ELKEDRA DIAMONDS NL
                                                        Level 1, 130 Hay Street
                                                              Subiaco  WA  6008
                                            PO Box 8035, Subiaco East  WA  6008
                                                     Telephone: +61-8-6380 2855
                                                     Facsimile: +61-8-6380 1644
                                                E-mail:  elkedra@elkedra.com.au
                                                  Web Site:  www.elkedra.com.au


1 March 2007

AIM Market
London  UK


Dear Sir/Madam,

RE:   INTERIM FINANCIAL REPORT - DECEMBER 2006

Please find attached herewith a copy of the Company's Interim Financial Report
to 31 December 2006, including the "Independent Review Report" concluded by our
Auditors.

For and on behalf of the Board


M.D.J. Cozijn
Company Secretary

cc:   Directors


                           Interim Financial Report                            

                               31 December 2006                                

                              ELKEDRA DIAMONDS NL

                              ABN 42 092 334 220                               

Incorporated under the Corporations Act 2001 in the State of Western Australia 
                              on 4th April 2000.                               

                           INTERIM FINANCIAL REPORT                            

                        6 Months Ended 31 DECEMBER 2006                        

                              CORPORATE DETAILS                                                                               

Directors:

D.B. Best BE, CPEng, FIEAustt - Executive Chairman
S. Randazzo B.Bus. CA, - Executive Director
M.D.J. Cozijn B.Com. ASA. - Non-Executive Director
T Teichmann  BA, MBA - Non-Executive Director

Secretary:

M.D.J. Cozijn - B.Com. ASA.

Registered & Principal Office:

Level 1
130 Hay Street
SUBIACO WA 6008
Telephone: + 618 6380 2855
Facsimile: +618 6380 1644

Postal Address:
PO Box 8035
SUBIACO EAST  WA  6008
                                                                              

Share Registry Perth:
Security Transfer Registrars Pty Ltd
770 Canning Highway
APPLECROSS  WA  6153

Share Registry UK:

Computershare Investor Services plc
Level 2, Reserve Bank Building
The Pavilions
Bridgewater Road
Bristol BS13 8AE
United Kingdom

Solicitors Perth:

Deacons
Level 31, Bank West Tower
108 St George's Terrace
PERTH  WA  6000

Auditors:

Grant Thornton Western Australian Partnership                 
256 St Georges Terrace                             
PERTH  WA  6000                                
      
        
                      CONTENTS
  
Page No.

1.         Corporate Details                       1

2.         Directors' Report                       2

3.         Auditor's Independence Declaration      6

4.         Consolidated Income Statement           7                                                                                  
5.         Consolidated Balance Sheet              8                                                                                        
6.         Consolidated Statement of Changes in
           Equity                                  9

7.         Consolidated Cash Flow Statement       10                                                                           
8.         Notes to the Financial Statements      11                                                                          
9.         Directors' Declaration                 14                                                                                 
10.        Independent Review Report              15                                                                            

                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                                                                  

        INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2006

                               DIRECTOR'S REPORT                               

 
Your Directors submit the financial report of the economic entity for the half
year ended 31 December 2006.

DIRECTORS

The names of directors who held office during or since the end of the half
year:

            Mr D.B. Best

            Mr S. Randazzo

            Mr M.D.J. Cozijn

            Mr T. Teichmann

                         HIGHLIGHTS FOR THE SIX MONTHS                         

BRAZIL

Chapada Diamond Project

10,312 carats of diamonds produced for the six months ending 31 December 2006.

Plant ramp-up is well advanced with the plant running for extended periods of
time at up to 110% of design capacity.

Revenue of A$4,442,960 was generated from sales in the six months ending 31
December 2006.

AUSTRALIA

Diamonds

An application was made for several tenements in the Tiwi Islands.

A NT Government aerial magnetic survey over the Tiwi Islands was completed in
November 2006.

Thorntonia Project tenements granted.

Planning is underway for sampling programs in Elkedra's Thorntonia and
Altjawarra Diamond Projects for the coming 2007 field season.

