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Stornoway Presentation at PDAC 2014

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Matt Manson, President and CEO of Stornoway Diamond Corp's presentation to investors at the Diamond Investor Forum of the PDAC March 4, 2014

Matt Manson, President and CEO of Stornoway Diamond Corp's presentation to investors at the Diamond Investor Forum of the PDAC March 4, 2014

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  • 1. BUILDING QUÉBEC’S FIRST DIAMOND MINE PDAC March 4th 2014 Matt Manson President, CEO & Director Orin Baranowsky Director of Investor Relations
  • 2. 2 Forward-Looking Information This presentation 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 presentation 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 recovered grade, average ore recovery, internal dilution, mining dilution and other mining parameters set out in the Feasibility Study or Optimization Study; (v) assumptions relating to gross revenues, operating cash flow and other revenue metrics set out in the Feasibility Study or Optimization Study; (vi) mine expansion potential and expected mine life; (vii) expected time frames for completion of permitting and regulatory approvals and making a production decision; (viii) future exploration plans; (ix) future market prices for rough diamonds; and (x) 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 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 Stornoway’s ability to achieve its 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) 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) the assumption that a production decision will be made, and that decision will be positive; (v) anticipated timelines for the commencement of mine production; (vi) market prices for rough diamonds and the potential impact on the Renard Project’s value; and (vii) future exploration plans and objectives. Additional risks are described in Stornoway's most recently filed Annual Information Form, annual and interim MD&As, and other disclosure documents available under the Company’s profile at: www.sedar.com. 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. Readers are referred to the technical report dated December 29th, 2011 in respect of the November 2011 Feasibility Study for the Renard Diamond Project, the technical report dated February 28th, 2013 in respect of the January 2013 Optimization Study, and the press release dated July 23rd 2013 in respect of the July 2013 Mineral Resource estimate for further details and assumptions relating to the project. These technical reports and this press release list the names of the Qualified Persons in respect of these studies.
  • 3. 3 Stornoway Diamond Corporation TSX:SWY Strong Base Case Economics; World Class Upside All-Season Access Road Opened Ahead of Schedule and Under Budget Mining Lease and Certificates of Authorization Issued Strong Public Support in Québec; IBA in Place Excellent Diamond Supply & Demand Fundamentals 100% Ownership in Renard, Québec’s First Diamond Mine One of the World’s Few New Diamond Projects Under Development Ready to Build Focussed on Final Project Financing
  • 4. 4 MAJOR SHAREHOLDINGS* 12 MONTH ANALYST TARGETSMarket Capitalization: (based on voting and non-voting shares) C$ 163 million Total Shares Outstanding: (Basic and Non-voting convertible shares) 175 million Total Options & Warrants Outstanding: (9m Options $0.40-$2.40; 25m warrants $1.20) 33 million Consolidated Cash: (as of January 31, 2014) C$ 21 million Consolidated Debt: ($100m Standby Facility with IQ undrawn) C$ 66 million IQ** (common shares) (non-voting convertible shares) 23.2% 33.0% Agnico-Eagle 9.7% 8.4% Caisse de dépôt et placement du Québec 7.5% (est) 6.5% (est) Float 59.7% 52.0% Fully Diluted Basic BMO Ed Sterck Market Perform na Desjardins John Hughes Speculative Buy $1.70 Dundee Laurence Curtis Speculative Buy na Laurentian Eric Lemieux Buy $1.70 Paradigm David Davidson Buy $2.00 RBC Des Kilalea, Outperform- Speculative Risk $1.20 BALANCE SHEET* Notes: Debt Facility: In December 2010, Stornoway announced a $100 million Credit Support Agreement with a subsidiary of Société générale de financement du Québec, now Investissment Québec, with respect to future project debt financing. The Credit Support Agreement has an annual commitment fee of 175 bps undrawn, and will take the form of a direct project loan ranking pari passu with concurrent senior lenders or, as appropriate, on a stand alone basis on terms no less favourable than prevailing commercially reasonable market terms. *Based on market close of $0.93 on March 4rd 2014 and includes the issue of flow through shares which closed December 3rd 2013. **IQ: Investissement Québec, the Québec government's industrial and financial holding company whose mission is to foster the growth of investment in Québec, thereby contributing to economic development and job creation in every region Stornoway’s Platform for Project Development and Financing
