Stornoway Diamond Corporation
TSX : SWY

Stornoway Diamond Corporation

October 21, 2013 09:03 ET

Stornoway to Proceed With Liquefied Natural Gas (LNG) Power Plant for Renard Diamond Project

MONTREAL, QUEBEC--(Marketwired - Oct. 21, 2013) - Stornoway Diamond Corporation (TSX:SWY) is pleased to announce the results of a recent feasibility study on the viability of a Liquefied Natural Gas ("LNG") fuelled power plant for the Renard Diamond Project. The study was authored by SNC-Lavalin Inc. and AMEC America Ltd. under the Renard Project EPCM joint venture, and demonstrates substantial benefits to the project in terms of annual operating cost and environmental emissions compared to the currently planned diesel gen-set option. Highlights of the study are as follows:

  • Annual operating cost reductions of between $8 million and $10 million over the initial 11 year mine life, representing a life of mine operating cost saving of $89 million, or 6.6%.

  • Incremental capital cost of only $2.6 million over the cost of diesel gen-sets, representing a net payback of 4 months.

  • An estimated reduction in greenhouse gas emissions of 43%, with significant reductions in NO2 and SO2.

  • Stable LNG local supply market based on existing commercial distribution network within Québec.

Matt Manson, President and CEO, commented: "Since the release of the Renard Diamond Project Feasibility Study in November 2011 and the subsequent Optimization Study in January 2013, we have been investigating more efficient alternatives for power supply at the project compared to the traditional diesel option contained within the current execution plan. A July 2012 Hydro-Québec feasibility study into a powerline for the project demonstrated only a marginal economic benefit of using grid power owing to the high cost for powerline construction. The LNG option now provides us with a much more attractive way forward, with off-the-shelf technology, a positive long-term supply outlook, a much smaller environmental footprint and immediate economic benefits for the project through substantially reduced operating costs. This option is made possible to us because, with an all-season road, we are able to receive regular shipments of liquefied gas from the existing commercial distribution network in Québec, without the need for expensive high-capacity on-site storage facilities. The LNG study has been completed in time to have it incorporated into the final project execution plan prior to the planned commencement of project construction in 2014."

The Renard LNG power plant will comprise seven 2.1MW rated gas gen-sets, providing sufficient power generation capacity for the project's normal operating specification of 9.5MW, which represents five gen-sets operating at a planned 92% efficiency. Onsite gas storage will be sufficient for 10 days operation, with new supplies delivered daily by cryogenic tanker truck from the existing Gaz Metro Liquefaction plant and distribution center in Montréal. In addition to power generation, the LNG will be used for heating of buildings and the underground mine, removing the requirement for onsite propane. A smaller quantity of diesel will continue to be used at site for construction activities and mobile mining equipment.

Based on the operating parameters contained within the January 2013 Renard Optimization Study, the incremental benefits of the LNG option over the existing diesel gen-set plan are as follows:

Table 1: LNG Feasibility Study Results and Project Impact1

January 2013 Optimization Study, Diesel January 2013 Optimization with LNG Power Option
Operating Cost Parameters2 Unit Power Cost (C$/kWh) $0.299 $0.188 (-37%)
Unit Operating Cost (C$/tonne)3 $57.63 $53.84 (-7%)
Life of Mine Operating Cost (C$M)3 $1,352 $1,263 (-7%)
Capital Cost Parameters2 Initial Capital Cost (C$M) $752.1 $754.0 (+0.3%)
Escalation Allowance on Initial Capital (C$M) $45.1 $45.8 (+1.6%)
Life of Mine Capital Cost (C$M)4 $1,013 $1,010 (-0.3%)
Commodity Consumption Annual Diesel Consumption (million liters) 27.5 5.9 (-79%)
Annual LNG Consumption (m3/annum) n/a 41,700
Annual Propane Consumption (m3/annum) 3,500 n/a
Notes
1. Based on the 11 year reserve-based mine life (17.9 mcarats) contained within the January 2013 Optimization Study, with a normal operating load of 9.49MW and an oil price assumption of US$95/barrel.
2. The January 2013 Optimization Study costs, under either the diesel or LNG power options, are expressed in October 2012 terms.
3. Excludes capitalized preproduction costs.
4. Includes all initial capital, escalation on initial capital, sustaining and deferred capital and contingencies.