Base Metals and Uranium

Gravity survey at Box Hole lead-zinc project identified 14 positive gravity
anomalies.

Gravity anomalies and steep gravity gradients coincident with magnetic targets
have been identified at Marqua (SEL24769) and Field River (EL24693).

CORPORATE
                                                                             

Placement of 1,731,898 fully paid ordinary shares to Australian institutions in
September raising $0.885 million.

Placement of 7,713,830 fully paid ordinary shares completed in December raising
$3.625 million.


As at 31st December 2006, the total issued capital of the company is 94,446,003
shares including 7,353,915 shares which were released from ASX escrow on 20th
December 2006.


As at 31st December 2006 a total of 13,673,724 unlisted options exercisable at
between 10 pence and A$1.05 are on issue, in addition to 8,368,532 warrants
(options) exercisable at 12 pence listed on AIM in the UK.


496,612 unlisted convertible notes are also on issue.


REVIEW OF OPERATIONS & RESULTS


OPERATIONS

The consolidated loss of the economic entity after providing for income tax and
eliminating minority equity interests amounted to $3,448,365.

Diamond production at the Company's 100% owned Chapada Alluvial Diamond Project
in Brazil commenced in late June 2006.  Plant ramp-up continued during the
subsequent months and at the end of the December 2006, the plant
debottlenecking modifications were approximately 80% complete and the
processing plant running for extended periods of time at up to 110% of design
capacity.

The processing plant's design throughput capacity is 50,000 bcm per month, or
approximately 200 tonnes per hour of alluvial gravels which equates to
approximately 1.4 million tonnes of gravels per annum.  With the plant
debottlenecking nearing completion the processing plant has been running at
around 220 tonnes per hour for some periods of time.  On completion of the
debottlenecking program the next focus for plant ramp-up will be to fine tune
maintenance operations to maximise plant availability (i.e. the actual hours
the plant is available for production each month).

Mining production ramp up has been progressing in parallel with the increasing
throughput capacity of the process plant.  The onset of the wet season in the
Chapada region has caused some loss in mining productivity by the mining
contractor however, alternative mining methods were trialed to minimise wet
weather effects on production.

Average grade achieved during the six month period was 0.038 carats/bcm
compared to the reserve grade of 0.05 carats/bcm. The overall mining reserve at
Chapada is made up of a number of gravel terraces stepping down in elevation
towards the rivers to the east and west. To date, mining has only progressed in
the higher level terraces hence there is still potential for grades to improve
as mining moves into the lower terraces later in the year.

Diamond production and key operating statistics since commencement of
operations to 31 December 2006 are shown in the following table.


TABLE - PRODUCTION STATISTICS

 

                                                                                
                 Plant                Diamonds       Average Stone     Average  
  Production   Throughput Average     Recovered           Size          Value   
    Month        (bcm)1    Grade                      (cts/stone)     per Carat 
                                                                        (US$)   
                                   Stones   Carats                              
                                                                                
Total - Start                                                                   
      up        114,707    0.038   10,114   4,338         0.43           382    
 to 30 Sep 06                                                                   
                                                                                
   October       44,367    0.038   3,397    1,698         0.50           353    
                                                                                
   November      58,835    0.038   3,431    2,243         0.65           442    
                                                                                
   December      51,428    0.040   3,753    2,033         0.54           409    
                                                                                
 Total -  Dec   154,630    0.038   10,581   5,974         0.56           406    
     Qtr                                                                        
                                                                                
 Year to Date   269,337    0.038   20,695   10,312        0.50           396    
                                                                                
      

1. "bcm" means "bank cubic metre" of in situ gravel in mining benches and plant
throughput is based on total run of mine production including all under and
oversize material. The monthly plant throughput bcm's have been amended
marginally from previously issued figures due to balancing out
 

With the ramp up activities associated with the mine and plant operations at
Chapada nearing completion the Company will implement its Brazilian exploration
programme during the March 2007 quarter.