  • 5. 55 Towards Québec’s First Diamond Mine
  • 6. 6 Lynx R10 N R7 R1Hibou R4 R9 R2 R3 R65 R8 Kimberlite Bodies with Probable Reserves Hibou Lynx R4 R9 R2 R3 R65 Kimberlite Bodies with Resource Potential R1Hibou Lynx Legend Stornoway Properties Hydro-Québec Facility Renard Kimberlites Kimberlitic Dyke Regional Kimberlites Hydro-Québec Powerlines Route 167 Extension/ Renard Mine Road Road Exploration/ Mining Projects LEGEND: 0 1 2 Kilometers 60 0 60 120 Kilometers Renard LG3LG2 LG4 Laforge 1 Laforge 2 Brisay Foxtrot Property Strateco Eastmain MineWestern Troy Troilus Mine Eleonore Temiscamie Mistissini Chibougamau Matagami Wemindji Renard Kimberlite Bodies Kimberlite Bodies with Inferred Resources
  • 7. 7 The Feasibility: 11 years of mining Permitting and Long Term Business Plan The Vision: Deposit still Open 40 60 80 100 120 140 Millions of Tonnes 20 0 Exploration Target High Range Inferred Resource Exploration Target Low Range Probable Reserve The Renard Diamond Project A Large, High Value Diamond Resource with a Very Long Mine Life Potential 0m 100m 200m 400m 600m 700m 500m 300m Renard 65 29/24cpht Renard 3 103/112cpht Renard 2 104/119cpht Renard 9 53cpht Renard 4 60/50cpht 27 mcarat Indicated Mineral Resource 17 mcarat Inferred Mineral Resource 26-48 mcarat Exploration Target Grades illustrated are for Indicated and Inferred Mineral Resources respectively at a +1DTC sieve size cut-off. Reserve and Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantity and grade of any Exploration Target (previously referred to as a “Potential Mineral Deposit”) is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.
  • 8. Reserve Based Mine Plan Jan 2013 Feasibility Study Optimization 0m 100m 200m 400m 600m 700m 500m 300m Notes 1. Key Assumptions:C$1=US$1, Oil US$95/barrel, 2.5% real terms diamond price growth Q311-Q425, 82.9% ore recovery, 23.8% mining and internal dilution, 0cpht dilution grade, January 1 2013 effective date for NPV and IRR calculation. 2. Expressed in May 2011 terms. 3. Expressed in October 2012 terms, as adjusted in October 2013 LNG FS. 4. Actual. 5. Excludes capitalized preproduction costs. 6. Expressed in de-escalated nominal terms. Reserve Based Mine Plan1 (Jan 2013 FS Optimization using Parity Dollar and May 2011 Diamond Pricing) Mining Parameters Mine Life 11 years Mineral Reserve 17.9 mcarats Ave. Diamond Price2 $180/carat Production Rate 2.2 mtonnes/yr Ave. Diamond Production 1.6 mcarats/yr Gross Revenue (C$M) $4,268 Initial Capital Costs Initial Cap-ex3 $754m Escalation Allowance $45m Renard Mine Road4 $70m Operating Parameters Operating Cost3,5 $58/t ($76/carat) Operating Margin 67% Operating Cash Flow $2.7B Valuation Parameters6 After Tax NPV (7%; Jan 1 2013) $391m After Tax IRR 16.3% Payback 4.8 years Renard 65 Renard 2 Renard 3 Renard 4
  • 9. 9 Resource Based Mine Plan Long Term Plan: Foundation of Permitting and ESIA 0m 100m 200m 400m 600m 700m 500m 300m Renard 65 Renard 2 Renard 3 Renard 4 Renard 9 27 mcarat Indicated Mineral Resource 17 mcarat Inferred Mineral Resource 26-48 mcarat Exploration Target Resource Based Mine Plan (Basis of December 2012 ESIA and Mine Permitting) Represents the mine plan contained within the Renard December 2012 ESIA and operating authorizations. Not part of Stornoway’s public disclosure consistent with NI 43-101. Increased project valuation and mine life. Includes the mining of up to 17mcarat Inferred Resources within the scope of the Feasibility Study mine infrastructure. Includes the mining of up to 2.3mcarat Indicated Resources within a Renard 65 open pit for increased annual processing capacity from 2.2mtonnes/yr to 2.5mtonnes/yr. Additional sustaining capital only, principally on underground mine. Incremental capital for deepening of production ramp from 600m to 700m depth. Does not include non-resource exploration upside. All pipes open at depth. Reserve and Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantity and grade of any Exploration Target is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.
