Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

December 08, 2009 08:00 ET

Stornoway Announces Revised NI 43-101 Mineral Resource Estimate for Renard Contained Carats More Than Tripled; Deposit Still Open

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 8, 2009) - Stornoway Diamond Corporation (TSX:SWY) is pleased to announce the completion of a revised National Instrument ("NI") 43-101 compliant mineral resource estimate for the Renard Diamond Project in North Central Quebec. The Renard Diamond Project, which includes the Renard kimberlite pipes and the Lynx-Hibou system of kimberlite dykes, is a 50:50 joint venture with SOQUEM INC. ("SOQUEM").

The new estimate, prepared by Mr. D. Farrow, P.Geo. (BC) of Golder Associates Ltd. ("Golder") an independent consultancy, follows the completion of a very successful drill campaign at Renard during 2009, and draws upon revised geological models for each kimberlite body, a different grade estimation technique, and an updated diamond valuation by WWW International Diamond Consultants Ltd. Highlights are as follows:

- A total Indicated Mineral Resource of 23.0 million carats, and a total Inferred Mineral Resource of 13.3 million carats, increases of 228% and 195% respectively over the previous estimates published in December 2008.

- An Indicated Mineral Resource at Renard 2 of 18.0 million carats and an Inferred Mineral Resource of 6.4 million carats, increases of 557% and 313% over the previous estimates.

- An Indicated Mineral Resource grade at Renard 2 of 103 carats per hundred tonnes ("cpht") and an Inferred Mineral Resource grade of 120 cpht, increases of 27% and 39% over the previous estimates.

- A diamond valuation of US$117 per carat to be applied equally to each of the Renard 2, 3, 4 and 9 kimberlite pipes for resource estimation purposes.

- New geological models demonstrating extensive upside in multiple kimberlite bodies.

Matt Manson, President and CEO, commented: "Today's release confirms the Renard Diamond Project as a major undeveloped diamond resource with three essential components: a large, high grade core resource within the Renard 2 & 3 kimberlites contributing strong potential mining margins over a substantial, initial mine life; a large, lower grade resource in the Renard 4 & 9 kimberlites offering mine expansion potential, and; extensive exploration upside. This new resource estimate marks the culmination of a highly successful year at Renard which has significantly increased our understanding of the deposit model and the true scope of the project."

Eira Thomas, Executive Chairman, commented: "Work in 2009 has transformed Renard into a world class diamond asset ideally situated in Quebec, Canada, the world's best mining jurisdiction, at the center of planned near-term infrastructure development. The latest resource work has outlined more than US$4 billion of contained resource value, with good potential to add additional resources thereafter. This pivotal study has now become the focus of an updated economic assessment which we expect to complete in the 1st quarter of 2010 as a precursor to an aggressive work program aimed at completing a final feasibility study as soon as possible."

Mineral Resource Estimate (December 07, 2009)

The NI 43-101 compliant estimate of Indicated and Inferred Mineral Resources, summarized in Table 1, was compiled by Golder. Golder reviewed updated three dimensional geological models for each kimberlite body (prepared by Stornoway) and extensive project data collected since 2001. The mineral resource estimate comprises the integration of kimberlite volumes, density, petrology and diamond content data obtained from 81,894 meters of diamond drilling, 6,151 meters of reverse circulation ("RC") drilling, 12.7 tonnes of samples submitted for microdiamond analysis, 600.8 carats of diamonds (6,457 stones) recovered from RC drilling and 8,611.6 carats of diamonds (84,381 stones) recovered from surface trenching and bulk sampling.



Table 1: Total NI 43-101 Mineral Resource Estimate(1,3)
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Grade Tonnes Contained Carats
Kimberlite (cpht) (4,5) (millions) (millions)
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Indicated Resource
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Renard 2 103 17.48 17.96
Renard 3 106 1.71 1.81
Renard 4 44 7.32 3.20
Renard 9 - - -
Lynx - - -
Hibou - - -
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Total Indicated 87 (+44%)(2) 26.50 (+128%)(2) 22.96 (+228%)(2)
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Inferred Resource
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Renard 2 120 5.36 6.42
Renard 3 122 0.15 0.19
Renard 4 41 4.57 1.87
Renard 9 46 5.75 2.63
Lynx 107 1.80 1.92
Hibou 144 0.18 0.26
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Total Inferred 75 (+19%)(2) 17.81 (+149%)(2) 13.29 (+195%)(2)
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(1) Resource categories are compliant with the "CIM Definition Standards
on Mineral Resources and Reserves". Mineral resources that are not
mineral reserves do not have demonstrated economic viability.

(2) Percent increase from previously disclosed NI 43-101 Mineral Resource
Estimate.

(3) Totals may not add due to rounding.

(4) Carats per Hundred Tonnes.

