently finances its operations through shareholders’ funds and loan finance. The loan finance at 31
May 2023 relates to a convertible loan therefore any fluctuations in interest rates will not have an impact on the
results of the Company and no sensitivity analysis has been performed. 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. The Company is further exposed to foreign currency risk through
the warrants denominated in sterling which is not the Company’s functional currency.
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 2023 and 31 May 2022, 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 2023:
Cash and cash equivalents
Derivative liability
Convertible loan
Trade and other payables
Other receivables
Amount due to related party
Total exposure
Sterling exposure
denominated in €
89,936
(10,304)
(109,224)
-
-
-
(29,592)
Not at risk
€
26,053
-
-
1,436,087
36,613
(5,023)
1,493,730
Total
€
115,989
(10,304)
(109,224)
1,426,087
36,613
(5,023)
1,454,138
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 2022:
Cash and cash equivalents
Amount due to related party
Other receivables
Convertible loan
Derivative liability
Trade and other payables
Total exposure
Sterling exposure
denominated in €
67,138
-
-
(166,790)
(146)
(7,046)
(106,844)
Not at risk
€
50,730
(199,806)
16,514
-
-
(1,434,192)
(1,566,754)
Total
€
117,868
(199,806)
16,514
(166,790)
(146)
(1,441,238)
(1,673,598)
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
16 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
(c) Foreign currency risk (continued)
The following are the significant exchange rates that applied against €1 during the financial year:
Average Rate
2023
Average Rate
2022
Spot Rate
31 May
2023
Spot Rate
31 May
2022
GBP
0.869
0.844
0.865
0.851
Sensitivity analysis
A 10% strengthening of the Euro against Sterling, based on outstanding financial assets and liabilities at 31 May 2022
would have decreased the reported loss by €9,713 (31 May 2022 decreased by: €10,684) 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 risk 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. Contractual maturities of financial liabilities as at 31 May 2023
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
€
1,426,087
10,304
119,246
1,426,087
10,304
119,246
134,118*
-
-
1,291,969**
-
-
-
10,304***
119,246***
1,555,637
1,555,637
134,118*
1,291,969**
129,550***
-
-
-
-
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
16 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
(d) Liquidity risk (continued)
Contractual maturities of financial liabilities as at 31 May 2022 were as follows:
Trade and other
payables (including
related party loans)
Derivative liability
Convertible loan
Carrying
amount €
Contractual
cash flows €
6 months or
less €
6-12 months
€
1-2 years
€
2-5 years
€
1,441,238
146
166,790
1,441,238
146
166,790
1,608,174
1,608,174
334,268*
-
-
334,268*
-
-
-
-
1,106,970**
-
-
1,106,970**
-
146
166,790
166,936
*The amount of €134,118 (31 May 2022: €334,268) relates to other creditors and accruals (including amounts owed
to Conroy Gold and Natural Resources P.L.C.).
**The Directors, Professor Richard Conroy, Séamus P. FitzPatrick, Maureen T.A. Jones, Dr. Sorċa Conroy, Howard
Bird and Brendan McMorrow, and former Director James P. Jones, have confirmed that they will not seek repayment
of amounts owed to them by the Company of €1,291,969 (31 May 2022: €1,106,970) within 12 months of the date
of approval of the financial statements, unless the Company has sufficient funds to repay. There were no related
party loans in existence at 31 May 2023 and 31 May 2022 relating to monies owed to any of the Directors.
***On 26 May 2023, the Company has entered into a convertible loan note agreement for a total amount of
€129,550 (£112,500) with one of its shareholders. Please refer to Note 10 for further details.
The Company had cash and cash equivalents of €116,038 at 31 May 2023 (31 May 2022: €117,868).
(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
Other receivables
2023
€
116,038
36,613
152,651
2022
€
117,868
16,514
134,382
The Company’s cash and cash equivalents are held at AIB Bank which has a credit rating of “BBB” (31 May 2022:
‘’BBB’’) as determined by Fitch.
48
Annual report and financial statements for the financial year ended 31 May 2023 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 2023 (continued)
16 Financial instruments (continued)
Financial risk management objectives, policies and processes (continued)
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 2023 and 31 May 2022, all cash is
accessible on demand and held with counterparties with a credit rating of BBB or higher. Having considered the
credit rating of the counterparties and the outstanding balances, management have determined that for both
financial years presented, the amount of ECL is immaterial.
(f) Fair values versus carrying amounts
Due to the short-term nature of the majority of the Company’s financial assets and liabilities held at amortised cost
at 31 May 2023 and 31 May 2022, 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.
17 Post balance sheet events
Post year end the Company announced the completion of a stream sampling programme in Northern Ireland where
subsequent indicator mineral and microprobe analysis results confirmed the prospectivity of the Company's licence
area for nickel, copper and platinum group metals.
The Company also announced that it has completed a pitting programme over a series of more than twenty
kimberlite target locations in the Kuhmo region of Finland. The resulting glacial till samples have been sent for
kimperlite indicator mineral testing.
The Company also raised funds of £250,000 in October 2023 (including £100,000 from Board members) with a view
to carrying out follow up exploration in Northern Ireland and to continue its ongoing work in Finland.
There were no further important events to note post year end.
18 Approval of the audited financial statements for the financial year ended 31 May 2023
These audited financial statements were approved by the Board of Directors on 27 November 2023 and authorised
for issue on 28 November 2023. 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.
48
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 50
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 51
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc 52
Annual report and financial statements for the financial year ended 31 May 2023 Karelian Diamond Resources Plc