Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

August 26, 2010 10:07 ET

Stornoway Commences Fall Drilling at Renard High Potential to Expand Project Resources

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 26, 2010) - Stornoway Diamond Corporation (TSX:SWY) is pleased to announce the commencement of a fall program of exploration drilling at the Renard Diamond Project, located in North Central Québec. The Renard Diamond Project is a 50:50 joint venture between Stornoway Diamond Corporation and SOQUEM Inc., a wholly-owned subsidiary of Société générale de financement du Québec ("SGF"), the Québec government's main industrial and financial holding company.

The upcoming drill program is a continuation of a step-out program of deep drilling first initiated last winter (Stornoway Press Release dated April 14, 2010), and is designed to assess the size and composition of several kimberlite pipes outside the established mineral resource. This step-out drilling is part of an ongoing effort to determine the overall scope of the potential mineral resources at the project within the context of the ongoing mine design and mine permitting activities. A total of four deep drill holes are planned for the Renard 3, 4 and 65 kimberlites. In addition, a single hole will be drilled at the Renard 1 kimberlite which, although not part of the current mineral resource, has been identified as having the potential for a high diamond content following a review of historical sampling data.

Matt Manson, President and CEO commented: "During 2009, limited deep delineation drilling, principally at Renard 2, resulted in a tripling of the project's mineral resources. We are excited to commence this new program which has the potential to grow the resources further. Our geological models suggest that the Renard kimberlite pipes are less eroded and larger at depth than previously thought, providing significant exploration upside for the project. Our step out drilling is specifically designed to prove this upside. At a time when large diamond resources in good mining jurisdictions are becoming increasingly scarce, Renard ranks amongst the world's best undeveloped diamond deposits."

Renard Geological Modeling and Resource Estimation

In the most recent National Instrument ("NI") 43-101 compliant mineral resource statement (Stornoway Press Release dated December 8th 2009) the Renard Diamond Project was estimated to contain a total Indicated Mineral Resource of 23.0 million carats (26.5 million tonnes at 87 carats per hundred tonnes, "cpht") and a total Inferred Mineral Resource of 13.3 million carats (17.8 million tonnes at 75 cpht). An additional 26.8 to 45.7 million tonnes, containing between 12.2 and 26.5 million carats, was characterized as a potential mineral deposit (or "PMD"). For the Renard kimberlite pipes, this PMD was determined by projecting reasonable kimberlite volumes from the base of the Inferred Mineral Resources to a common depth of 700m below surface. The projections on Renard 3, 4 and 65 were subsequently tested during the winter 2010 drill program. Drill intersections demonstrated that each of these pipes was significantly larger at depth than previously assumed, and that geological models constructed for each pipe may have understated the project's PMD. The reader is cautioned that the potential quantity and grade of any PMD is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource. Further, mineral resources that are not mineral reserves do not have demonstrated economic viability.

The fall 2010 drill program is designed to provide further deep delineation on each of Renard 3, 4 and 65 to better quantify the PMD and, if possible, allow for the conversion of portions of this material to Inferred Mineral Resources. The drilling will be accompanied by microdiamond sampling for diamond content modeling, but no large scale macro-diamond sampling.

Step-Out Drilling: Renard 3, 4 and 65

The winter 2010 drill program at Renard resulted in the discovery of a significant thickness of kimberlite in an untested location on the eastern side of Renard 3 at 373 meters below surface. It also expanded both the southeastern extent of Renard 4 and the eastern extent of Renard 65, at 759 meters and 383 meters below surface respectively.

The new drilling will seek to confirm the apparent eastern expansion of Renard 3's southern lobe, where it measures approximately 35 x 45 meters. The single hole will extend an existing historical inclined drill hole across the body to the west-southwest, perpendicular to the winter drilling. The target area is outside of the current Inferred Mineral Resource but above the base of the current conceptual mine plan, which currently extends to a depth of 395m at Renard 3.

At Renard 4, a single drill hole will test the northwest extent of the body within the currently modeled PMD at about 600 meters below surface, on the opposite side of the pipe from the winter drilling, and will facilitate collection of microdiamond samples from two of the most volumetrically significant kimberlite units at depth. This hole will also determine kimberlite dilution within these lithologies and help to define the size of the body at this level for ongoing mine planning.

Renard 65 is represented in its entirety in the most recent NI 43-101 compliant mineral resource statement as PMD, with a low range estimate based on its projection to 280 meters below surface and a high range estimate based on projection to 700 meters below surface. The first hole will extend a previous vertical hole in the northern end of the oblong pipe from 200 meters below surface to about 600 meters below surface. The purpose of the hole is to demonstrate continuity of kimberlite at depth and to establish the type and nature of lithologies present beneath current drilling. The second hole will be drilled from south to north along the entire length of the oblong body, initially targeting a poorly defined magmatic unit for which an estimated diamond content has not yet been established (Stornoway Press Release dated July 13, 2010). Measured dilution data and additional sampling data from multiple kimberlite facies across the body will also be an important component of this work.