(5) Estimated at a +1 DTC sieve size cut-off


The revised mineral resource estimate shown above demonstrates an increase in both tonnage and carats when compared to the mineral resource documented in an earlier NI 43-101 "Technical Report on the Preliminary Assessment of the Renard Project" (dated December 12, 2008, revised March 25, 2009). Providing resource assumptions and economic parameters remain the same as in the earlier 43-101 report, the mineral resources reported in Table 1 have reasonable prospects for economic extraction. However, mineral resources that are not mineral reserves do not have demonstrated economic viability.

Potential Mineral Deposit

In addition to the mineral resources, Golder reviewed the potential mineral deposit which totals 12.2 to 26.5 million carats (26.8 to 45.7 million tonnes at grades ranging from 23 to 168 cpht), as summarized in Table 2.



Table 2: Estimate of Potential Mineral Deposit (1,2)
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Range of Grades Range of Tonnes Range of Cont.
Kimberlite Body (cpht)(3,4) (millions) Carats (millions)
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Renard 2 - to - - to - - to -
Renard 3 107 to 168 0.1 to 0.2 0.1 to 0.3
Renard 4 38 to 79 5.1 to 8.2 1.9 to 6.5
Renard 9 45 to 50 3.1 to 7.2 1.4 to 3.6
Renard 65 23 to 33 12.6 to 24.0 2.9 to 7.9
Lynx 96 to 120 3.1 to 3.2 3.0 to 3.8
Hibou 104 to 151 2.7 to 2.9 2.9 to 4.3
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Total Potential Mineral
Deposit 26.8 to 45.7 12.2 to 26.5
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(1) Potential mineral deposit does not constitute a mineral resource, and
the reader is referred to the cautionary language contained within this
release.

(2) Totals may not add due to rounding.

(3) Carats per Hundred Tonnes.

(4) Estimated at a +1 DTC sieve size cut-off


The potential mineral deposit for the Renard kimberlite pipes has been determined by projecting reasonable kimberlite volumes from the base of the inferred resource to a depth of 700m below surface. In the case of the Lynx and Hibou dykes, the potential mineral deposit was established on the basis of known drill intersections of kimberlite for which insufficient diamond sampling exists to adequately estimate a diamond resource grade. A large quantity of kimberlite contained within the Renard 65 body has also been designated as potential mineral deposit given the sensitivity to diamond price growth over the expected mine-life at Renard. The reader is cautioned that the potential quantity and grade of any potential mineral deposit is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.

Tonnages and Grades

For each kimberlite pipe, 5m by 5m by 5m block models were created for tonnage and grade estimation using solid body geological models for each pipe, as revised by Stornoway and Golder. Resource tonnages were derived by combining rock volumes from the block models with representative specific gravity measurements for each kimberlite lithology. All tonnages cited are for kimberlite lithologies only, and do not include cracked or brecciated country rock units.

Cut-off depths for the mineral resource categories were defined within each pipe based on density of drill control and the consistency of grade data within the geological models. Indicated Mineral Resources at Renard 2 encompass kimberlite from surface to a depth of 600m, and Inferred Mineral Resources extend vertically for another 100m. Indicated Mineral Resources for Renard 3 and 4 extend from surface to a vertical depth of 250m. Inferred Mineral Resources extend from 250m to 395m below surface for Renard 3, and from 250m to 380m below surface for Renard 4. Renard 9 does not have a large tonnage bulk sample, and consequently the Inferred Mineral Resource extends from surface to 380m below surface. Inferred Mineral Resources for the Lynx and Hibou dyke systems are restricted to the areal extent of modeled kimberlite within 100m of surface trenches.

Grades for the kimberlite pipes were estimated by first establishing a "dilution model" derived from drill core and underground data. Representative "undiluted" grade models were constructed for each kimberlite lithology using diamond datasets obtained from caustic fusion and dense media separation ("DMS") processes. These undiluted grade models were then mapped onto the dilution model for each pipe, with the resulting resource models comprising blocks with lithology, grade and dilution parameters. As part of quality control exercises, grade and tonnage estimates were cross-checked against drill data for each kimberlite and tested for consistency with bulk sample data.

For each kimberlite body, diamond resource grades are estimated on a +1 DTC sieve size cut-off. An allowance has been made for the non-recovery of small diamonds typical in a commercial diamond production plant, and to make diamond resource grades consistent with the diamond valuation models, which have been established on the same basis. Following this exercise, Golder is confident that the resource models for each kimberlite body are consistent with the accumulated geological and diamond sampling data to the best extent possible.

