Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

October 17, 2006 08:30 ET

Stornoway Increases Stake in Ashton to 75.6% and Stake in Contact to 89.4%

Ashton Offer Expires and Contact Offer Extended to October 30, 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 17, 2006) -

Ashton Offer

Stornoway Diamond Corporation (TSX:SWY) announces that it has taken up and accepted for payment an additional approximately 2.7 million, or approximately 2.9% of the outstanding, Ashton common shares, under its takeover bid offer for all of the common shares of Ashton Mining of Canada Inc. Stornoway now holds approximately 72 million, or approximately 75.6% of the outstanding, Ashton common shares.

Stornoway has not extended the Ashton offer. As noted in the circular for the Ashton offer, Stornoway intends to take such actions as are necessary, including if necessary calling a special meeting of Ashton shareholders, to effect a compulsory acquisition or subsequent acquisition transaction that will result in Stornoway owning 100% of the Ashton common shares. Stornoway intends to vote the Ashton common shares held by it in favour of any subsequent acquisition transaction.

Pursuant to the agreement between Stornoway and Ashton announced on October 11, 2006, the Board of Directors of Ashton is now comprised of six directors: Eira M. Thomas, Brian C. Irwin, David DeWitt, Marcel de Groot, David Watkins and G. Bernard Coulombe.

As a result of pro rationing, Ashton shareholders who tendered to the cash alternative will receive approximately $0.59 in cash and approximately 0.53 of a Stornoway common share for each Ashton common share taken up on October 16, 2006, subject to adjustment in respect of fractional shares. The aggregate cash to be paid by Stornoway will be approximately $1.6 million and the aggregate number of Stornoway common shares to be issued will be approximately 1.5 million, in respect of the acquisition of the approximately 2.7 million Ashton common shares taken-up on October 16, 2006.

Contact Offer

Stornoway also announces that it has taken up and accepted for payment an additional approximately 910,000, or approximately 2.1% of the outstanding, Contact common shares, under its takeover bid offer for all of the common shares of Contact Diamond Corporation. Stornoway now holds approximately 39.2 million, or approximately 89.4% of the outstanding, Contact common shares.

As noted in the circular for the Contact Offer, Stornoway intends to take such actions as are necessary, including if necessary calling a special meeting of Contact shareholders, to effect a compulsory acquisition or subsequent acquisition transaction that will result in Stornoway owning 100% of the Contact common shares. As Stornoway now owns approximately 89.4% of the issued and outstanding Contact common shares, it intends to vote these shares in favour of any subsequent acquisition transaction to the extent it is permitted to do so as described in the circular.

In order to enable the remaining Contact shareholders to receive prompt payment of the same consideration paid to those Contact shareholders who have already tendered to the Contact offer, Stornoway has extended the Contact offer until 8:00 p.m. (Toronto time) on October 30, 2006 to allow Contact shareholders an additional opportunity to tender to the Contact offer. A notice of extension will be mailed to Contact shareholders.

Under the terms of the Contact offer, Contact shareholders are offered 0.36 of a Stornoway common share per Contact common share. The aggregate number of Stornoway common shares to be issued will be approximately 328,000 in respect of the acquisition of the Contact common shares taken-up on October 16, 2006.

About the Contact Offer

Stornoway's take-over bid circular and related documents in respect of the Contact offer were filed with the Canadian securities regulatory authorities. Contact shareholders are advised to read these documents as they contain important information including the terms and conditions of the Contact offer and the procedures for depositing shares. Additional information about the offer or copies of these documents may be obtained from Georgeson Shareholder Communications Canada Inc. (Toll Free in North America 1-866-399-8737) who are acting as Stornoway's Information Agents.

On behalf of the Board

STORNOWAY DIAMOND CORPORATION

Eira Thomas, President

Important Notice:

As a result of restrictions under United States securities laws, Ashton shareholders that (i) are U.S. Persons (as such term is defined in Regulation S under the United States Securities Act of 1933) or (ii) hold Ashton shares on behalf of a U.S. Person (collectively "U.S. Shareholders") shall not be entitled to receive Stornoway shares in connection with the Ashton offer. Instead, Stornoway shares that would have otherwise been distributed to U.S. Shareholders will be deposited in trust and sold in the market through an orderly sale and the net cash proceeds remitted to U.S. Shareholders.

This press release is not an offer of Stornoway shares or any other securities for sale in the United States. The Stornoway shares will not be registered under the United States Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

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