Stornoway Announces Third Quarter 2015 Results

LONGUEUIL, QUEBEC--(Marketwired - Mar 11, 2015) - Stornoway Diamond Corp. (TSX:SWY) ("Corporation" or "Stornoway") announced today its third quarter results for the three months ended January 31, 2015 (Fiscal Year 2015).

Third Quarter 2015 Highlights

(All quoted figures as at January 31^st, 2015, in C$)

Matt Manson, President and CEO of Stornoway stated "Stornoway's construction team continues to make excellent progress towards the completion of the Renard Mine. The forecast cost to complete remains within our fully funded capital budget of $811 million and the project remains on schedule for first ore in the plant in the second half of calendar 2016 and for commercial production in the second quarter of calendar 2017. Prioritization has been given to critical path construction items such as the accommodation complex, mine office and civil works, over non-critical path engineering and procurement activities under the EPCM mandate. This has resulted in our overall construction advancing modestly ahead of the planned schedule. The 2015 Q3 financials again reflect the impact of the recent devaluation of the Canadian dollar. While this can be expected to create volatility in our earnings statements going forward (due to a fair value calculation on a portion of our carried debt) a lower Canadian dollar serves to create a significant foreign exchange gain on our funded and committed cash balance (both actual and unrealized) and increases the future potential operating margins of the project. These are both highly positive factors in the outlook for the Corporation."

Financial Summary

Stornoway ended the quarter with cash, cash equivalents and short-term investments of $321.6 million, compared with $387.9 million at the end of the previous quarter. Stornoway's current cash resources are sufficient to cover planned mine development expenses, financing and corporate costs during calendar 2015; the first and second payment deposits under the stream agreement of US$80 million each are expected to be received in March and September 2015, respectively, with the final payment of US$90 million expected in March 2016, following which Stornoway expects to draw on a $100 million senior secured loan in late 2016 to complete mine development at Renard.

Mine development capital expenditures incurred during the quarter were $70.0 million ($136.1 million for the nine months ending January 31, 2015), with total capital expenditures of $225.0 million having been committed against the total project cost estimate of $811 million (including contingencies and capital escalation allowances) as at January 31, 2015.

Net earnings for the three and nine months ended January 31, 2015 totaled $7.7 million and $7.8 million respectively, and include other income of $11.8 million and $16.3 million, respectively. Net earnings were impacted by several items not reflective of Stornoway's underlying operating performance, including changes in the fair value of a derivative and unrealized gains and losses from foreign exchange. Operating expenses for the three and nine months ended January 31, 2015 totaled $4.1 million and $8.2 million, respectively.

Construction Highlights

At quarter end, overall construction progress stood at 17.4% based on man-hour estimates compared to a planned 15.6%. Calendar 2014 construction activities, which were successfully completed during the quarter, represented approximately 15% of the total execution plan, with 36% of work scheduled for 2015, 46% for 2016 and 3% for 2017. Two lost time incidents were recorded during the quarter.

Significant progress was achieved during the quarter in the completion of the project's civil works, including pad and road construction, piping and surface water management. By quarter end over 825,000 of tonnes of aggregate had been mined from the Renard 65 pit area, well ahead of plan. The first transfer of site construction staff to the new 327 bed permanent accommodation complex occurred at the end of January, at which time assembly of the 60 modules comprising the permanent mine office had also been completed. Occupation of the mine office is scheduled for the end of March. By quarter end, the project's waste water treatment plant and potable water plant had been completed and commissioned.

Construction of the 2.2mtonne per annum diamond plant represents the project's critical path activity. Engineering work on the plant is progressing well, with the first pouring of the concrete foundations expected to commence in April as scheduled. The plant building is scheduled to be completed and heated by the fourth quarter of 2015, allowing the installation of the temperature sensitive crushing and recovery circuits through the first half of 2016. The plant is scheduled to be energized in the second half of 2016 with wet commissioning beginning in the fourth quarter of that year. A 10 month commissioning ramp-up is planned, with a view to commercial production being achieved in the second quarter of 2017 and full production by the summer of 2017. An optimization study completed in the Fall of 2014 demonstrated sufficient design efficiencies and cost savings could be implemented in the process plant to allow for a Large Diamond Recovery circuit to be fully integrated into the plant's primary flow-sheet within the existing capital budget and with no change of scope in the existing ore processing capacity of 2.2mtonnes per annum. The modified plant design that will be built contemplates the recovery of diamonds up to 45mm in diameter (equivalent to a 600 carat round octahedral stone).

Development of the box-cut, portal and ramp for the underground mine commenced during the quarter, several months ahead of plan, using on-site contractors. Development of the ramp was suspended during January and February, and is expected to commence again in late March. Removal of lake sediment in the Renard 2-Renard 3 pit area was successfully completed during January and February, and pre-stripping of the open pit commenced in early March, within the planned schedule. Open pit mining of Renard 2 and Renard 3 during the construction phase of the project is expected to result in the availability of a 0.7mtonne ore stockpile by the time plant commissioning begins in late 2016. In support of these activities, procurement of mining equipment stood at 82% for the mobile open pit mining fleet, 63% for the mobile underground fleet, and 63% for general surface mobile equipment by the end of January.