The Company's priority will be to commence exploration on the tenements it
already holds surrounding the existing Chapada operations, which include some
270 km2 of highly prospective ground.


The current declared probable reserves are contained within tenements covering
only 15 km2 and the additional 270 km2 tenement holdings provide good
exploration potential to fast track the expansion of the Chapada Project.   The
Company's medium term objective is to increase its reserves to sustain a mine
life in excess of 20 years and increase production to 100,000 carats per annum.


SALES


The total diamond production from the Chapada operations is sold under
agreement to the Leviev Diamond Group on a monthly basis. Under the terms of
the sales agreement the price for each diamond sale is determined by a mutually
agreed London based independent diamond valuer.


Sales revenue for the half year ending 31 December 2006 was $4,442,960.


AUDITOR'S INDEPENDENCE DECLARATION


The lead auditor's declaration of independence under section 307C of the
Corporations Act 2001 is set out on page 6 for the half-year ended 31 December
2006.


This report is signed in accordance with a resolution of the Board of
Directors.

D Best                          S Randazzo
Director                        Director

Dated this 28th day of February 2007


ATTRIBUTION

This report is based on geological information compiled by and reported upon by
Dr. Wayne R Taylor, Consulting Mineralogist, who is a member of the Australian
Institute of Geoscientists, and who has at least 5 years experience in the
field of activities covered.

The resource information on the Brazilian Chapada Alluvial Diamond Project is
based on data compiled by and reported upon by Mr Hugh Durey of Hugh Durey &
Associates Pty Ltd.  Mr Durey is a member of the Australasian Institute of
Mining & Metallurgy and qualifies as a competent person as defined in the
September 1999 edition of the Australasian Code for Reporting of Mineral
Resources and Ore Reserves (The JORC Code).  He has consented to the inclusion
of the information in the form and context in which it is presented in this
report. Mr Durey holds no interest in the share capital of Elkedra Diamonds NL.


                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            

                      AUDITOR'S INDEPENDENCE DECLARATION                       

 

Grant Thornton West Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants

AUDITOR'S INDEPENDENCE DECLARATION

In accordance with the requirements of section 307C of the Corporations Act
2001, as lead auditor for the review of Elkedra Diamonds NL and its controlled
entities for the half-year ended 31 December 2006, I declare that, to the best
of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations
    Act 2001 in relation to the review; and

(b) no contraventions of any applicable code of professional conduct in relation to
    the review.

 

GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP
Chartered Accountants


CYRUS PATELL
Partner

Dated 28 February 2007

 
Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T  61 8 9481 1448
F  61 8 9481 0152
E  gtperth@gtwa.com.au
W  www.grantthornton.com.au

An independent Western Australian partnership entitled to trade under the
international name Grant Thornton.

Grant Thornton is a trademark owned by Grant Thornton International and used
under licence by independent firms and entities throughout the world.

 

 

                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            
                                                                               
                         CONSOLIDATED INCOME STATEMENT                         
                   FOR THE HALF YEAR ENDED 31 DECEMBER 2006                    

 

                                                           Economic Entity

                                                      31 December   31 December
                                                             2006          2005
                                                 Note           $             $
                                                                               
                                                                              
Revenue from sale of product                      3     4,442,960             -
                                                                              
Cost of sales                                     4   (4,752,278)             -
                                                                               
Gross loss                                              (309,318)             -
                                                                              
Other income                                      3        44,857       300,135
                                                                              
Other expenses                                    4   (3,183,904)   (1,691,279)
                                                                             
Loss before income tax expense                        (3,448,365)   (1,391,144)
                                                                              
Income tax expense                                              -             -
                                                                               
Net loss attributable to members of the parent                                 
entity                                                (3,448,365)   (1,391,144)
                                                                             
Basic loss per share (cents per share)                     (7.91)        (2.10)
                                                                               
Diluted loss per share (cents per share)                   (7.91)        (2.10)


The accompanying notes form part of these financial statements.



