Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

August 01, 2011 11:00 ET

Stornoway Announces Financing Agreements With Québec For the Route 167 Extension

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 1, 2011) - Stornoway Diamond Corporation (TSX:SWY) is pleased to announce the signing of two financing agreements with the Government of Québec by which Stornoway will contribute to the construction and maintenance costs of the Route 167 Extension, the road development project that will provide year round highway access to Stornoway's 100% owned Renard Diamond Project by way of the communities of Mistissini and Chibougamau. The signing of the agreements was announced today during a joint press conference held in Chibougamau with Jean Charest, Premier of Québec and Pierre Corbeil, Minister of Agriculture, Fisheries and Food and Member for Abitibi-Est as well as Norman MacMillan, Minister for Transport. The agreements represent an important example of financial partnership between industry and government in full accord with the recently announced "Plan Nord", the Québec Government's initiative to maximize, notably, the natural resource potential of northern Québec.

Under the auspices of the Plan Nord, $1.2 billion will be committed over five years to fund infrastructure development in the region of Québec north of the 49th parallel. Included in this amount will be $331.6 million to facilitate the construction the Route 167 Extension, a funding commitment initially announced on March 17, 2011. In two separate agreements executed today with the ministère des Ressources naturelles et de la Faune and the ministère des Transports (the "MTQ"), Stornoway has agreed to contribute $44 million to the development of the new road, amortized over a ten year period and starting in July 2015. Stornoway's contribution will be financed by Québec at 6.3% and will be conditional upon, amongst other things, the completion of the road on schedule, the receipt of all regulatory approvals for the construction of the Renard Diamond Project and the successful completion of Renard project financing. In addition, Stornoway has agreed to contribute a maximum of $5,000 per kilometer, or $1.215 million per year, to the maintenance of the road during operation. Other partners may also be called upon to contribute to the financing of this infrastructure.

Matt Manson, President and CEO, commented: "The agreements announced today confirm our previously stated commitment to provide financial assistance for the development of the Route 167 Extension, the key catalyst for the successful and timely development of the Renard Diamond Project. We are particularly pleased that the agreements we have negotiated with Québec require no up-front capital investment, and are established on the basis of long term cost recovery tied to the successful development of the project. As we look towards the establishment of Québec's first diamond mine, we are indebted to the leadership and commitment shown by Premier Jean Charest, Deputy Premier Natalie Normadeau, the Minister responsible for the Plan Nord, and all of our regional and community partners within the James Bay region who have worked tirelessly to make the Route 167 Extension project a reality."

The Route 167 Extension will be constructed as a 243 km-long, 70 km/hour two lane gravel-top highway under the supervision of the MTQ. The road will be designated as a multi-service provincial highway connecting Renard to the end of the current Route 167 at Lac Albanel (Temiscamie), and will provide access to a number of other prospective mining projects as well as the new Albanel-Temiscamie-Otish Park. Construction is expected to commence this fall.

About the Renard Diamond Project

The Renard Diamond Project is located approximately 250 km north of the Cree community of Mistissini and 350 km north of Chibougamau in the James Bay region of North-Central Québec. In May 2010, Stornoway filed a National Instrument 43-101 compliant technical report for the Preliminary Assessment at Renard that estimated the project to have the potential to produce approximately 30 million carats of diamonds over a 25 year mine life, with a pre-tax Net Present Value of C$885 million (at an 8% discount rate) and an Internal Rate of Return of 24.8%. Total capital investment was estimated to be $511 million, with an average operating expenditure of approximately $67 million per year and a workforce of 300 people. National Instrument 43-101 compliant Indicated and Inferred Mineral Resources currently stand at 23.8 and 17.5 million carats respectively, with a further 23.5 to 48.5 million carats classified as a non-resource, "potential mineral deposit". All kimberlites remain open at depth. Readers are referred to the technical report in respect of the Renard Diamond Project for further details and assumptions relating to the project.

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.

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, operating costs and diamond price assumptions; (v) mine expansion potential and expected mine life; (vi) expected time frames for completion of permitting and regulatory approvals, completion of a Feasibility Study and making a production decision; (vii) future exploration plans; and (viii) sources of and anticipated financing requirements. 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) estimates of net present value and internal rates of return; (ii) estimates of potential production and duration of mine life; (iii) estimated completion date for the Feasibility Study and related Environmental and Social Impact Assessment; (iv) required capital investment and estimated workforce requirements; (v) receipt of regulatory approvals on acceptable terms within commonly experienced time frames; (vi) the assumption that a production decision will be made, and that decision will be positive; (vii) anticipated timelines for the commencement of mine production; (viii) anticipated timelines related to the Route 167 extension and the impact on the development schedule at Renard; (ix) anticipated timelines for community consultations and the conclusion of an Impact and Benefits Agreement; (x) market prices for rough diamonds and the potential impact on the Renard Project's value; (xi) future exploration plans and objectives. 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.

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