Overview

Stornoway Diamond Corporation (TSE:SWY) is a leading Canadian diamond development and exploration company. The Company’s flagship property is the Feasibility Stage, Renard Diamond Project located in north-central Quebec, and on track to become Quebec’s first diamond mine and Canada`s next.

The Company also maintains a pipeline of earlier-stage projects for long-term Company growth, three of which are grassroots projects that are seeing exploration work for new discovery in 2011/2012 and four of which are in the advanced stage of assessment and have the potential to become the pipeline projects to Renard.

On April 1^st, 2011 Stornoway became the 100% owner of the Renard Diamond Project and as a result, now has the Quebec Government (through Investissement Quebec) on board as their largest shareholder at 37% (25% votable shares).  In the 3^rd quarter of 2011 Stornoway will release the Feasibility Study on Renard followed shortly by the Environmental and Social Impact Assessment.

Investment Highlights

• Management and technical team with unparalleled experience in the Canadian diamond industry through experience from the discovery and development of the Diavik Mine in the 90`s with Aber Diamonds, now Harry Winston.
• Owns 100% of one of the better emerging, diamond development stories worldwide; a large resource (41 million carats thus far) with growth potential, strong mining margins, road and hydro power potential, modest capex and opex numbers, located in a supportive mining jurisdiction: Quebec.
• Heading into a potential 25 years of production at Renard during a time when world diamond reserves are being depleted and the market for diamonds is rapidly growing.
• High quality Canadian diamonds with June 2011 modeled average value of $182 US per carat (above world average of $90 US per carat).
• Very undervalued compared to current project and peer valuations.
• Pronounced upside potential in every variable at Renard: diamond price, resource tonnage and grade.
• High potential for new discovery through grassroots projects and value growth potential in future development of Advanced Stage portfolio (Aviat, Qilalugaq, Timiskaming).

Chief Properties

 

Foxtrot (Renard)

The Renard Project, located within the Foxtrot Property started in 1996 as a joint venture with SOQUEM Inc. to conduct regional reconnaissance scale diamond exploration in north-central Québec. The now 100% owned property contains 128,000 hectares of mineral permits in the Otish Mountains region.   Exploration has resulted in the discovery of a new field of kimberlitic intrusions, the Renard Cluster.  Four of which, the Renard 2, 3, 4 and 9 pipes have been included in an Updated Preliminary Economic Assessment that was released on March 22, 2010 and yielded a pre-tax Net Present Value (“NPV”) and Internal Rate of Return (“IRR”) of C$885 million (at an 8% discount rate) and 24.8% respectively using a September 2009 diamond valuation of US$117/carat and a US dollar exchange rate of C$1.11.

The project officially commenced a Feasibility Study on July 22, 2010 under a budget of $28 million and is on schedule to be completed in the third quarter of 2011.  In anticipation of the study Stornoway recently had the 8,300 carats of diamonds recovered from the Renard 2, Renard 3 and Renard 4 kimberlite pipes and the Lynx and Hibou kimberlite dykes revalued for current market pricing.  The results came in at $182 US per carat for Renards 2 and 3, an impressive 56% increase over the previous modeled “base case” price established in September 2009. The revised modeled price estimate obtained from the new valuation exercise will be utilized in the financial model within the Feasibility Study and for future mine planning.

Recent Developments at Renard

In July 2010, Stornoway announced the commencement of a full program of mine design, environmental assessment, permitting and community engagement designed to lead to a production decision at Québec’s first diamond mine. Since this time, Stornoway has acquired a 100% interest in Renard through the acquisition of the 50% interest previously owned by DIAQUEM Inc. (Stornoway press release dated April 1, 2011), increased the size of the Renard National Instrument 43-101 compliant Mineral Resource (Stornoway press release dated January 24, 2011), and welcomed the Québec Government announcement of final funding for the Route 167 Extension road development project (Stornoway press release dated March 18, 2011). Work on the project itself is well advanced, and is summarized as follows:

