Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

October 12, 2010 08:30 ET

Stornoway Diamond Corporation: Renard Drilling Expands Three Kimberlite Pipes

Anticipated Positive Impact on Project Resources

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 12, 2010) - Stornoway Diamond Corporation (TSX:SWY) is pleased to report the completion of the fall exploration drilling program at the Renard Diamond Project in North Central Québec. The Renard Diamond Project is a 50:50 joint venture with DIAQUEM, a wholly-owned subsidiary of SOQUEM INC., itself a wholly-owned subsidiary of Société générale de financement du Québec ("SGF"), the Québec government's main industrial and financial holding company.

The fall program reported today was a continuation of a step-out program of deep drilling first initiated last winter (Stornoway Press Release dated April 14, 2010), and designed to assess the size and composition of several kimberlite pipes outside the project's established National Instrument ("NI") 43-101 compliant Mineral Resources. Highlights of the drilling, and its implications, are as follows:

  • New intersections of kimberlite outside of the current geological models in two new drill holes at Renard 3, one hole at Renard 4 and two holes at Renard 65;
  • Anticipated increase in the quantity of Inferred Mineral Resources estimated at Renard 3 and Renard 4, and in the amount of Potential Mineral Deposit estimated at Renard 3, Renard 4 andRenard 65;
  • Confirmation of kimberlite to a depth of 513 meters at Renard 65, and an anticipated conversion of Potential Mineral Deposit over the uppermost elevations of Renard 65 to Inferred Mineral Resources;
  • Successful completion of a new drill hole at Renard 1, confirming considerable size potential and enabling sampling of Renard 1 kimberlite units for microdiamond analysis.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Further, the potential quantity and grade of any Potential Mineral Deposit ("PMD") is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.

President and CEO, Matt Manson, commented, "The results of the fall drill program have confirmed that the Renard kimberlite pipes are larger at depth than previously assumed. As well as the expected boost to the project's Inferred Mineral Resources, the drilling serves to bring out the extensive resource upside below the level of the existing conceptual mine plan at Renard, and confirms the potential for a considerable mine life at the project."

Geological Drilling

The fall drill program comprised six holes totaling 3,020 meters, including two existing holes that were re-entered and deepened. Detailed geological modeling and micro-diamond sampling from each drill hole are ongoing. However, kimberlite lithologies identified from previous drilling were intersected in each hole, including Coherent Kimberlite ("Brown" kimberlite), Tuffisitic Kimberlite Breccia ("Blue" kimberlite), Hypabyssal Kimberlite and Kimberlite Breccia, and Country Rock Breccias. Results from both winter and fall phases of the 2010 drill program are shown in Table 1 below. Illustrations showing the location of drill holes from both programs, and with respect to the existing geological models for each pipe, can be viewed here:

Renard 3: http://stornowaydiamonds.com/_resources/R3_lookingSW_2010DDH_final.JPG

Renard 4: http://stornowaydiamonds.com/_resources/R4_lookingnorth_2010DDH_final.jpg

Renard 65: http://stornowaydiamonds.com/_resources/R65_lookingNW_2010DDH_final.jpg

Table 1: Geological Drill Results.
Hole Azimuth Dip Length   Kimberlite Intersection
(meters down hole)
  
Horizontal Impact on Size of Kimberlite Body Compared to Previous Estimates1 Maximum Vertical Depth of Kimberlite Intersected Vertical Depth of Existing NI 43-101 Compliant Resource
ID (degree) (degree) (meters)   From To Upper Contact (meters) Lower Contact(meters) (meters) (meters)
Renard 3          
R3-53
 
 260
 
 -70
 
 383
 
Expected1 376  n/a
 
 +2
 
 n/a
 
 357
 
 
 
 
Actual 327
Difference 2 +49
R3-59
 
 310
 
 -75
 
 391
 
Expected1 419 455  +23
 
 n/a
 
 373
 
 395
 
Actual 295 391
Difference 2 +124 n/a3
R3-60
 
 48
 
 -65
 
 508
 
Expected1 388 439  +23
 
 +24
 
 439
 
 
 
 
Actual 357 484
Difference 2 +31 +45
Renard 4          
R4-53
 
 68
 
 -76
 
 789
 
Expected1 275 637  +7
 
 > +35
 
 759
 
 
 
 
Actual 212 789
Difference 2 +63 > +152
R4-54
 
 277
 
 -66
 
 718
 
Expected1 376 705  +16
 
 -21 to -40
 
 532  380
 
Actual 341 595
Difference 2 +35 -110
GR4-10
 
 157
 
 -66
 
 513
 
Expected 131 398  -8
 
 +7
 
 366
 
 
 
 
Actual 180 412
Difference 2 -49 +14
Renard 65          
R65-34
 
 n/a
 
 -90
 
 596
 
Expected1  n/a
 
591  n/a
 
 +6
 
 513
 
 
 
 
Actual 513
Difference 2 -78
R65-35
 
 133
 
 -53
 
 531
 
Expected1 194 320  -9
 
 +75
 
 383
 
No Resource
Established
Actual 211 486
Difference 2 -17 +166
R65-36
 
 347
 
 -51
 
 508
 
Expected1 219 645  +26
 
 -38
 
 459
 
 
 