                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            
                                                                               
                          CONSOLIDATED BALANCE SHEET                           
                            AS AT 31 DECEMBER 2006                             


                                        Economic Entity

                                 31 December        30 June
                                        2006           2006
                                           $              $
                                                          
CURRENT ASSETS                                             
                                                           
Cash and cash equivalents          4,016,467      4,235,270
                                                           
Trade and other receivables                -          6,100
                                                           
Inventories                          790,295         52,182
                                                           
Other current assets                       -          6,294
                                                          
TOTAL CURRENT ASSETS               4,806,762      4,299,846
                                                           
NON-CURRENT ASSETS                                         
                                                           
Property plant and equipment      19,500,638     20,196,813
                                                           
Financial assets                      16,000         13,500
                                                          
TOTAL NON-CURRENT ASSETS          19,516,638     20,210,313
                                                          
TOTAL ASSETS                      24,323,400     24,510,159
                                                           
CURRENT LIABILITIES                                        
                                                           
Trade and other payables             309,631        748,868
                                                           
Short-term borrowings              2,582,227      1,086,881
                                                           
Short-term provisions                242,375        196,529
                                                          
                                                           
TOTAL CURRENT LIABILITIES          3,134,233      2,032,278
                                                          
                                                           
NON-CURRENT LIABILITIES                                    
                                                           
Long-term borrowings               8,000,991      9,797,686
                                                          
                                                           
TOTAL NON-CURRENT LIABILITIES      8,000,991      9,797,686
                                                           
TOTAL LIABILITIES                 11,135,224     11,829,964
                                                          
NET ASSETS                        13,188,176     12,680,195
                                                           
EQUITY                                                     
                                                          
Issued capital                    27,393,104     23,002,328
                                                           
Reserves                           1,728,336      2,162,766
                                                           
Accumulated losses              (15,933,264)   (12,484,899)
                                                           
TOTAL EQUITY                      13,188,176     12,680,195
 

The accompanying notes form part of these financial statements.


                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            

                  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                  

                                        Share
                                      Capital
                                     Ordinary  Accumulated  Reserves       Total
                                                    Losses                      
                                                                             
Balance at 1 July 2005             17,960,750  (7,867,359)         -  10,093,391
                                                                                
Shares issued during the year       1,208,136            -         -   1,208,136
                                                                                
Loss attributable to members of                                                 
the parent entity                              (1,391,144)           (1,391,144)
                                                                                
Foreign currency translations               -            -   187,567     187,567
                                                                                
Options reserve                             -            -    57,662      57,662
                                                                                
                                                                                
Balance at 31 December 2005        19,168,886  (9,258,503)   245,229  10,155,612
                                                                               
                                                                                
Balance at 1 July 2006             23,002,328 (12,253,943) 1,931,810  12,680,195
                                                                                
Prior period adjustment                          (230,956)   230,956           -
                                                                                
Shares issued during the year       4,390,776                          4,390,776
                                                                                
Loss attributable to members of                                                 
the parent entity                              (3,448,365)           (3,448,365)
                                                                                
Foreign currency translations                              (480,247)   (480,247)
                                                                                
Options reserve                                               45,817      45,817
                                                                                 
                                                                                
Balance at 31 December 2006        27,393,104 (15,933,264) 1,728,336  13,188,176
 

The accompanying notes form part of these financial statements.


                                                                               

                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            
                                                                               
                       CONSOLIDATED CASH FLOW STATEMENT                        
                   FOR THE HALF YEAR ENDED 31 DECEMBER 2006                    

                                                         Economic Entity

                                                   31 December   31 December
                                                          2006          2005
                                                             $             $
                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES                                        
                                                                           
                                                                            
Receipts from customers                              4,442,960             -
                                                                            
Payments to suppliers and employees                (7,005,497)     (766,690)
                                                                            
Cash generated from operations                     (2,562,537)     (766,690)
                                                                            
Payments for exploration expenditure                 (278,198)     (228,512)
                                                                            
