Stornoway splashing $28.4 million for Renard engineering

Stornoway Diamond Corp will spend $28.4 million to advance  its Renard diamond project in northern Quebec, the Vancouver-based company (TSX:SWY) announced yesterday.

The budget will detailed engineering and design, site preparation and ordering of long lead items, Stornoway said. It also expects to enter into an EPCM contract covering project engineering, procurement and construction management for the project’s process plant, water treatment plant, accommodation and maintenance facilities, and site utilities. Pre-development engineering on the project’s shaft and hoisting facilities will be initiated under separate EPCM contract in the second half of the year.

“The pre-development capital program announced today for Renard will maintain our development schedule as we complete final permitting and project financing in 2012," said Stornoway President and CEO Matt Manson.

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 for Renard. The study pegged NI 43-101 compliant Probable Mineral Reserves at 18.0 million carats, with a further 17.5 million carats classified as Inferred Mineral Resources, and 23.5 to 48.5 million carats classified as non-resource exploration upside. All kimberlites remain open at depth.

Pre-production capital cost stands at C$802 million, with a life of mine operating cost of C$54.71/tonne giving a 68% operating margin over an initial 11 year mine life. Production start-up is scheduled for 2015. Readers are referred to the technical report dated December 29, 2011 in respect of the Renard Diamond Project for further details and assumptions relating to the project.

Stornoway is currently pursuing a financing strategy for the Renard project based on a combination of project debt and equity. In April 2011 Stornoway entered into a $100 million credit support agreement with its largest shareholder, DIAQUEM Inc., a subsidiary of Investissement Québec, in connection with the acquisition of DIAQUEM’s 50% interest in the Renard Project. At this time, DIAQUEM was also granted a pre-emptive right to subscribe to 25% of any new equity issued.

Read the full news release below:

May 23, 2012

Stornoway Diamond Corporation (TSX-SWY) is pleased to announce a significant pre-development capital program for 2012 at the 100% owned Renard Diamond Project (“Renard”) located in north-central Québec. In November 2011 Stornoway released the results of the Renard Feasibility study, which demonstrated an economically viable project with an initial 11 year reserve based mine life, strong operating margins and extensive resource upside. Since this time, Stornoway has filed the project’s Environmental and Social Impact Assessment (“ESIA”; December, 2011), announced the start of construction on the Route 167 highway extension project by the Québec Ministère des transports (“MTQ”;  February, 2012), announced the signing of an Impacts and Benefits Agreement with the Crees of the James Bay Region (the “Mecheshoo Agreement”; March 2012), and announced the raising of gross proceeds of $40 million in a combination of unsecured debt and new equity (March, April and May, 2012).

Matt Manson, President and CEO, commented: “The pre-development capital program announced today for Renard will maintain our development schedule as we complete final permitting and project financing in 2012. Despite the currently challenging market conditions, we have succeeded in raising the significant capital required to perform this work and we are highly encouraged by the response we have received to date on our larger scale project financing activities. Our objective is to continue hitting our project milestones, this being the most effective way of delivering long term shareholder value.”

Patrick Godin, COO, added: “An important part of the 2012 program will be to expand our mine development team based in Longueuil, Mistissini and Chibougamau, Québec. This team has already added considerable mining depth to the company alongside our existing diamond technical team based at our North Vancouver office and plant facility. Our strategy is to build upon our already strong operating credentials, recognizing that strong in-house expertise is an essential element for the successful growth of any diamond mining business”.

2012 Engineering Program

Subsequent to the recent financings, Stornoway’s board has approved a $28.4 million budget for pre-development work at Renard including detailed engineering and design, site preparation activities and the ordering of long lead items. As a component of this program of work, Stornoway expects to shortly enter into an EPCM contract covering project engineering, procurement and construction management for the project’s process plant, water treatment plant, accommodation and maintenance facilities, and site utilities. Stornoway’s mining team based in Longueuil Québec will be expanded during the course of the year and will assume responsibility for design of the open pit and underground mine, design of the processed kimberlite containment facility, and security operations. Pre-development engineering on the project’s shaft and hoisting facilities will be initiated under separate EPCM contract in the second half of the year.