  • 10. 10 What has Changed Since the January 2013 Optimization Study? 0m 100m 200m 400m 600m 700m 500m 300m Renard 65 Renard 2 Renard 3 Renard 4 Renard 9 27 mcarat Indicated Mineral Resource 17 mcarat Inferred Mineral Resource 26-48 mcarat Exploration Target Reserve and Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantity and grade of any Exploration Target is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource. 14% Increase in Indicated Resources July 2013: Additional 2.3Mcarats at Renard 65 (7.9 Mtonnes at 29cpht), open pittable to 150m depth. 7% Reduction in Op-ex with LNG Option October 2013: Annual op-ex reduction of up to $10m using LNG for power generation, with incremental cap- ex increase of just $2.6m. 10% Improvement in C$:US$ Exchange Current US$0.90 rate boosts operating margin and increases NAV compared to parity dollar assumption used in Jan 2013 FS Optimization. Increase in Average Diamond Prices March 2013: Revised estimates of US$190/ct for Renard 2; US$180/ct for Renard 65, and an estimated +5% additional market movement since. New Québec Tax Regime Absorbed May 2013: New Québec system of mining taxation and royalties: Long term clarity on tax environment.
  • 11. 11 Mine Plan Production Schedule and Cash Flow (Mineral Reserves Only) - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 OreTonnage(t) Open Pit & Underground Mining R2 Pit R3 Pit R2 UG R3 UG R4 UG - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Diamonds(carats) Diamond Production R2 R3 R4 - 100,000 200,000 300,000 400,000 500,000 600,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Revenue(kC$) Gross Revenue (Real Terms) R2 R3 R4
  • 12. 12 Stornoway will be a Significant Diamond Producer Current and Future Diamond Producers Source: Kimberly process and Company Reports 1 De Beers (Anglo/Botswana) $6,404m 2 Alrosa (Russia) $4,801m 3 Dominion Diamond (TSX: DDC) $940m 4 Rio Tinto (ASE: RIO) $783m 5 Petra (note 1; L: PDL) $432m 6 Stornoway (note 2; TSX: SWY) $306m 7 Mountain Province (note 3; TSX: MPV) $273m 8 Gem (L: GEMD) $218m 9 Lucara (note 4; TSX: LUC) $155m 10 Others $2,588m Total $16,900m DeBeers 38% Alrosa 28% BHPB/ Dominion 6% RioTinto 5% Petra 2% SWY 2% MPV 2% GEM 1% LUC 1% Others 15% 2013 World Diamond Production Data/ Forecast Future Production Notes: 1. Petra 12 month results for period ending December 31, 2013 2. Renard estimated at FS average annual diamond production of 1.7 million carats, and WWW April 2011 weighted diamond price of $180/ct, un-escalated 3. Gahcho Kue estimated at 50% of FS average annual production of 4.5 million carats, and WWW April 2011 weighted diamond price of $121/ct, un-escalated 4. Karowe estimated as mid-range per Lucara FY2014 Operating Guidance.