Schedule of Feasibility Study and Permitting

The Renard Feasibility Study and its accompanying Environmental and Social Impact Assessment (“ESIA”) are on track for completion in the third quarter of this year. A separate Feasibility Study and Environmental Assessment for a power line to connect the project to the James Bay hydro-electric network are also underway under the auspices of Hydro-Québec. The Renard Diamond Project falls under the environmental protection regimes of the James Bay and Northern Québec Agreement (the “JBNQA”) and the Canadian Environmental Assessment Act. Subject to a schedule to be established by the Review Committee of the JBNQA (“COMEX”), it is currently expected that community hearings will be held in the fourth quarter of 2011 and, subject to the satisfaction of all regulatory requirements, the project will be eligible for the receipt of Certificates of Authorization by the end of the first quarter of 2012. Once the provincial and federal administrators have issued authorizations for project development, final mine permits will be sought from the Québec Ministère du Développement durable, de l’Environnement et des Parcs, the Ministère des Ressources Naturelles et de la Faune, and all relevant federal authorities. In support of this schedule, an expenditure of $14.3m has been budgeted for the completion of all project feasibility work programs, permitting and associated pre-development activities to the end of March 2012, to be funded from existing cash resources.

Mine Plan Development

The Renard mine plan currently under development within the Feasibility Study contemplates a combined open pit and underground operation focused initially on the high grade Renard 2 and Renard 3 kimberlite pipes mined at a rate of 6,000 tonnes per day (2.1 million tonnes per year). The potential for production expansion beyond 6,000 tonnes per day is also being investigated through the addition of supplementary, open pittable ore from the nearby Renard 65 kimberlite. To this end, Stornoway expects to complete a 5,000 tonne bulk sample of Renard 65 so as to recover a large parcel of diamonds for valuation purposes. This work will be undertaken in 2012, in time to allow the conversion of Renard 65 from an Inferred to an Indicated Mineral Resource and, if warranted, to a Mineral Reserve, prior to construction start-up.

Road Access and Development Schedule

On March 17, 2011 it was announced that the Québec Government will commit to the development of the Route 167 Extension under the auspices of the “Plan Nord”, the strategic initiative to develop the north of Québec. The Route 167 Extension (also known as the “Route des Monts Otish”) will provide year round highway access to the Renard Diamond Project by way of the communities of Mistissini and Chibougamau. Road construction is expected to commence this year, and Stornoway anticipates first vehicle access to the Renard site for construction mobilization by the first quarter of 2013 through the utilization of an upgraded seasonal road and construction easements. The Renard Feasibility Study will establish the optimum schedule for mine construction and production start-up based on this road access time-line.

Stakeholder Relations

Consultation with communities, including public open houses and individual stakeholder meetings, have been undertaken in conjunction with the ESIA and mine permitting processes. With the collaboration of the Crees of the James Bay region, Stornoway has established an Environmental Exchange Group designed to provide a forum for the exchange of environmental and traditional knowledge in the area of the proposed development. Stornoway also is currently in negotiations with the Cree Nation of Mistissini and the Grand Council of the Crees (Eeyou Istchee) with the aim of concluding an Impact and Benefits Agreement. This agreement is expected to provide mine related employment and contracting opportunities, as well as foster environmental and social protection. This negotiation process follows upon the successful execution of a Pre-Development Agreement between the parties in July 2010, and the establishment of a project business development office in the community of Mistissini in January of this year.

Aviat

The 476,000 acre Aviat Project is a joint venture with the Hunter Exploration Group (10%) under which Stornoway holds a 90% interest in the property, is the operator, and holds 100% of the diamond marketing rights.