Development costs                                    (826,632)   (3,892,618)
                                                                            
Interest received                                       44,857       300,135
                                                                            
Finance costs                                        (453,987)     (414,764)
                                                                            
Net cash flows (used in) operating activities      (4,076,497)   (5,002,449)
                                                                           
CASH FLOWS FROM INVESTING ACTIVITIES                                        
                                                                           
Proceeds from sale of non-current assets                   364         1,607
                                                                            
Purchase of non-current assets                        (23,343)     (150,708)
                                                                            
Net cash flows (used in) investing activities         (22,979)     (149,101)
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES                                        
                                                                            
                                                                            
Proceeds from issue of shares                        4,600,166     1,246,073
                                                                            
Capital raising costs                                (197,128)      (49,117)
                                                                            
Proceeds from borrowings                               500,000     5,000,000
                                                                            
Repayment of borrowings                            (1,018,865)      (37,402)
                                                                            
                                                                            
Net cash flows provided by financing activities      3,884,173     6,159,554
                                                                            
Net increase (decrease) in cash held                 (215,303)     1,008,004
                                                                            
Cash at beginning of period                          4,235,270     2,564,273
                                                                           
Exchange rate adjustments                              (3,500)       507,102
                                                                           
                                                                            
Cash at end of period                                4,016,467     4,079,379
                                                                            
  

The accompanying notes form part of these financial statements.

 
 

                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            
                                                                               
                       NOTES TO THE FINANCIAL STATEMENTS                       
                   FOR THE HALF YEAR ENDED 31 DECEMBER 2006                    


NOTE 1 - BASIS OF PREPARATION


The half-year financial report is a general purpose financial report prepared
in accordance with the requirements of the Corporations Act 2001, Accounting
Standard AASB 134: Interim Financial Reporting, Urgent Issues Group
Interpretations and other authoritative pronouncements of the Australian
Accounting Standards Board.


Elkedra Diamonds NL and controlled entities has adopted all of new and revised
Standards and Interpretations issued by the Australian Accounting Standards
Board (the AASB) that are relevant to its operations and effective for annual
reporting periods beginning on or after 1 July 2006.


It is recommended that this financial report be read in conjunction with the
annual financial report for the year ended 30 June 2006 and any public
announcements made by Elkedra Diamonds NL during the half-year in accordance
with continuous disclosure requirements arising under the Corporations Act
2001.


The half-year report does not include full disclosures of the type normally
included in an annual financial report.


Reporting Basis and Conventions


The half-year report has been prepared on an accruals basis and is based on
historical costs modified by the revaluation of selected non-current assets,
financial assets and financial liabilities for which the fair value basis of
accounting has been applied.
 

NOTE 2 - CONTINGENT LIABILITIES


There has been no change in contingent liabilities since the last annual
reporting date.
 

NOTE 3 - REVENUE

                                              31 December   31 December
                                                     2006          2005
                                                        $             $
                                                                       
a) Operating                                                           
- sale of product                               4,442,960             -
                                                                       
Total revenue from operating activities         4,442,960             -
                                                                       
                                                                       
b) Non-operating                                                       
- interest received                                44,857       300,135
                                                                       
Total revenue from non-operating activities        44,857       300,135
                                                                      
                                                                       
Total revenues from ordinary activities         4,487,817       300,135


                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            
                                                                               
                       NOTES TO THE FINANCIAL STATEMENTS                       
                   FOR THE HALF YEAR ENDED 31 DECEMBER 2006                    

 