  • 13. 13 490 m asl -275 m asl 0 m 790 m Indicated Resource Legend Inferred Resource Inferred Resource of R2 CRB Low TFFE High TFFE Ongoing Resource Expansion $10m Drill Program for 2014 Announced on Jan 22nd 2014 Renard 2 Renard 3 Renard 4 Renard 65 Renard 9 1. Conversion of Renard 65 Inferred Resources to Indicated to 150m depth (July 2013: Completed) 2. Addition of Renard 2 Country Rock Breccia to both Indicated and Inferred Resources (July 2013: Completed) 3. 6.2 Mcarats in 5.23 Mtonnes (at 119 cpht) in Renard 2 Inferred Resources between 610m and 700m depth: 4.2 to 7.3 Mcarats TFFE between 700m and 770m depth. Open below 770m. (2014 Drill Program) 1 2 3
  • 14. 14 Renard’s High Value Diamonds Large Diamond Potential Not Included in Base Case Diamond Valuation Models The Renard kimberlite pipes have similar, but marginally different diamond populations exhibiting coarse size distributions and with high proportions of large white gems. 99% by weight gem/near-gem quality. 1% industrial quality boart. Value Upside in Large Gems: Diamonds larger than 10.8ct (“Specials”) estimated at three to six 50 - 100ct stones and one to two +100ct stones every 100,000 carats (two weeks). Not accounted for in the revenue model. The January 2013 FS Optimization utilized an average diamond valuation of US$180/ct based on May 2011 prices. Kimberlite Body Size of Valuation Sample (carats) WWW March 2013 Sample Price (US$/carat)1 WWW March 2013 Base Case Price Model (US$/carat)1 Sensitivities (Minimum to High) Renard 2 1,580 $180 $190 $171 to $214 Renard 3 2,753 $173 $151 $141 to $185 Renard 4 2,674 $100 $104 ($150)2 $98 to $168 Renard 65 997 $250 $180 $169 to $203 Notes 1. All prices in US$/carat. Samples utilizing a +1 DTC sieve size cut-off. 2. Should the Renard 4 diamond population prove to have a diamond population with a size distribution equal to the average of Renard 2 and 3, WWW have estimated that a base case diamond price model of $150 per carat based on March 2013 pricing. Renard 3 Bulk Sample Stones larger than 2 carats. “Run of Mine”Diamond Valuations:
  • 15. 15 100 150 200 250 300 350 01/01/10 01/01/11 01/01/12 31/12/12 01/01/14 Indexto2009=100 WWW Rough Index, CPI Adjusted Renard Model Price Growth WWW R.I. CPI Adj Base Price May 2011 Mar 2013 +20% -10% +10% -20% Rough Diamond Price Movements The Diamond Market, January 2010 to March 2014 A tracking of the diamond market since the publication of the November 2011 FS indicates rough diamond prices have generally remained within the bounds of sensitivities contained within the FS financial model (May 2011 spot prices and a 2.5% real terms annual price escalator). May 2011 Valuation utilized in the FS based on the average of 5 diamantaires c.10% below the WWW rough index price
  • 16. 16 Waste Rock Processed Kimberlite Containment (PKC) Overburden Stockpile R2-R3 Ore Stockpile R65 Camp Plant Road from Chibougamau General Project Arrangement Small Project Footprint of 3.1km2, Modest Environmental Impact
  • 17. 17 Project Execution Accommodation Complex Process and Power Plants Access Infrastructure Pre-Financed and Already Constructed Renard Mine Road open to traffic since August 30th 2013. Aerodrome open since November 5th 2013. Favourable Cost and Labour Environment Limited amount of recent mine construction activity in Quebec means competitive cost environment and good contractor/labour availability. Owner’s Team and EPCM Contract in Place Montreal based owner’s team in place for planning, engineering, environment, stakeholder relations and cost management. Stornway will also enter into an EPCM agreement with SNC-Lavalin & AMEC. LNG Power Option Completed for Reduced Operating Cost Risk LNG power option utilizes all-season access road and existing commercial LNG distribution network in Quebec.
