Corporate Highlights

  • Filed a short-form prospectus (see original press release dated February 23) with securities regulators and completed an equity financing. Including exercise of an over-allotment option, the Company issued 25,370,000 common shares at $0.50 per share for gross proceeds of $12.7 million.
  • Appointed Vice President of Finance, Zara Boldt, to the additional role of Chief Financial Officer (see original press release dated March 1, 2010). Zara is tasked with the key financial management and planning functions of the company as it transitions from an exploration stage to a project development stage over the next few years.
  • Promoted Ghislain Poirier to the role of Vice President, Public (see original press release dated March 1, 2010). Ghislain joined Stornoway from SOQUEM INC in July 2006 as Director, Environment and Public Affairs, and has worked effectively since that time to build to strong relationships with key government and community stakeholders at the Renard Diamond Project in north central Québec.
  • Appointed Patrick Godin as Chief Operating Officer, and hired key members of a Quebec-based mining team to transition the Renard Diamond Project through feasibility, then into construction and ultimately production (see original press release dated May 3, 2010).
  • In June 2010, the Company issued 8,775,000 “flow-through” common shares for gross proceeds of $5,001,750 by way of a brokered private placement, with Desjardins Securities Inc. as lead agent (see original press release dated June 29, 2010).

Project Highlights

Renard

During the year ended April 30, 2010 and the period ended July 15, 2010 Stornoway’s primary focus was the completion of two updated National Instrument (“NI”) 43-101 compliant technical reports.

The first NI 43-101 technical report was a revised mineral resource estimate that was announced in early December 2009; the technical report was filed in January 2010 (See original press releases dated December 8, 2009 and January 22, 2010).

Highlights of this work include:

  • A total Indicated Mineral Resource of 23.0 million carats and a total Inferred Mineral Resource of 13.3 million carats, increases of 228% and 195% respectively over the previous estimates published in December 2008.
  • At Renard 2, an Indicated Mineral Resource of 18.0 million carats, grading 103 carats per hundred tonnes (“cpht”) and an Inferred Mineral Resource of 6.4 million carats, grading 120 cpht.
  • A diamond valuation of US$117 per carat to be applied equally to each of the Renard 2, 3, 4 and 9 kimberlite pipes for resource estimation purposes.
  • New geological models demonstrating extensive upside in multiple kimberlite bodies.

The second NI 43-101 technical report was an updated preliminary assessment announced in March 2010; the technical report was filed in May 2010. The updated preliminary assessment comprised a number of elements, including: a conceptual mine plan, capital and operating cost estimates, a cash flow model, a diamond processing plant design (with capital and operating cost estimates), and social, environmental and permitting aspects (see original press release dated March 22, 2010). The conceptual mine plan included in the preliminary assessment is based upon the revised mineral resource estimate reported in the NI 43-101 technical report filed by Stornoway in January 2010.

Highlights from the technical report for the preliminary assessment, on a 100% project basis, are as follows:

  • Base case estimates of pre-tax Net Present Value (“NPV”) and Internal Rate of Return (“IRR”) at 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.
  • A conceptual mine life of 25 years based on a production rate of 1.8 million tonnes per year and a total diamond production of 30 million carats.
  • Estimated pre-production capital cost of C$450 million, including contingencies of $65.8 million, which increases to a total capital cost of C$511 million after sustaining capital and closure cost.
  • Average life of mine operating cost of C$39.45/tonne in a conceptual mine plan utilizing both open pit and underground mining.
  • Estimates of pre-tax NPV and IRR at C$1,173 million (at an 8% discount rate) and 29.7% respectively using current market assumptions for rough diamond pricing and the current US dollar exchange rate.

