Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

December 18, 2006 08:48 ET

Ashton Board of Directors Approves Stornoway Amalgamation Proposal

Special meeting of shareholders to proceed on January 15, 2007

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 18, 2006) - Stornoway Diamond Corporation ("Stornoway") (TSX:SWY) announces that it has been advised that the Board of Directors of Ashton Mining of Canada Inc. ("Ashton") has approved the execution of an agreement with and a wholly owned subsidiary of Stornoway ("Newco"), pursuant to which Ashton will amalgamate with Newco.

The amalgamation, which is subject to the approval of Ashton's shareholders, will constitute the second stage transaction proposed by Stornoway in order to acquire all of the common shares of Ashton that Stornoway did not acquire pursuant to the takeover-bid originally announced on July 24, 2006. Under the take-over bid, which expired on October 16, 2006, Stornoway acquired 75.6% of the outstanding common shares of Ashton.

As announced by Ashton on November 24, 2006, a special meeting of Ashton shareholders will be held on January 15, 2007 to consider, and if deemed appropriate, to approve the proposed amalgamation. The consideration offered to Ashton shareholders pursuant to the amalgamation agreement is equal in value to, and is in the same form as, the consideration offered under the take-over bid.

An Ashton shareholder may elect to receive consideration, for each common share of Ashton, in one of two forms, the "Share Consideration" or the "Cash Consideration". Subject to the terms of the detailed provisions of the agreement, the Share Consideration, which is unlimited, consists of one common share of Stornoway plus $0.01 in cash and the Cash Consideration is equal to $1.25 in cash but is subject to pro ration of the approximately $13.6 million that will be allocated among all Ashton shareholders who elect to receive the Cash Consideration To the extent that these shareholders do not receive the Cash Consideration, they will receive a proportionate allotment of the Share Consideration.

In order to elect to receive the Cash Consideration, an Ashton shareholder must submit a valid election form together with all other required documents not later than 5:00 p.m. (Eastern Standard Time) on Thursday, January 11, 2007. If an Ashton shareholder fails to do so, she or he will be deemed to have elected to receive the Share Consideration. An election form will be provided to all shareholders together with the Information Circular.

Stornoway understands that an Independent Committee of the Board of Directors of Ashton engaged Sprott Securities Inc. as its independent financial advisor and instructed Sprott to complete a formal valuation of Ashton as well as a formal valuation of the consideration offered to Ashton's shareholders pursuant to the amalgamation agreement.

Stornoway has been informed that, on December 17, 2006, Sprott presented, in oral form, its formal valuation of Ashton and of the consideration offered to the Ashton's shareholders under the proposed transaction to the Ashton Independent Committee and Board of Directors. While Sprott utilized several valuation methods, it placed the greatest emphasis on the "net asset value" approach. Under its "Likely Case" scenario, Sprott determined the fair market value of each common share of Ashton to be in the range of $0.91 to $1.35. Likewise under its "Likely Case" scenario, Sprott determined the value of the Cash Consideration and the Share Consideration to be in the range of $1.10 to $1.36, and $0.98 to $1.45, per Ashton common share, respectively.

Stornoway further understands that, in a fairness opinion also delivered orally on December 17, Sprott concluded that the consideration offered by Stornoway under the amalgamation agreement is fair, from a financial point of view, to Ashton's shareholders other than Stornoway, its associates and its affiliates. The conclusions and determinations of Sprott are subject to the limitations, qualifications, assumptions and exceptions described in the written valuation and fairness opinion that will be appended to the Information Circular (the "Valuation and Fairness Opinion"), including those that are summarized below.

The amalgamation is subject to a number of conditions. They include the absence of any material adverse change to either Ashton or Stornoway and the approval of not less than sixty-six and two-thirds per cent of Ashton's shares that are voted in person or by proxy at the January 15 meeting.

Stornoway is entitled to vote the shares it acquired as a result of the take-over bid in favour of the amalgamation and intends to do so. Accordingly, Stornoway anticipates that the transaction will be approved and will therefore take effect on or about January 16, 2007. At that time, Ashton will become a wholly owned subsidiary of Stornoway and the common shares of Ashton will thereafter cease to trade on the Toronto Stock Exchange.

The Information Circular and Consideration Election Form will be available under Ashton's profile on the SEDAR website at www.sedar.com.

On behalf of the Board

STORNOWAY DIAMOND CORPORATION

Eira Thomas

The Valuation and Fairness Opinion must be considered and reviewed as a whole. Selecting portions of the stated analyses or factors considered therein without considering all of the stated analyses and factors together could create a misleading view of the process underlying or the scope of the Valuation and Fairness Opinion. The Valuation and Fairness Opinion may not be used by any person or relied upon by any other person other than the Independent Committee or the Board of Directors of Ashton. Accordingly, the Valuation and Fairness Opinion does not constitute a recommendation to the shareholders of Ashton in relation to voting for or against the amalgamation.

This news release is not an offer of Stornoway shares or any other securities for sale in the United States. The Stornoway shares to be issued pursuant to the amalgamation described herein have not been, and will not be, registered under the United States Securities Act of 1933 or any state securities laws, and may not be resold in the United States absent registration or an applicable exemption from registration requirements.

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