  • 18. 18 Permitting and Social Acceptability Strong Regulatory and Public Support for Québec’s First Diamond Mine Social Licence Permitting March 2012: Impact and Benefits Agreement (“IBA” or the “Mecheshoo Agreement”) with the Cree Nation of Mistissini and the Grand Council of the Crees (EI). July 2012: Partnership Agreements Signed with Chibougamau and Chapais. May 2013: Settlement of future Québec mining tax regime Oct. 2012: Québec Mining license issued. Dec. 2012: Québec Certificate of Authorization issued. July 2013: Positive Federal Environmental Assessment decision issued. All Community Agreements and Regulatory Authorizations Required to Proceed to Construction are in Place.
  • 19. 19 The Route 167 Extension and the Renard Mine Road The Only Canadian Diamond Mine with an All-Season Access Road 50 km Renard Project Explor./Mining Projects Stornoway Properties Albanel-Témiscamie- Otish Par Segment A: 0-82km Segment B: 82-143km Segment C: 143-195km Segment D: 195-240km Legend Renard WesternTroy Eastmain Abitex Strateco Mistissini Lac Mistassini Lac Naococane Lac Hecla Lac Albanel Km 0 Km82 Km240 Km195 Km143 Construction of an all-season access road connecting Renard to the Québec highway system began in Feb. 2012. Road segments A & B (143 km) constructed by Québec as a 2-lane highway. Segments C & D (97 km) constructed by Stornoway as the single lane “Renard Mine Road”. All 4 segments were connected and opened for mine construction traffic on August 30th 2013, 2 months ahead of schedule and approximately 10% below budget. To complete this work, Québec provided Stornoway $77m of debt financing, repayable upon commercial production at Renard. Stornoway has been able to apply $7m of debt savings to complete the civil works for the Renard Aerodrome. Segments C & D Stornoway 97km of Mine Road (50km/hr) Segments A & B Min. of Transport 143km of Regional Highway (70km/hr) Eastmain Bridge, March 2013 Transportation of Pre- Fabricated Temporary Bridge Spans March 2013
  • 20. 20 Views of the Road KM 210 KM 237 KM 155
  • 21. 21 Renard Mine Aerodrome Civil Works Completed Early Utilizing Savings Under the Renard Mine Road Credit Facility Tree Cutting Area Runway Centerline First Landing: November 5th
  • 22. 22 Site Progress October 2013 R65 Borrow Pit Tree Clearing Bulk Sample DMS Plant Construction Camp Renard Mine Road R65 R2 R9 R4
  • 23. 23 Project Schedule January 2013 Optimization Study BFS (Complete) ESIA (Complete) Community Hearings (Complete) Reg. Authorizations (Complete) Specific Operating Permits (50) Detailed Engineering Project Financing Road Construction Site Construction Commissioning and Ramp-up Commercial Production 2011 2H 2H 2H 2H2H 1H 1H 1H1H 2012 2013 2014 2015 2H1H 2016 First Vehicle Access The timely completion of mine project financing is the principal driver on the schedule of project construction and start up
  • 24. 24 Québec’s First Diamond Mine – Ready to Build Project Green-lighted: Authorizations Issued Community Agreements in Place Stornoway Operating Team in Place Access Road Opened 2 Months Ahead of Schedule and Under Budget LNG Power Plant Results in Meaningful Cost Savings Resource Continuing to Grow Favourable Cost Environment for Project Construction Stornoway is Focused on Completing Project Financing for Construction in 2014 and 2015, with first Production in 2016