Permitting Progress Report

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. Stornoway filed the Renard ESIA on December 28th 2011 with both the Québec Ministère du Développement durable, de l’Environnement et des Parcs (the “MDDEP”) and the Canadian Environmental Assessment Agency (the “CEAA”). Two highly successful information sessions on the ESIA were hosted by Stornoway in Chibougamau and Mistissini on March 14th and March 21st respectively, and initial feedback from local communities and the federal and Québec regulators has been positive. Both the Review Committee of the JBNQA (“COMEX”) and the CEAA will now hold formal public hearings on the Renard Project, the first of which have been scheduled by the CEAA for June 5th and 6th in Chibougamau and Mistissini. It is currently expected that the COMEX hearings will be scheduled for later in the summer, making the project eligible to receive its Certificates of Authorization thereafter.

Route 167 Construction Progress Report

Vehicle access to the Renard Diamond project will be by way of the Route 167 Extension, a $332 million road development project under the auspices of the MTQ. The MTQ have now awarded contracts for two of four construction segments and tree clearing along the route was initiated in January 2012 on the southernmost segment. Work is progressing well, with only minor delays to the schedule. The MTQ is investigating the development of a full winter road access next year to expedite the all-season road project and maintain the construction schedule. On this basis, Stornoway is maintaining its guidance of construction start-up during 2013 and first ore production by July 2015, as defined within the Renard Feasibility Study.

Project Financing Progress Report

Stornoway is currently pursuing a financing strategy for the Renard project based on a combination of project debt and equity. In April 2011 Stornoway entered into a $100 million credit support agreement with its largest shareholder, DIAQUEM Inc., a subsidiary of Investissement Québec, in connection with the acquisition of DIAQUEM’s 50% interest in the Renard Project. At this time, DIAQUEM was also granted a pre-emptive right to subscribe to 25% of any new equity issued. Stornoway’s recent financings were undertaken on the basis of 50% debt and 50% equity, with DIAQUEM exercising its pre-emptive right. On the basis of this strong support from its largest shareholder, Stornoway is actively exploring a broad range of financing options available for the project within the commercial bank debt, bond and equity markets, in addition to financing options tied to future diamond supply.

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 for Renard that highlighted the potential of the project to become a significant producer of high value rough diamonds over a long mine life. NI 43-101 compliant Probable Mineral Reserves stand at 18.0 million carats, with a further 17.5 million carats classified as Inferred Mineral Resources, and 23.5 to 48.5 million carats classified as non-resource exploration upside. All kimberlites remain open at depth. Pre-production capital cost stands at C$802 million, with a life of mine operating cost of C$54.71/tonne giving a 68% operating margin over an initial 11 year mine life. Production start-up is scheduled for 2015. Readers are referred to the technical report dated December 29, 2011 in respect of the Renard Diamond Project 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. Our flagship asset is the 100% owned Renard Diamond Project, on track to becoming Québec’s first diamond mine. Stornoway also maintains an active diamond exploration program with both advanced and grassroots programs in the most prospective regions of Canada. 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
/s/ “Matt Manson”
Matt Manson
President and Chief Executive Officer

For more information, please contact Matt Manson (President and CEO) at 416-304-1026
or Nick Thomas (Manager Investor Relations) at 604-983-7754, toll free at 1-877-331-2232

Pour plus d’information, veuillez contacter M. Ghislain Poirier, Vice-président Affaires publiques de Stornoway au 418-780-3938, [email protected]

**  Website: www.stornowaydiamonds.com  Email: [email protected] **

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 capital costs, operating costs and other cost metrics set out in the Feasibility Study; (v) assumptions relating to gross revenues, operating cash flow and other revenue metrics set out in the Feasibility Study; (vi) assumptions relating to recovered grade, average ore recovery and other mining parameters set out in the Feasibility Study; (vii) mine expansion potential and expected mine life; (viii) expected time frames for completion of permitting and regulatory approvals and making a production decision; (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 by Stornoway or its consultants 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 ability to achieve 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) estimated completion date for the Environmental and Social Impact Assessment; (ii) required capital investment and estimated workforce requirements; (iii) estimates of net present value and internal rates of return; (iv) receipt of regulatory approvals on acceptable terms within commonly experienced time frames; (v) the assumption that a production decision will be made, and that decision will be positive; (vi) anticipated timelines for the commencement of mine production; (vii) anticipated timelines related to the Route 167 extension and the impact on the development schedule at Renard; (viii) anticipated timelines for community consultations; (ix) market prices for rough diamonds and the potential impact on the Renard Project’s value; and (x) future exploration plans and objectives.

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; (xiv) the effects of competition in the markets in which Stornoway operates; (xv) operational and infrastructure risks; and (xvi) 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.