A total of twelve distinct, but likely related, kimberlite bodies have been identified on the Aviat Property since 2002 (AV1, AV1 West, AV267, AV2 Upper, AV3, AV4, AV5, AV8 Upper, AV8 Middle, AV8 Lower, AV9, and one currently un-named body discovered in 2008). The bodies range from small pipe-like intrusions at AV1, AV4, and AV9 to layered sheet or dyke like intrusions which characterize bodies AV1 West, and AV2 through AV8, including AV267, and reach widths of up to 16 m in the southwest. These shallowly dipping (8 to 20 degrees), macrocrystic, hypabyssal kimberlite sheets with associated zones of kimberlite breccia are thought to be part of a sequence of layered, horizontally stacked sheets separated by vertical distances of 10 to 30m.

Exploration work in 2007 and 2008 has led to a revised geological model and naming system for the Eastern Sheet Complex (“ESC”). Drilling has confirmed the AV267 body to be linked to the AV3 and AV8 Upper sheets, creating a single, 260 ha body averaging 1.7 m (reaching thickness of up to 16 m in the southwest), renamed the ES 1 kimberlite sheet. ES 2 sits in the ES1 hanging wall and ES 3 and 4 sit in the footwall.

Stornoway engaged SRK Consulting (Canada) Inc. (“SRK”), an independent consultant, to provide a conceptual resource study on the Eastern Sheet Complex. The results of which were announced on October 7, 2008, and outlined the potential for 24.1 to 40.3 million carats of diamonds in 12.4 to 16.0 million tonnes of kimberlite using a diamond content of 235 cpht +/- 30 cpht based on existing diamond data. A mini-bulk sample of 202 wet tonnes was extracted from the ES 1 in 2008 for DMS processing for the purpose of providing additional insight into the grade, diamond value and overall economic potential of this large scale, and growing, diamond camp.

Management

Matt Manson – President, Chief Executive Officer and Director
Matt Manson has over 14 years of experience in diamond exploration, development and production. He was appointed President of Stornoway in March 2007 following the acquisition of Ashton Mining of Canada and Contact Diamond Corporation, and subsequently President & CEO in January 2009. Between 1999 and 2005 he was employed by Aber Diamond Corporation (now Harry Winston Diamond Corporation) as VP Marketing and subsequently VP Technical Services & Control, during which time he participated in the US$230m project financing for the Diavik Diamond Project and oversaw Aber’s technical and marketing operations. Matt is a director of Karmin Exploration Inc., and a graduate of the University of Edinburgh (BSc Geophysics, 1987) and the University of Toronto (PhD Geology, 1996).

Patrick Godin – Chief Officer of Operations

Mr. Godin is a professional mining engineer with more than 20 years of experience in all aspects of mine development, construction and operation.  Prior to joining Stornoway, Mr. Godin held the position of Vice President, Project Development, for G Mining Services Inc. of Montreal, with responsibility for the successful development of the Essakane Project in Burkina Faso under contract to IAMGOLD Corporation. Between 2007 and 2008 he oversaw the development of the Nunavik Nickel Project as Vice President Operations for Canadian Royalties Inc. Between 1991 and 2007 he held successively senior positions with Cambior Inc. and its affiliate companies, with experience in the development and management of several mining operations in the Abitibi-Témiscamingue region of Québec, and culminating in the role of President and General Manager of CBJ-CAIMAN S.A.S., the Cambior, and subsequently IAMGOLD, subsidiary in French Guiana.
Mr. Godin is a member of the Ordre des Ingénieurs du Québec, a director of Orbit Garant Drilling Inc. (TSX-OGD), and a member of the Technical Advisory Committee of the Canada Centre for Mineral and Energy Technology (“CANMET”).

Zara Boldt – Vice-President Finance
Zara Boldt has held progressive positions with several mineral exploration companies, in addition to working for a national brokerage firm for several years. Her most recent resource industry roles include CFO for Sherwood Copper Corporation from May 2006 to May 2007 and Controller for the Northair Group of Companies between May 2004 and April 2007. Ms. Boldt is a Certified General Accountant and a graduate of the University of Puget Sound in Tacoma, Washington. Beyond her role at Stornoway, Ms. Boldt currently serves as a Corporate Secretary for Strongbow Exploration Inc. and North Arrow Minerals Inc. and is a Director of Troon Ventures Ltd.