  • 25. 2525 Appendix 1: NI 43-101 Mineral Reserves and Mineral Resources
  • 26. 26 Probable Mineral Reserve Mining Recovery Factors Utilized in the Reserve Calculation Kimberlite Grade (cpht) Tonnes (millions) Contained Carats (Millions) Internal Dilution Mining Recovery Mining Dilution Renard 2 OP 95 1.31 1.24 0.0% 96.0% 7.1% Renard 2 UG 80 17.03 13.62 7.0% 82.4% 20.2% Renard 3 OP 93 0.72 0.67 0.0% 96.0% 10.5% Renard 3 UG 84 1.00 0.84 21.1% 85.0% 14.0% Renard 4 UG 42 3.72 1.58 1.4% 78.2% 14.0% Total 75 23.79 17.95 5.9% 82.9% 17.9% Notes: Reserve categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Totals may not add due to rounding. Grades are estimated at a +1DTC sieve size cut-off. R2 , 83% R3, 8% R4, 9% Revenue R2 , 77% R3, 7% R4, 16% Tonnage R2 , 83% R3, 8% R4, 9% Carats NI 43-101 Probable Mineral Reserves January 28th 2013
  • 27. 27 Notes: Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. Indicated Mineral resources are Inclusive of the Mineral Reserve. Totals may not add due to rounding. Grades are estimated at a +1DTC sieve size cut-off. Renard NI 43-101 Mineral Resources July 23rd 2013. Changes to Previous January 2011 Mineral Resource in Italics Kimberlite Grade (cpht) Tonnes (millions) Contained Carats (Millions) Renard 2 – Total 100 (n/a) 18.58 (n/a 18.66 (n/a) Renard 2 104 (+1.2%) 17.71 (-0.4%) 18.38 (+1.6%) Renard 2 CRB-2a 32 (n/a) 0.87 (n/a) 0.28 (n/a) Renard 3 103 (-2.2%) 1.76 (+0.5%) 1.82 (-1.7%) Renard 4 60 (+13.1%) 7.25 -- 4.31 (+13.0%) Renard 65 29 (n/a) 7.87 (na) 2.30 (n/a) Total Indicated 76.4 (-14.3%) 35.45 (33.1%) 27.09 (+14.0%) Renard 2 – Total 64 (n/a) 11.77 (n/a) 7.47 (n/a) Renard 2 119 (+1.2%) 5.23 (+0.4%) 6.23 (+1.6%) Renard 2 CRB 19 (n/a) 6.54 (n/a) 1.24 (n/a) Renard 3 112 (-4.5%) 0.54 (+0.2%) 0.61 (-4.2%) Renard 4 50 (+13.7%) 4.75 (-0.1%) 2.37 (+13.7%) Renard 9 53 (+13.2%) 5.70 (+0.1%) 3.04 (+13.2%) Renard 65 24 (-16.8%) 4.93 (-61.9%) 1.18 (-68.3%) Lynx Dyke 107 -- 1.80 -- 1.92 -- Hibou Dyke 144 -- 0.18 -- 0.26 -- Total Inferred 56.8 (+1.2%) 29.67 (-4.6%) 16.85 (-3.5%)
  • 28. 28 Notes: The potential quantity and grade of any exploration target (previously referred to as “potential mineral deposit”) is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource. The exploration upside for the Renard kimberlite pipes has been determined by projecting reasonable kimberlite volumes from the base of the inferred Resource to a depth of 700m below surface. In the case of the Lynx and Hibou dykes, the exploration upside was established on the basis of known drill intersections of kimberlite for which insufficient diamond sampling exists to adequately estimate a diamond resource grade. Target for Further Exploration July 23rd 2013. Changes to Previous January 2011 Estimates in Italics Kimberlite Grade (cpht) Tonnes (millions) Contained Carats (Millions) Renard 2 104 to 158 4.0 to 4.6 4.2 to 7.3 Renard 3 105 to 168 0.8 to 1.7 0.8 to 2.8 Renard 4 50 to 77 11.1 to 15.4 5.6 to 11.8 Renard 9 52 to 68 3.9 to 6.3 2.0 to 4.3 Renard 65 25 to 33 29.0 to 40.9 7.3 to 13.5 Lynx Dyke 96 to 120 3.1 to 3.2 3.0 to 3.8 Hibou Dyke 104 to 151 2.7 to 2.9 2.9 to 4.3 Total Exploration Upside 54.6 (-0.8%) to 74.9 (-0.8%) 25.7 (+9.1%) to 47.8 (-1.4%)
