Stornoway sees over 2 million carats a year, longer life for Renard

Stornoway flourished under the leadership of Eira Thomas, the renowned diamond explorer whose spectacular success in the 90s transformed Canadian diamond mining. Thomas left in August following the acquisition of Renard. The Quebec government owns some 37% of the company.

CEO Matt Manson told Miningweekly on the sidelines of the Toronto Resource Investing conference: “If we can put a significant capital inflow into building the project from monetising the marketing rights, we’re happy to do it.”

Stornoway Diamond Corporation CA:SWY -3.57% is pleased to provide a progress update on feasibility level work at the Renard Diamond Project, Stornoway’s flagship project located in North Central Quebec. 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 Quebec’s first diamond mine. This program is now nearing completion, and Stornoway can provide the following guidance:

Schedule of Feasibility Study and Mine Permitting

Feasibility Study operating and cost estimates are nearing completion, and a mine plan and production schedule finalized. Over the next several weeks, Stornoway expects to complete final due diligence and review, prior to approval by the Stornoway Board of Directors for release. The accompanying Environmental and Social Impact Assessment (“ESIA”) is also nearing completion, and will be submitted to the relevant permitting authorities upon finalization of the Feasibility Study. The Renard Diamond Project falls under the environmental protection regimes of the James Bay and Northern Quebec Agreement (the “JBNQA”) and the Canadian Environmental Assessment Act. Subject to a schedule to be established by the Review Committee of the JBNQA (“COMEX”) and the Canadian Environmental Assessment Agency, it is currently expected that public hearings will be held in the first half of 2012 and, upon the satisfaction of all regulatory requirements, the project will be eligible for the receipt of both Quebec and Federal Certificates of Authorization by the end of the second quarter of 2012. Once the provincial and federal administrators have issued authorizations for project development, final mine permits will be sought from the Quebec Ministere du Developpement durable, de l’Environnement et des Parcs, the Ministere des Ressources Naturelles et de la Faune, and all relevant federal authorities.

Mine Plan Development

The Renard Feasibility Study will outline a mine life based on 24 mtonnes of National Instrument (“NI”) 43-101 compliant Indicated Mineral Resources in the Renard 2, 3 and 4 kimberlites, which represents the Mineral Resources available for potential conversion to Mineral Reserves. This will be mined by way of open pits on Renard 2 and 3, and an underground mine utilizing a 5.5 meter diameter shaft to 740m depth. Nameplate ore processing capacity will be 6,000 tonnes per day (2.2 mtonnes/annum) with a maximum carat production expected to be in excess of 2 mcarats/annum. To minimize impact on fish habitats in Lake Lagopede, a water retention dyke and open pit at Renard 4 are not being considered at this time. Underground mining of Renard 2 and 3 to a maximum of 600 meters depth will be by blast-hole shrink stoppage with waste backfill from surface. Renard 4 will be mined by blast-hole stoping with waste backfill under a crown pillar. Processed kimberlite management will be by way of a “dry-stack” disposal facility which will be progressively reclaimed. Successful metals leach tests indicate no liner will be required, and no fish habitat will be impacted by tailings disposal.

Separate from the Renard Feasibility Study, Stornoway is developing a Long Term Business Plan (“LTBP”) based on all Indicated and Inferred Mineral Resources within the scope of the mine infrastructure contained within the Feasibility Study. The LTBP is expected to outline an increased production rate and extended mine life, with underground mine development at Renard 2, 3, 4 and 9 to a maximum 700 meters depth, and an open pit at Renard 65. The Renard 65 pit will be included within the Feasibility Study and permitting plan as a borrow pit for backfill waste and for water management. Ore recovered from Renard 65, currently classified as Inferred Mineral Resource, will not appear in the Feasibility Study production schedule. In support of the LTBP, Stornoway expects to complete a large tonnage bulk sample of Renard 65 in order to allow the conversion of a portion of these resources to an Indicated Mineral Resource and, if warranted, to a Mineral Reserve, prior to construction start-up.

In addition to the NI 43-101 compliant Mineral Resources at Renard, Stornoway has delineated additional, non-resource upside in the form of a potential mineral deposit (“PMD”) of 55.1 to 75.5 mtonnes containing an estimated 23.5 to 48.5 mcarats to a maximum depth of 775 meters in the Renard 2, 3, 4, 65 and 9 kimberlite pipes, and in the Lynx and Hibou klimberlite dykes. No PMD will be included in the production schedules of the Feasibility Study. Beyond the base of the currently estimated PMD, all ore bodies remain open at depth.

The reader is cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. In addition, the potential quantity and grade of any potential mineral deposit is conceptual in nature, there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource. Readers are referred to the NI 43-101 compliant technical report dated February 3rd, 2011 with respect to the disclosure of Mineral Resources for the Renard Diamond Project.

Road Access and Mine Development Schedule

Year round access to the Renard Diamond Project will be by way of the Route 167 Extension, a $332 million road development project sponsored by the Quebec Ministry of Transportation under the auspices of the “Plan Nord”. Permitting for the road is nearing completion. Successful public hearings were held by the COMEX on August 30th and 31st in the communities of Mistissini and Chibougamau and, subject to the satisfaction of all regulatory requirements, the Ministry of Transportation expects to commence road construction in the 4th Quarter of this year. Based on this schedule, Stornoway anticipates first vehicle access to the Renard site for mine construction mobilization by mid-2013 and first diamond production in 2015 based on an approximately 2 year mine development schedule. This development timeline is highly dependent upon the successful development of the road on schedule. On August 1st, 2011, Stornoway announced the signing of two financing agreements with the Government of Quebec by which Stornoway will contribute to the construction and maintenance costs of the new road. Stornoway has agreed to contribute $44 million to its development, to be paid annually over a ten year period, starting in July 2015. Stornoway’s contribution will be financed by Quebec 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 Diamond Project financing.

Powerline

As a component of the Renard feasibility work program, Hydro-Quebec is undertaking a separate Feasibility Study on behalf of Stornoway for a potential 161kV powerline connecting Renard to the LaForge 1 hydro-electric powerstation 165 kilometers to the north. This powerline will add capital cost to the project but offers substantial operating cost savings over a long mine life. While Stornoway awaits the completion of the powerline study by Hydro-Quebec, the Renard Feasibility Study will be formulated on a base case scenario of on-site diesel power generation, with an assessment of the expected benefits to the project upon transference to grid power.

Stakeholder Relations

In collaboration with the Crees of the James Bay region, Stornoway undertakes regular consultations with communities, including public open houses and individual stakeholder meetings. Since the beginning of this year the Renard Environmental Exchange Group has met in the Cree community of Mistissini five times, giving a forum for the exchange of environmental and traditional knowledge in the area of the proposed development. Stornoway also is currently in negotiations with 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.

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.

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 Quebec. In May 2010, Stornoway filed a National Instrument 43-101 compliant technical report for the Preliminary Assessment at Renard that highlighted the potential of the project to become a significant producer of high value rough diamonds over a long mine life. Current NI 43-101 compliant Indicated and Inferred Mineral Resources 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.