Renard Resource Update

Fieldwork for the 2014 resource expansion program at Renard concluded in November 2014. In total, 12,145 meters of deep directional drilling was completed at the Renard 2 kimberlite, with the deepest kimberlite intersection being at 1,012 vertical metres below surface. The drilling has indicated that Renard 2 maintains a substantial cross-sectional area to 1,000m depth, with preliminary geological modeling suggesting a tonnage range of 9 to 12 mTonnes between 600m and 1,000m. The four primary kimberlite rock types identified in the upper pipe are present and remain consistent in the deep drilling, and there is no indication at this stage that the proportion of the two principal diatreme units Kimb2a and Kimb2b diminishes markedly with depth.

Ongoing work in support of a revised Mineral Resource estimate for Renard 2 includes the processing of 4.8 tonnes of samples submitted for microdiamond analysis by caustic dissolution, 59.4 tonnes of samples submitted for macrodiamond analysis by dense media separation, as well as thin section analysis, indicator mineral characterization, geochemical analysis, density determinations and dilution measurements. A revised Mineral Resource estimate for Renard 2 is expected at the end of the second quarter of calendar year 2015.

In addition to the Renard 2 work, studies are also underway to better understand the grade and petrographic characteristics on certain other kimberlites which contain Inferred Mineral Resources outside of the current Mineral Reserve, such as Renard 3, Renard 4, Renard 9, Lynx and Hibou, and on bodies outside of the current Mineral Resource, such as Renard 1, Renard 7, Renard 8, Renard 10. In support of these studies, 2.6 tonnes of samples have been submitted for microdiamond analysis by caustic dissolution and 8.8 tonnes of samples have been submitted for macrodiamond analysis by dense media separation.

Of particular note, a discrete 126.6m intersection of kimberlite was observed in drill hole R2-81J between 942.2m and 1,068.8m down hole, after the hole had exited the interpreted eastern margin of the Renard 2 kimberlite. Ongoing work suggests this intersection may represent an extension of the Renard 3 kimberlite pipe at depths of 919m to 1,037m below surface, more than 550m deeper than any previous drilling. The horizontal width implied by this single intersection is a minimum of 46m at 1,000m depth. The interpretation of a Renard 3 intersection at these depths may have implications on future potential mining of Renard 3 beneath the currently contemplated underground mine.

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 exploration target is conceptual in nature, and it is uncertain if further exploration will result in it being delineated as a mineral resource.

Exploration Update

Stornoway retains an ownership interest in two diamond exploration projects operated by North Arrow Minerals Inc. ("North Arrow"). During 2014, North Arrow collected an approximately 1,500 tonne sample at the Qilalugaq Project in Nunavut with a view to the recovery of a diamond parcel for valuation purposes. This program is being undertaken under the terms of a 2013 option agreement that allows North Arrow to earn an 80% interest in the project, subject of a one-time back-in right by Stornoway to earn an additional 20%, bringing its interest to 40%. Processing of the sample by dense media separation is being undertaken at Microlithics Laboratories Inc. in Thunder Bay, Ont., with final diamond recovery being conducted at Stornoway's facility in North Vancouver, B.C. On February 26^th, 2015, North Arrow announced that 5,366 diamonds greater than +1 DTC (~1 mm) weighing 189.97 carats had been recovered from the processing on an initial 609.0 dry tonnes of kimberlite. The recovered diamonds included 17 diamonds larger than the 3 grainer (~0.6 carat) size and 8 diamonds larger than 1 carat. The largest three diamonds recovered were 4.42 carats (greenish yellow cubic aggregate), 4.16 carats (intense yellow cubic aggregate), and 3.53 carats (pale yellow cubic aggregate). Yellow diamonds, representing a range of hues and tones, comprised approximately 8.5% by stone count (21.4% by carat weight) of the +1 DTC diamonds recovered. Sample processing is expected to be completed in April. Upon the completion of the diamond recovery portion of the work program and a subsequent independent valuation of the diamonds, North Arrow will have completed the option work program.

Exploration is also being conducted with North Arrow at the Pikoo Project in northern Saskatchewan under an 80-per-cent (North Arrow)/20-per-cent (Stornoway) participating joint venture arrangement. Kimberlites were first discovered at the Pikoo project in 2013, with the PK150 kimberlite showing encouraging early microdiamond counts. Follow-up exploration in 2014 confirmed the presence of additional kimberlite indicator mineral trains indicative of further undiscovered kimberlite bodies on the property. On February 11^th, 2015, North Arrow announced the commencement of a 3,000m drill program to test certain additional targets. Stornoway has elected to participate in this program at the level of its 20% participating interest.