Exploration Drilling: Renard 1

The Renard 1 kimberlite is situated less than 500 meters north of Renard 65, and was originally discovered in 2001. Geological modeling of the early drill data has suggested the presence of approximately 9.1 million tonnes of kimberlite to a modeled depth of about 280 meters below surface. Three primary kimberlite lithologies comprise the body, representing about 5.6 million tonnes of tuffisitic kimberlite, 2.5 million tonnes of transitional kimberlite and 1.0 million tonnes of hypabyssal kimberlite. These kimberlite lithologies are similar to that recognized in the other Renard bodies currently comprising the mineral resource and, like the other bodies, Renard 1 exhibits a halo of non-kimberlitic country rock breccia ("CRB") and cracked country rock ("CCR"). Between 2001 and 2003, approximately 264 kilograms of mostly hypabyssal kimberlite were analysed for their micro-diamond content, and some 10.3 tonnes of composited material were processed through a commercial dense media separation plant as a series of samples between 300 and 1,500 kilograms in size, returning diamond content results between 0 and 16 cpht. It is now appreciated that this early sample processing incorporated significant amounts of the non-kimberlitic halo material (CRB and CCR) and that the potential diamond content of this large body may be understated. Consequently, a single hole at Renard 1 has been included in the fall drill program to better reconcile the pipe shape with the associated geophysical anomaly and historical drill results, to re-test each of the kimberlite's principal lithologies with industry standard microdiamond analysis, to quantify dilution, and to permit a correlation with other bodies currently in the mine plan.

About 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 seven 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. Stornoway's diamond exploration programs are conducted under the direction of Robin Hopkins, P.Geol. (NT/NU), Vice President, Exploration, a Qualified Person under NI 43-101. Mr. Hopkins has reviewed the contents of this press release.

About SGF

Société générale de financement du Québec (sgfqc.com), an industrial and financial holding company, has a mission to carry out economic development projects, particularly in the industrial sector, in cooperation with partners and in compliance with accepted profitability requirements and with the economic development policy of the Québec government. As part of its new mandate, SGF is authorized by the Québec government to go beyond its traditional role as an equity investor by offering complementary solutions, such as loans, debentures or preferred shares.

SOQUEM, a wholly-owned subsidiary of Société générale de financement du Québec, is to undertake exploration, development and mining activities throughout the province of Québec.

On behalf of the Board

STORNOWAY DIAMOND CORPORATION

Matt Manson, President and Chief Executive Officer

This document contains "forward-looking information" within the meaning of Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. This information and these statements, referred to herein as "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: (i) the amount of mineral resources and potential mineral deposits; (ii) the amount of future production over any period; (iii) net present value and internal rates of return of the proposed mining operation; (iv) capital costs, including plant costs, and operating costs; (v) diamond values and increases in diamond values; (vi) strip ratios, rates of extraction of kimberlite and mining rates; (vii) mine expansion potential and expected mine life; (viii) exploration potential at the Project; (ix) road construction, power generation and operation costs; and (x) expected time frames for completion of permitting and regulatory approvals, completion of a Feasibility Study and making a production decision. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "anticipates", "plans", "projects", "estimates", "assumes", "intends", "strategy", "goals", "objectives" or variations thereof or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

All forward-looking statements are based on Stornoway's or its consultants' current beliefs as well as various assumptions made by and information currently available to them. Many of these assumptions are set forth in the news release and include: (i) the presence of and continuity of diamonds in its host rocks at the Project at modeled grades; (ii) diamond values and diamond price escalation factors; (iii) discount rates; (iv) financing structure and costs; (v) reasonable contingency requirements; (vi) anticipated financial performance, (vii) receipt of regulatory approvals on acceptable terms within commonly experienced time frames; (viii) the settlement of an Impact and Benefits Agreement on acceptable terms within a reasonable time frame; (ix) the construction of an access road on a timely basis. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Many forward-looking statements are made assuming the correctness of other forward looking statements, such as statements of net present value and internal rate of return, which are based on most of the other forward-looking statements and assumptions herein. The cost information is also prepared using current values, but the time for incurring the costs will be in the future and it is assumed costs will remain stable over the relevant period.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that estimates, forecasts, projections and other forward-looking statements will not be achieved or that assumptions do not reflect future experience. We caution readers not to place undue reliance on these forward-looking statements as a number of important factors could cause the actual outcomes to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates assumptions and intentions expressed in such forward-looking statements. These risk factors may be generally stated as the risk that the assumptions and estimates expressed above do not occur, including the assumption in many forward-looking statements that other forward-looking statements will be correct, but specifically include, without limitation, risks relating to variations in the grade, kimberlite lithologies and country rock content within the material identified as mineral resources from that predicted, variations in rates of recovery and breakage; the greater uncertainty of potential mineral deposits, developments in world diamond markets, slower increases in diamond valuations than assumed, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar, increases in the costs of proposed capital and operating expenditures, increases in financing costs or adverse changes to the terms of available financing, if any, tax rates or royalties being greater than assumed, results of exploration in areas of potential expansion of resources, changes in development or mining plans due to changes in other factors or exploration results of Stornoway or its joint venture partners, changes in project parameters as plans continue to be refined, risks relating to receipt of regulatory approvals or settlement of an Impact and Benefits Agreement, 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.

Contact Information