NOTE 4 - EXPENSES

                                                    31 December   31 December
                                                           2006          2005
                                                              $             $
                                                                            
a) Cost of sales                                                             
                                                                             
- production costs                                    3,814,494             -
                                                                             
- depreciation of plant and equipment                   400,946             -
                                                                             
- amortisation of mining properties                     536,838             -
                                                                             
Total cost of sales                                   4,752,278             -
                                                                            
                                                                             
b) Other expenses                                                            
                                                                             
- administration costs                                  499,629       240,333
                                                                             
- corporate costs                                       841,208       826,075
                                                                             
- depreciation of plant and equipment                   143,841        48,643
                                                                             
- field exploration costs                               275,698       228,512
                                                                             
- finance costs                                         522,562       303,091
                                                                             
- foreign currency translation                           29,574        44,625
                                                                             
- loss on sale or write off of non-current assets         4,786             -
                                                                             
- site infrastructure costs                             239,850             -
                                                                             
- other site expenses                                   626,756             -
                                                                             
Total other expenses from ordinary activities         3,183,904     1,691,279
                                                                            
Total expenses ordinary activities                    7,936,182     1,691,279
  

NOTE 5 - EVENTS SUBSEQUENT TO REPORTING DATE

No matters or circumstances have arisen since balance date which significantly
affected or may significantly affect the operations of the economic entity, the
results of those operations, or the state of the affairs of the economic entity
in subsequent reporting periods other than:

On 18 January 2007 LL Mining Corporation BV exercised 5,000,000 12 pence
warrants (options) which resulted in the allotment of 5,000,000 fully paid
ordinary shares and the receipt of �600,000 ($1,500,000).

The financial effect of this transaction has not been brought to account at
balance date.


                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                            AND CONTROLLED ENTITIES                            
                                                                               
                       NOTES TO THE FINANCIAL STATEMENTS                       
                   FOR THE HALF YEAR ENDED 31 DECEMBER 2006                    

 

NOTE 6 - SEGMENT INFORMATION


Primary reporting - Geographical segments

For the half year ending 31 December 2006, the economic entity operated in one
business and two geographical segments, being diamond mining in Brazil and
mining exploration in Australia and Brazil.  Chapada Diamonds Ltd and its
subsidiary operate primarily in Brazil.

 

                       Australia               Brazil          Eliminations      Economic Entity    
                                                                                                
                   2006        2005        2006      2005      2006 2005        2006        2005
                                                                                                
                                                                                                
                                                                                                
Revenue                                                                                         
                                                                                                
External              -           -   4,442,960         -         -    -   4,442,960           -
Sales                                                                                           
                                                                                                
Other           562,255      29,886      11,325   270,249 (528,723)    -      44,857     300,135
Income                                                                                          
                                                                                                
Total                                                                                           
Segment         562,255      29,886   4,454,285   270,249 (528,723)    -   4,487,817     300,135
 Revenue                                                                                        
                                                                                                
Result                                                                                          
                                                                                                
Segment     (1,084,248) (1,142,764) (2,364,117) (248,380)         -    - (3,448,365) (1,391,144)
Result                                                                                          
                                                                                                
Unallocated                                                                                     
Corporate                                                                          -           -
Expenses                                                                                        
                                                                                                
Result from                                                                                     
ordinary                                                                                        
Activities                                                               (3,448,365) (1,391,144)
before                                                                                          
income tax                                                                                      
                                                                                                
Result from                                                                                     
ordinary                                                                                        
Activities                                                               (3,448,365) (1,391,144)
after                                                                                           
income tax                                                                                      
                                                                                                
Net Profit/                                                              (3,448,365) (1,391,144)
(Loss)                                                                                          
                                                                                                


Secondary Reporting - Business Segments

The economic entity operates predominantly in one business segment being
diamond mining in Brazil and diamond exploration in Australia and Brazil.
Reporting on business segments is similar to the main financial statements and
is therefore not applicable to restate.

NOTE 7 -PRIOR PERIOD RESTATEMENT

During the current reporting period it has been discovered that an error was
made in the second half of the 2006 financial year.  On consolidation of the
economic entity the foreign currency translation effect on intercompany loans
was presented in the income statement. Under AASB 121: The Effects of Changes
in Foreign Exchange Rates these translations should have been presented in
equity.
        