Robin Hopkins – Vice-President, Exploration
Robin Hopkins, P.Geol. (NT/NU), has held this position since January 2006 and was Chief Technical Officer for the predecessor company, Stornoway Ventures Ltd., since 2003. Mr. Hopkins was Vice-President, Exploration, for Navigator Exploration Corporation between 2000 and 2004, and prior to that a key member of the Aber Resources Ltd. exploration team that discovered the Diavik Diamond Project pipes in the Northwest Territories in 1994. With more than 20 years exploration experience throughout Canada, Greenland and southern Africa since graduating from the University of Waterloo (HBASc, Earth Sciences), Mr. Hopkins is a Qualified Person under NI 43-101, and the Company’s diamond exploration programs are conducted under his direction.

Dave Skelton – Vice-President, Project Development
Mr. Skelton brings more than 21 years of experience as a geologist including 15 years in diamond exploration and advanced evaluation. For the last 6 years, Mr. Skelton has managed the Renard Diamond Project, recently the subject of a positive Preliminary Assessment study released on October 28, 2008. Renard is Stornoway’s most advanced project and remains on track to be developed as Quebec’s first diamond mine.

Ghislain Poirier – Vice-President, Public Affairs
Ghislain Poirier is a geological engineer with more than 20 years of experience in the mining exploration industry.  He is a graduate of Université Laval in 1984 and he obtained a masters degree in economic geology from Université du Québec à Montréal (UQAM) in 1987.  From 1988 to 1991, he was involved as a consultant for several junior companies.  From 1991 to 2005 he was employed by SOQUEM, a Quebec crown corporation involved in the mineral exploration industry.  During this period he was involved in the discovery of the Renard diamond deposit as the joint venture partner of Ashton Mining of Canada inc.  He  joined Ashton in 2006 as Manager Environment and Public Affairs, a position that he is still responsible for with Stornoway Diamond Corporation.   He is member of the Ordre des Ingénieurs du Québec (OIQ) and he has been a board member of the Association de l’Exploration Minière du Québec (AEMQ) for 10 years.  In January 2009, he was appointed president of AEMQ for a 2 years mandate.

Eira Thomas – Chairman
Ms. Thomas is a respected Canadian geologist who brings extensive experience to her role with Stornoway. She served as a geologist with Aber Resources Ltd. (now Harry Winston Diamond Corporation) from 1992 to 1997, leading the field exploration team that discovered the Diavik Diamond Project pipes in the Northwest Territories in 1994. She was promoted to Vice-President Exploration for Aber in 1997, a post she held for two years. She served as a director of Aber Diamond Corporation from April 1998 to August 2006.

Catherine McLeod-Seltzer – Director
Catherine McLeod-Seltzer is the Chairman of Bear Creek Mining Corporation and a recognized leader in the minerals industry for her ability to create growth-focused companies that generate significant shareholder value. Catherine partners with successful geological teams and has been instrumental in helping build a number of successful mineral companies in the past 20 years, including Arequipa Resources, Francisco Gold, Miramar Mining, Bear Creek Mining, Stornoway Diamonds and Peru Copper Inc. Catherine was named Mining Man of the Year by The Northern Miner in 1999 and in 1997 she was given the “Award for Performance” by the Association of Women in Finance. She has also held a position on the Financial Post’s “Power 50″ since 2002.

Peter Nixon – Director
Mr. Nixon brings to the Stornoway board over 30 years of experience in research and institutional equity sales, largely focused on the mining industry. In 1989, Mr. Nixon helped to found Goepel Shields & Partners where the primary focus was to assist in the creation and building of a new independent investment firm specializing in the provision of investment advice to institutional investors as well as raising capital for companies in the natural resource industries in Canada. As an independent member of Stornoway’s board of Directors, Mr. Nixon brings strength in corporate governance and environmental stewardship.