Notable Changes to the Mineral Resource Estimate since December 2008

The revised Indicated and Inferred Mineral Resource tonnages at Renard 2 (17.48 million tonnes and 5.36 million tonnes respectively) represent increases of 420% and 198% compared to the December 2008 estimate and reflect the extension of known kimberlite to depths of 700m below surface during the 2009 drill program (Stornoway Diamond press release dated October 6th, 2009). At 700m below surface, the Renard 2 kimberlite lithologies measure approximately 116 by 224 meters, have a surface area of 2.1 hectares, and remain open at depth.

Changes to resource tonnages for Renard 3, 4 and 9 result from the application of a revised modeling technique that better reflects pierce points established by drilling and conforms to current geological emplacement models. Modifications to the Renard 3 model take into account three deep drill holes completed during the 2009 program.

The revised Renard 2 geological model comprises two primary kimberlite lithologies, a Tuffisitic Kimberlite Breccia (kimb2a or "Blue" kimberlite) and a Coherent Kimberlite (kimb2b or "Brown" kimberlite). High grade Hypabyssal Kimberlite (kimb2c) occurs in both the Blue and Brown units. The Blue unit has higher average country rock dilution than the Brown, and its grade is lower. The Renard 2 Indicated Mineral Resource grade of 103 cpht is derived from a Blue-Brown ratio of 58% to 42% to 600m depth, whilst the Inferred Mineral Resource grade of 120 cpht is derived from a more favourable Blue-Brown ratio of 43% to 57% between 600m and 700m depth. This represents increases in Indicated and Inferred Mineral Resource grades for Renard 2 of 27% and 39% respectively over the previous estimates.

Using the grade estimation methodology described above, Indicated and Inferred Mineral Resource grades for Renard 3 have decreased 9% and increased 1% respectively (to 106 cpht and 122 cpht), Indicated and Inferred Mineral Resource grades for Renard 4 have increased 19% and 32% respectively (to 44 cpht and 41 cpht), and the Inferred Mineral Resource Grade for Renard 9 has increased 15% (to 46 cpht).

New geological models were constructed for the Lynx and Hibou dykes, and grades were determined primarily from bulk sample recoveries. Some 177,800 tonnes of kimberlite (256,000 carats) contained within the Hibou dyke and previously designated as potential mineral deposit have been elevated to the Inferred Mineral Resource category on the basis of the large tonnage trench sampling completed subsequent to December 2008 (Stornoway press release dated January 15th, 2009). Inferred tonnage at Lynx has increased by 35% to 1.8 million tonnes.

Diamond Breakage

As an additional quality control measure, Golder commissioned a detailed diamond breakage study on each Renard diamond sample utilized in the resource estimation process. This was conducted by Dr. Paddy Lawless, a leading authority on diamond breakage, between August and September 2009. The study determined that overall diamond breakage levels were high, and breakage was particularly severe in the RC samples, and in the bulk samples processed at the joint venture's wholly owned 10 tonne per hour DMS plant located at the project site. Diamond breakage in exploration sized samples has implications for grade and value determinations, and can occur in DMS processing plants because of aggressive ore crushing, excessive re-circulation of concentrates, and inter-particle impacts. Diamond breakage in RC samples is commonly attributed to both processing and the extraction method itself. Dr. Lawless' study determined potential grade losses of between 23% and 38% in the RC samples and between 15% and 28% in the bulk samples. A modest amount of diamond breakage can be expected in any diamond processing plant, including a commercial scale plant, so no attempt has been made to adjust the mineral resource grades to account for this effect. However, it is Golder's view that if appropriate diamond value management practices are followed in the production plant, improvements in grade and value recovery above that assumed in the mineral resource statement are possible upon production start-up.

Diamond Valuation

As part of the current resource work, the diamond size frequency distributions of all bodies were examined in detail with consideration given to the diamond breakage and plant recovery characteristics of each diamond sample. It is the opinion of Golder that the size frequency distributions of Renard 2, Renard 3, Renard 4 and Renard 9 are similar, and that it is appropriate to use a single size frequency distribution to determine value on the basis that there exists a similar diamond population within the four kimberlite pipes.

In conjunction with the updated resource work, WWW International Diamond Consultants Ltd. ("WWW") were commissioned to provide an updated diamond valuation of the Renard diamond bulk samples that had been previously valued in September 2007 and again in March 2008. The new diamond value models were obtained by applying WWW's September 2009 rough diamond price book to the existing valuation models established during the earlier exercises. WWW have recommended a modeled "Base Case" diamond price estimate for both the Renard 2 and Renard 3 valuation samples of US$117 per carat (estimated at a +1 DTC sieve size cut-off), with a "High" modeled price estimate of US$131 per carat and a "Low" modeled price estimate of US$103 per carat. This is a 3% decrease compared to the previous diamond price model of $121 per carat determined in March 2008 (Stornoway press release dated April 28th 2008).

Consistent with the approach recommended by Golder, this price of $117 per carat will also be applied to Renard 4 and Renard 9.