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 November 2011, Stornoway released the results of a Feasibility Study at Renard, followed by an Optimization Study in January 2013, which highlighted the potential of the project to become a significant producer of high value rough diamonds over a long mine life. Probable Mineral Reserves as defined under National Instrument ("NI") 43-101 stand at 17.9 million carats. Total Indicated Mineral Resources, inclusive of the Mineral Reserve, stand at 27.1 million carats, with a further 16.9 million carats classified as Inferred Mineral Resources, and 25.7 to 47.8 million carats classified as non-resource exploration upside. All kimberlites remain open at depth. Readers are referred to the technical report dated December 29th, 2011 in respect of the November 2011 Feasibility Study for the Renard Diamond Project, and the technical report dated February 28th, 2013 in respect of the January 2013 Optimization Study, for further details and assumptions relating to the project.

About Stornoway Diamond Corporation

Stornoway is a leading Canadian diamond exploration and development company listed on the Toronto Stock Exchange under the symbol SWY and headquartered in Montreal. Our flagship asset is the 100% owned Renard Diamond Project, on track to becoming Québec's first diamond mine. Stornoway is a growth oriented company with a world class asset, in one of the world's best mining jurisdictions, in one of the world's great mining businesses.

On behalf of the Board

STORNOWAY DIAMOND CORPORATION

Matt Manson, President and Chief Executive Officer

This press release 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 press release 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 exploration targets; (ii) the amount of future production over any period; (iii) net present value and internal rates of return of the mining operation; (iv) assumptions relating to recovered grade, average ore recovery, internal dilution, mining dilution and other mining parameters set out in the Feasibility Study or the Optimization Study; (v) assumptions relating to gross revenues, operating cash flow and other revenue metrics set out in the Feasibility Study or the Optimization Study; (vi) mine expansion potential and expected mine life; (vii) expected time frames for completion of permitting and regulatory approvals and making a production decision; (viii) the expected time frames for the construction of a mining grade road by Stornoway and completion generally of the Route 167 extension and the financial obligations or costs incurred by Stornoway in connection with such road extension; (ix) future exploration plans; (x) future market prices for rough diamonds; and (xi) 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.

Forward-looking statements are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performances or achievements of Stornoway to be materially different from future results, performances or achievements expressed or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which Stornoway will operate in the future, including the price of diamonds, anticipated costs and Stornoway's ability to achieve its goals. Certain important factors that could cause actual results, performances or achievements to differ materially from those in the forward-looking statements include, but are not limited to: (i) required capital investment and estimated workforce requirements; (ii) estimates of net present value and internal rates of return; (iii) receipt of regulatory approvals on acceptable terms within commonly experienced time frames; (iv) the assumption that a production decision will be made, and that decision will be positive; (v) anticipated timelines for the commencement of mine production; (vi) anticipated timelines related to the construction of a mining grade road by Stornoway and completion generally of the Route 167 extension and the impact on the development schedule at Renard; (vii) anticipated timelines for community consultations and the impact of those consultations on the regulatory approval process; (viii) market prices for rough diamonds and the potential impact on the Renard Project's value; and (ix) future exploration plans and objectives. Additional risks are described in Stornoway's most recently filed Annual Information Form, annual and interim MD&As, and other disclosure documents available under the Company's profile at: www.sedar.com.

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 risk 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, (i) risks relating to variations in the grade, kimberlite lithologies and country rock content within the material identified as mineral resources from that predicted; (ii) variations in rates of recovery and breakage; (iii) the greater uncertainty of exploration targets; (iv) developments in world diamond markets; (v) slower increases in diamond valuations than assumed; (vi) risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar; (vii) increases in the costs of proposed capital and operating expenditures; (viii) increases in financing costs or adverse changes to the terms of available financing if any; (ix) tax rates or royalties being greater than assumed; (x) results of exploration in areas of potential expansion of resources; (xi) changes in development or mining plans due to changes in other factors or exploration results of Stornoway; (xii) changes in project parameters as plans continue to be refined; (xiii) risks relating to receipt of regulatory approvals or the implementation of the existing Impact and Benefits Agreement with aboriginal communities; (xiv) the effects of competition in the markets in which Stornoway operates; (xv) operational and infrastructure risks; (xvi) technical, environmental, permitting and execution risk relating to the construction by Stornoway of a mining grade road forming part of the Route 167 extension, (xvii) the additional risks described in Stornoway's most recently filed Annual Information Form, annual and interim MD&A, 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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