Organizational changes

Zara Boldt, the Corporation's Vice-President, Finance and Chief Financial Officer, has informed Stornoway that she will be leaving the Corporation, subsequent to the filing of the quarterly results, to pursue other interests. In her place, Jean-Charles Dumont, previously Stornoway's Corporate Controller, has been appointed Vice President, Finance for Stornoway and its subsidiary companies.

Matt Manson stated: "Zara has been employed by Stornoway in progressively senior finance roles since 2004, was a key member of the team that secured last year's $946 million Renard Project financing, and has been a close colleague. Zara will be ably succeeded by her deputy, Jean-Charles Dumont, who will assume the role of the senior financial officer for the Corporation. We wish Zara the very best in her future endeavours."

Financial Summary (con't.)

The Corporation's unaudited condensed interim consolidated Financial Statements are prepared in Canadian dollars in accordance with International Financial Reporting Standards. Unaudited condensed interim consolidated financial statements for the three and nine months ended January 31, 2015 and Management's Discussion and Analysis have been posted on the Corporation's website www.stornowaydiamonds.com and on SEDAR at www.sedar.com.

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. On July 8^th 2014 Stornoway announced the completion of a $946 million² project financing transaction to fully fund the project to production, and construction commenced on July 10^th, 2014. First ore is scheduled to be delivered to the plant in the second half of 2016 with commercial production scheduled for the 2^nd quarter of 2017.

In January 2013, Stornoway released the results of an Optimized Feasibility Study at Renard 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 in National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("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 16.85 million carats classified as Inferred Mineral Resources, and 25.7 to 47.8 million carats classified as non-resource exploration upside. Average annual diamond production is forecast at 1.6mcarats/year over the first 11 years of mining, at an average valuation of US$190/carat based on a March 2014 assessment by WWW International Diamond Consultants Ltd.

Readers are cautioned that the potential quality and grade of any target for further exploration 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. All kimberlites remain open at depth. Readers are referred to the technical report dated February 28th, 2013 in respect of the January 2013 Optimization Study, and the press release dated July 23, 2013 in respect of the July 2013 Mineral Resource estimate, for further details and assumptions relating to the project. Disclosure of a scientific or technical nature in this press release was prepared under the supervision of Patrick Godin, P.Eng. (Québec), Chief Operating Officer and Robin Hopkins, P.Geol. (NT/NU), Vice President, Exploration, both "qualified persons" under NI 43-101.

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.

This press release contains "forward-looking information" within the meaning of Canadian securities legislation. This information and these statements, referred to herein as "forward-looking statements", are made as of the date of this press release and the Corporation 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; (viii) expected time frames for completion of construction, start of mining and commercial production; (ix) future exploration plans; (x) future market prices for rough diamonds; (xi) the economic benefits of using liquefied natural gas rather than diesel for power generation; (xii) sources of and anticipated financing requirements; (xiii) the completion, effectiveness or availability, as the case may require, of the other elements of the Financing Transactions and the use of proceeds therefrom; and (xiv) the impact of the Financing Transactions on the Corporation's operations, infrastructure, opportunities, financial condition, access to capital and overall strategy. 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", "schedule" 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 prospects and 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, anticipated financial performance, regulatory developments, development plans, exploration, development and mining activities and commitments and the impact of changes in commodity prices and foreign exchange rates on Stornoway's results of operations. Although management considers its assumptions on such matters to be reasonable based on information currently available to it, they may prove to be incorrect. Certain important assumptions by Stornoway in making 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) anticipated timelines for completion of construction and the commencement of mine production; (v) market prices for rough diamonds and the potential impact on the Renard Diamond Project; (vi) Stornoway's ability to comply with its obligations under the various agreements forming part of the Financing Transaction and to draw on the funding available under those financing elements; (vii) Stornoway's interpretation of the geological drill data collected and its potential impact on stated Mineral Resources and mine life, and (viii) future exploration plans and objectives. Additional risks are described in Stornoway's most recently filed Annual Information Form, annual and interim MD&A, and other disclosure documents available under the Corporation'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 uncertainty as to whether further exploration of exploration targets will result in the targets being delineated as mineral resources; (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) uncertainty of 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; (xii) changes in project parameters as plans continue to be refined; (xiii) risks relating to the 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) timeframe and potential benefits relating to the issuance of an updated Mineral Resource Estimate in 2015; (xvii) the risk relating to Stornoway's ability to comply with its obligations under the various agreements forming part of the Financing Transaction and to draw on the funding available under those financing elements; ; (xviii) future sales or issuances of Common Shares lowering the Common Share price and diluting the interest of existing shareholders; (xix) Stornoway being unable to meet its diamond delivery obligations under the Streaming Agreement, and (xx) 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, and new, unforeseeable risks may arise from time to time.