The WWW recommended "Base Case" diamond price estimate for the Lynx valuation sample is US$57 per carat, with a "High" modeled price estimate of US$85 per carat and a "Low" modeled price estimate of US$48 per carat, a 14% decrease compared to the previous estimate.

Next Steps

Stornoway will publish a NI 43-101 compliant technical report on the new mineral resource statement at Renard within 45 days. Concurrently, a revised economic assessment of the Renard Diamond Project utilizing the new mineral resource statement is being prepared by Scott Wilson Roscoe Postle Associates. The existing conceptual mine plan contained within the preliminary economic assessment published in December 2008 contemplated combined open pit and sub-level, open stope underground mining to 600m depth over a 7 year mine life at a processing rate of 1.3 mtonnes/annum. Life of mine capital costs were C$308 million (including a $50 million contingency) with a blended operating cost of C$50.35/tonne. The bulk of the new resources outlined in this release lie within the scope of this conceptual mine plan, and their inclusion in the revised study is expected to have a material impact on the economic potential of the project. At the same time, Stornoway is investigating the merits of an expanded mine plan with a higher production rate facilitated by a shaft and a more traditional, block caving underground mining technique. An expanded mine plan, although increasing project capital cost, has the potential to enhance the economic return of the project further still. The revised economic assessment is expected within the first quarter of 2010.

Qualified Persons for the NI 43-101 Report

Mr. David Farrow, P.Geo. (BC), and Ms. Darrell Farrow, PrSciNat, both of Golder Associates Ltd. are the independent Qualified Persons responsible for the preparation of the mineral resource estimate, excluding the diamond valuation, for the Renard Diamond Project. The Renard Diamond Project is managed by Dave Skelton, P. Geol. (AB/QC), Vice President, Project Development, and a Qualified Person under NI 43-101. All of these Qualified Persons have reviewed and approved the contents of this release.

Stornoway Diamond Corporation

Stornoway Diamond Corporation is one of Canada's leading diamond exploration and development companies, involved in the discovery of over 200 kimberlites in six Canadian diamond districts. The Company benefits from a diversified diamond property portfolio, a strong financial platform and management and technical teams with experience in each segment of the diamond "pipeline" from exploration to marketing.

SOQUEM INC.

SOQUEM is a wholly-owned subsidiary of Societe generale de financement du Quebec ("SGF"). The SGF, the Quebec industrial and financial holding company, has as its mission to undertake economic development projects in the industrial sector in cooperation with partners and in compliance with the economic development policies of the Government of Quebec.

Golder Associates

Golder Associates is a global ground engineering and environmental services company formed in 1960 which now employs more than 7000 people based in 160 offices worldwide. Golder's expertise covers a broad range of technical disciplines including geology, mineral resource evaluation and mining engineering.

On behalf of the Board

STORNOWAY DIAMOND CORPORATION

Matt Manson, President and Chief Executive Officer

This document contains "forward-looking statements" within the meaning of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date of this document and the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by law.

Forward-looking statements relate to future events or future performance and reflect current expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral resources and potential mineral deposits, the amount of estimated future production, mine expansion potential, anticipated dilution of mineralized material, anticipated breakage in processing, diamond values, prospects for economic extraction of diamonds and exploration potential at the Project .

These forward-looking statements include, among others, statements with respect to Stornoway's objectives for the ensuing year, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "suspect," "outlook," "believe," "plan," "anticipate," "estimate," "potential", "expect," "intend," and words and expressions of similar import are intended to identify forward-looking statements. In particular, statements regarding Stornoway's future operations, future exploration and development activities or other development plans contain forward-looking statements.

All forward-looking statements and information are based on Stornoway's or its consultants' current beliefs as well as assumptions made by and information currently available to them concerning the presence of diamonds and its host rocks at the Project, diamond values, diamond recovery and breakage, anticipated financial performance, business prospects, strategies, regulatory developments, development plans, exploration, development and mining activities and commitments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements.

These factors include, but are not limited to, variations in the grade, kimberlite lithologies and country rock content within the material identified as mineral resources or potential mineral deposits from that predicted, variations in rates of recovery and breakage; the greater uncertainty of potential mineral deposits, developments in world diamond markets, changes in diamond valuations, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar, results of exploration in areas of potential expansion of resources, changes in exploration, development or mining plans due to exploration results and changing budget priorities of Stornoway or its joint venture partners, changes in project parameters as plans continue to be refined; , the effects of competition in the markets in which Stornoway operates, operational and infrastructure risks and the additional risks described in Stornoway's most recently filed Annual Information Form, annual and interim MD&As, and Stornoway's anticipation of and success in managing the foregoing risks. Stornoway cautions that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to Stornoway, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Stornoway does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by Stornoway or on our behalf, except as required by law.

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