Anthony Walsh – Director
Mr. Walsh graduated from Queen’s University (Canada) in 1973 and became a member of The Canadian Institute of Chartered Accountants in 1976. Mr. Walsh has over 20 years experience in the field of exploration, mining and development and is currently the President and CEO of Sabina Silver Corporation. Prior to joining Sabina, Mr. Walsh was President and CEO of Miramar Mining Corporation (1995-2007), was the Senior Vice-President and CFO of a computer leasing company (1993-1995) and the CFO and Senior Vice-President, Finance of International Corona Mines Ltd., a major North American gold producer (1989-1992). From 1985 to 1989 he was Vice-President, Finance of International Corona Mines Ltd., and from 1973 to 1985 Mr. Walsh held various positions at Deloitte, Haskins & Sells, a firm of Chartered Accountants.

Yves Harvey – Director
Yves Harvey obtained a Ph.D. in economic geology from Université Laval, Quebec, in 1984. He also holds a Master’s degree in geological engineering, which he obtained from Ecole Polytechnique, Montreal, in 1975. He joined SOQUEM in 1978 as senior geologist, exploration. He left SOQUEM in 1984 to work for Roche ltée, Groupe-Conseil until 1989, after which he returned to SOQUEM as executive vice-president. He was appointed president and executive director of SOQUEM in 1991 and served in this capacity until 2006.

Serge Vézina – Director
Dr. Vézina is a consultant and engineer with over 40 years experience in the mining industry. Between 1988 and June 2006, he was employed by Cambior Inc., most recently as Vice President of Industrial Engineering and Environment. Mr. Vézina is a member of the Order of Engineers of Québec, a former chairman of the board of the Québec Mining Association, a former chairman of the board of COREM, and a member of numerous advisory panels and professional bodies within the Québec Mining Industry. Dr. Vézina is currently an adjunct professor at McGill University in Montreal and Laval University in Québec City, and a director of Osisko Mining Corporation. He is a graduate of Laval University (B.Sc. in Mining, 1966 and Ph.D. in Metallurgical Sciences, 1972).

Ebe Scherkus,
Director

Mr. Scherkus is the President and Chief Operating Officer and a director of Agnico-Eagle. Mr. Scherkus has been with Agnico-Eagle since 1985. Prior to his appointment as President and Chief Operating Officer in December 2005, Mr. Scherkus served as Executive Vice-President and Chief Operating Officer from 1998 to 2005, as Vice-President, Operations from 1996 to 1998, as a manager of Agnico Eagle LaRonde Division from 1986 to 1996 and as a project manager from 1985 to 1986. Mr. Scherkus is a graduate of McGill University (B.Sc.), a member of the Association of Professional Engineers of Ontario and past president of the Quebec Mining Association.

Jean-Jacques Carrier,
Director

Jean-Jacques Carrier is the Vice-President and Chief Financial Officer of Investissement Québec.

Mr. Carrier began his career with Consolidated-Bathurst in Montréal and became Vice-President, Finance, in 1988. In 1991, he joined Edmonton-based Sherritt, as Senior Vice-President Finance and Chief Financial Officer. He continued his career at Mitel Corporation/Zarlink Semiconductor in Ottawa, as Senior Vice-President Finance and Chief Financial Officer, from 1993 to 2003.

With over 20 years of accounting and financial management experience, Jean-Jacques Carrier is acknowledged for his strategic vision and for the key role he has played in a number of investment and divestment projects in the industrial and technology sectors.

A member of the Ordre des comptables agréés du Québec, Mr. Carrier was also a member of the Accounting Standards Board of the Canadian Institute of Chartered Accountants from 1993 to 1996.

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