 
Actual 183 593
Difference 2 +36 -52
Renard 1          
R1-12
 
 15
 
 -58
 
 537
 
Expected1 n/a n/a  n/a
 
 n/a
 
 370
 
No Resource 
Established
Actual4 195 508
Difference 2 n/a n/a
1 Based on the "High Range Potential Mineral Deposit" component of the geological model utilized in the December 8th 2009 NI 43-101 compliant mineral resource
2 A positive ("+") difference indicates an increase in geological model size when compared to the High Range PMD geological model. A negative ("-") indicates a decrease in model size. Differences between expected and actual contacts have a smaller influence on the shape of the geological model at the top of the pipe than at the bottom owing to the amount of geological control already existing.
3 Hole terminated in kimberlite before the expected location of the first pierce point in the pre-existing geological model.
4 Intersection includes kimberlite, country rock breccia and blocks of cracked country rock; detailed geological logging has not been completed; material changes reported as available.

Renard 3

All three of the most recent drill holes at Renard 3 demonstrate that additional kimberlite is present between approximately 295 and 434m below surface. Two holes (R3-53 and R3-59) were terminated early while still in kimberlite due to technical challenges encountered during drilling. The base of the currently established Inferred Mineral Resources at Renard 3 occurs at 395m, and the new drilling is consistent with an expansion of the geological model in this area, both in width and to depth.

Renard 4

The four most recent drill holes at Renard 4, in conjunction with recent geotechnical drilling in the area of a potential open pit, may imply that Renard 4 has a plunge to the east and south. Additional kimberlite has been intersected in both of these areas at depth, including hole R4-53 which terminated in kimberlite at a vertical depth of 759 meters. Drill hole R4-54 in turn intersected less kimberlite than expected on the northwest boundary of the kimberlite at a vertical depth of 532 meters. It is expected that the net impact of this drilling will be an increase in the amount of Inferred Mineral Resource, an increase to the estimated quantity of PMD, and a smaller scale adjustment to the estimated quantity of Indicated Mineral Resources.

Renard 65

In the recent NI 43-101 compliant Mineral Resource Estimate, the Renard 65 body was represented only as PMD, with a low range estimate based on its projection to 280 meters below surface, and a high range estimate based on its projection to 700 meters below surface. The new drilling suggests that previous estimates on the dimensions of the Renard 65 kimberlite have been conservative, and an increase in tonnage estimates can now reasonably be expected, in particular on the eastern and southern sides. In addition, drill hole R65-34 now confirms the presence of kimberlite to a minimum depth of 513m below surface. For Renard 65, microdiamond analyses of drill core will be particularly important given the more limited historical diamond dataset available, the consistent recovery of larger stones, and the recognition of multiple kimberlite facies with variable diamond contents (Stornoway Press Release dated July 13, 2010).

Renard 1

The Renard 1 kimberlite does not form part of the project's current mineral resources but, following a review of historical sampling data, has been identified as having the potential for high diamond content. Renard 1 lies less than 500 meters north of Renard 65, and was originally discovered in 2001. Preliminary geological modeling of historical drill data suggests that the body is similar in dimension to the Renard 4 kimberlite when modeled to a depth of 280 meters below surface, and is composed of three primary kimberlite lithologies similar to those recognized in the other Renard bodies: tuffisitic kimberlite, competent (transitional) kimberlite and hypabyssal kimberlite. Like the other bodies, Renard 1 exhibits a halo of non-kimberlitic country rock breccia ("CRB") and cracked country rock ("CCR") related to the pipe emplacement event. During the summer program a single 537m drill hole inclined at -58 degrees crossed the body from south to north, intersecting kimberlite, CRB and CCR from 195 to 508m down hole. Detailed geological logging, including dilution estimates, has not yet been completed and any material changes to will be reported when available. Renard 1's three principal kimberlite lithologies will be tested by industry standard microdiamond analysis to permit a correlation with other bodies currently in the mine plan.

Next Steps

Detailed geological logging, microdiamond analysis, and dilution estimation on the new drill core will now be completed, and integrated into revised geological models for each pipe. The new drill core intersections on Renard 3 and 4 lie within the scope of the current conceptual mine plan (Stornoway press release dated March 22, 2010) and the revised models will be incorporated into ongoing feasibility level mine design work. An updated NI 43-101 compliant mineral resource estimate is expected following the completion of all necessary analytical work. Currently, Renard's NI 43-101 compliant mineral resource stands at 23.0 million carats of Indicated Mineral Resource (26.5 million tonnes at 87 carats per hundred tonnes, "cpht") and 13.3 million carats of Inferred Mineral Resource (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, is currently characterized as a PMD.

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 under take exploration, development and mining activities throughout the province of Québec.

On behalf of the Board
STORNOWAY DIAMOND CORPORATION
/s/ "Matt Manson"
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 and classification of indicated and inferred mineral resources and potential mineral deposits; (ii) the amount of future production over any period; (iii) diamond values and increases in diamond values; (iv) mine expansion potential and expected mine life; (v) exploration potential at the Project; and (vi) 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) the geological interpretation of drilling results and the expected impact on project resources, conceptual mine plans and mine life; and (iii) the anticipated incorporation of new information into existing geological models, feasibility study work and an updated NI 43-101 compliant mineral resource estimate. 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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