In addition to the filing of the two technical reports for the Renard Diamond Project, the Company also:

  • Completed a drill program of 12,718 metres at Renard 2 during the summer of 2009, which resulted in a high confidence geological model approximately four times larger than the mineral resource estimate for Renard 2 originally provided in December 2008 (see original press release dated October 6, 2009). This new information was included in the technical report filed by the Company in January 2010;
  • Filed a Notice of Intent in February 2010, the first step in the mine permitting process for the Renard Diamond Project, which is expected to take 18 to 24 months (see original press release dated February 12, 2010).
  • Announced, in April 2010, the completion of a 1,711 metre geological drill program at Renard 3, Renard 4 and Renard 65, resulting in intersections at depth in three separate kimberlites (see original press release dated April 14, 2010).
  • Modeled diamond contents of between 26 and 38 cpht, a substantial improvement on historical sampling results for four kimberlite lithologies within the Renard 65 kimberlite, the largest kimberlite pipe in the Renard cluster. Demonstrated diamond size frequency distribution for Renard 65 to be similar to other Renard kimberlite pipes, confirming a single diamond population previously shown to be characterized by large, high value gems (see original press release dated July 13, 2010)
  • Appointed Patrick Godin as Chief Operating Officer, and hired key members of a Quebec-based mining team to transition the Renard Diamond Project through feasibility, then into construction and ultimately production (see original press release dated May 3, 2010).
  • Announced a feasibility program with a total cost, covering a two year period from January 2010 to December 2011, estimated at $28.3 million on a 100% basis, including all studies, associated exploration work, program support, operator management fees and contingencies. The study has been conceived with the aim of making a production decision at the project by the end of 2011 (see original press release dated July 22, 2010).It will include the following elements:
    • A mine Feasibility Study incorporating both open pit and underground mining scenarios, with examination of an increased processing capacity from 5,000 up to 7,000 tonnes per day;
    • An Environmental and Social Impact Assessment;
    • Mine permitting, community consultation, and the negotiation of an Impact and Benefits Agreement;
    • Establishment of a Québec-based owner’s team for mine development; and
    • A separate Feasibility Study and Environmental Assessment for a power line to connect the project to the Hydro-Québec James Bay hydroelectric network.
  • Announced the conclusion of a Pre-Development Agreement (“PDA”) for the Renard Diamond Project with the Grand Council of the Crees (Eeyou Istchee) / Cree Regional Authority, the Cree Nation of Mistissini and DIAQUEM INC (“DIAQUEM”) (see original press release dated July 26, 2010).

Other Projects

The Aviat Project (NU)

Churchill

  • Announced the signing of an indicative proposal with Kennecott Canada Exploration Inc. (“Kennecott”) to jointly explore the northern portions of the Churchill Diamond Project, now referred to as the Chesterfield Inlet Diamond Project, whereby Kennecott may acquire up to a 70% interest in the diamond rights (see original press release dated August 10th, 2009).
  • Completion of diamond processing of the minibulk sample from the Notch kimberlite with an overall diamond recovery of 86.2 carats per hundred tonne (“cpht”). A total of 129 diamonds greater than 1.18 mm were recovered from 17.26 dry tonnes of kimberlite, the five largest weighing 0.92, 0.81, 0.77, 0.63, and 0.63 carats (see original press release dated March 8, 2010).

The Qilalugaq Project (NU)

  • Increased the Company’s ownership in the Qilalugaq Project, Nunavut, to 100% by providing BHP Billiton Diamonds Inc. with a 3% gross production royalty interest on diamonds and a 3% net smelter return royalty on other minerals. Stornoway has 100% of the diamond marketing rights for this project.

The Hammer Property (NU)

  • Discovered, by prospecting, a new kimberlite on a mineral claim within the Hammer Property area of interest and at the head of a previously unexplained kimberlitic indicator mineral anomaly with diamond inclusion chemistry (see original press release dated July 30, 2009)

Other Exploration Work

  • Continued an ongoing assessment of the Company’s various exploration properties (covering approximately 3.1 million acres), in addition to a continued review of in-house regional geological, geochemical and geophysical databases, with the objective of targeting acquisitions of promising diamond exploration properties within Canada.