                   Previously Stated Adjustment   Restated  
                         2006           2006        2006    
                                                           
Balance Sheet                                               
                                                            
Reserves                   1,931,810    230,956    2,162,766
                                                            
Accumulated Losses      (12,253,943)  (230,956) (12,484,899)
                                                            
  

                              ELKEDRA DIAMONDS NL                              
                              ABN 42 092 334 220                               
                                                                               
                            DIRECTORS' DECLARATION                             


The directors of the company declare that:


(a) The financial statements and notes, as set out on pages 7 to 13:

    (i) comply with Accounting Standard AASB134: Interim Financial Reporting and the
        Corporations Regulations 2001; and

   (ii) give a true and fair view of the economic entity's financial position as at 31
        December 2006 and of its performance for the half-year ended on that date.

(b) In the directors' opinion there are reasonable grounds to believe that the
    company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of
Directors by:

D Best                        S Randazzo
Director                      Director

Perth, Western Australia
28th February 2007



Grant Thornton West Australian Partnership
ABN 21 965 022 882
Chartered Accountants, Business Advisers and Consultants


Independent Review Report  


To the Members of Elkedra Diamonds NL

Report on the half-year financial report

We have reviewed the accompanying half-year financial report of Elkedra
Diamonds NL (Elkedra) and the entities it controlled (the consolidated entity),
which comprises the balance sheet as at 31 December 2006, and the income
statement, statement of changes in equity and cash flow statement for the
half-year ended on that date, a description of accounting policies, other
selected explanatory notes and the directors' declaration. The consolidated
entity comprises both Elkedra Diamonds NL and the entities it controlled during
that half-year.


Directors' responsibility for the half-year financial report

The directors of Elkedra Diamonds NL and its controlled entities are
responsible for the preparation and fair presentation of the half-year
financial report in accordance with Australian Accounting Standards (including
the Australian Accounting Interpretations) and the Corporations Act 2001. This
responsibility includes designing, implementing and maintaining internal
control relevant to the preparation and fair presentation of the half-year
financial report that is free from material misstatement, whether due to fraud
or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.


Auditor's responsibility

Our responsibility is to express a conclusion on the half-year financial report
based on our review.  We conducted our review in accordance with Auditing
Standard on Review Engagement ASRE 2410: Review of an Interim Financial Report
Performed by the Independent Auditor of the Entity, in order to state whether,
on the basis of the procedures described, we have become aware of any matter
that makes us believe that the financial report is not in accordance with the
Corporations Act 2001 including giving a true and fair view of the consolidated
entity's financial position as at 31 December 2006 and its performance for the
half-year ended on that date; and complying with Accounting Standard AASB 134:
Interim Financial Reporting and the Corporations Regulations 2001.  As the
auditor of Elkedra Diamonds NL and its controlled entities, ASRE 2410 requires
that we comply with the ethical requirements relevant to the audit of the
annual financial report.


Level 6
256 St Georges Terrace
Perth 6000 Australia
GPO Box P1213
Perth WA 6844
T  61 8 9481 1448
F  61 8 9481 0152
E  gtperth@gtwa.com.au
W  www.grantthornton.com.au

An independent Western Australian partnership entitled to trade under the
international name Grant Thornton.

Grant Thornton is a trademark owned by Grant Thornton International and used
under licence by independent firms and entities throughout the world.



A review of a half-year financial report consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures.  A review is substantially
less in scope than an audit conducted in accordance with Australian Auditing
Standards and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. 
Accordingly, we do not express an audit opinion.


Independence

In conducting our review, we complied with the independence requirements of the
Corporations Act 2001


Conclusion

Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half-year financial report of Elkedra
Diamonds NL and its controlled entities is not in accordance with the
Corporations Act 2001, including:


(a) giving a true and fair view of the consolidated entity's financial position as
    at 31 December 2006 and of its performance for the half-year ended on that
    date; and

(b) complying with Accounting Standard AASB 134: Interim Financial Reporting and
    Corporations Regulations 2001.


GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP
Chartered Accountants


CYRUS PATELL
Partner

Perth, WA
28 February 2007

END



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