  • 29. 2929 Appendix 2: Feasibility Study and Feasibility Optimization
  • 30. 30 Chronology of Renard Studies Feasibility Study Released on November 16th 2011. NI 43-101 Technical Report filed December 29 2011. 11 Year Mine Plan based on 18Mcarat Mineral Reserve derived from January 2011 NI 43-101 Resource. Long Term Business Plan Companion study to the Feasibility Study with an extended mine plan incorporating the project`s 17.5 million carats of Inferred Mineral Resources. Basis of overall mine design and project permitting. Not part of the project`s public disclosure, consistent with Canadian reporting standards Optimization Study Released on January 28th, 2013. NI 43-101 Technical Report filed March 2013. Refined of Feasibility mine design, including shaft deferral and a modified underground mining sequence. 11 Year Mine Plan based on 17.9 million carat Mineral Reserve. Resource Update Released July 2013. NI 43-101 Resource update with 14% increase in Indicated Resource contained carats LNG Feasibility Study Released October 2013. Modified project Cap-ex and Op-ex for LNG powered gensets
  • 31. 31 Optimization Study Financial Analysis Project Assumptions, Valuation and Pay-Back Key Assumptions in the Financial Model1 Mining Parameters Reserve Carats (M) 17.9 Tonnes Processed (M) 23.8 Recovered Grade (cpht) 75 Average Ore Recovery (%) 82.9% Average Mining Dilution (%) 17.9% Dilution Grade (cpht) 0 Processing Rate (Mtonnes/annum) 2.2 Mine Life (years) 11 Cost Parameters Initial Cap-ex (C$M)2 $752 LOM Cap-ex (C$M)4 $1,013 Oil Price (US$/barrel)2 $95 LOM Op-ex (C$/tonne)2 $57.63 LOM Op-ex (C$/carat)2 $76.63 Revenue Parameters Gross Revenue (C$M)2 $4,268 Marketing Costs 2.7% DIAQUEM Royalty 2.0% Cash Operating Margin (C$M)2 $2,693 % Operating Margin 67% Income Tax, Mining Duties and IBA Payments (C$M)1 $625 After Tax Net Cash Flow (C$M) $1,084 Diamond Price Parameters3 Renard 2 and Renard 3 (US$/carat) $182 Renard 4 (US$/carat) $164 Diamond Price Escalation 2.5% Exchange rate 1C$=1US$ Schedule Parameters Effective Date for NPV Calculation Jan. 1 2013 Construction Mobilization/Early Works Aug. 1 2013 Plant Commissioning Commences Dec. 1 2015 Commercial Production Declared Jun. 1 2016 Valuation Results5 (C$m) Pre-Tax After Tax NPV5% $894 $537 NPV7% (Base Case) $683 $391 NPV9% $514 $274 IRR 20.4% 16.3% Pay-Back (years) 4.69 4.82 Notes 1. Optimization Study, released January 28th 2013. 2. Expressed in October 2012 terms. 3. Expressed in May 2011 terms. 4. Expressed in nominal terms. 5. Expressed in Dde-escalated nominal terms.
  • 32. 32 Optimization Study Financial Analysis Capital Costs Capital Costs1 (C$m) Site Preparation & General $32.7 Mining $151.2 Mineral processing plant $175.4 Onsite utilities and infrastructures $114.8 Owner’s Cost $94.7 Spares, fills, tools $7.1 EPCM services $47.9 Field indirect costs, vendor representatives $33.9 Construction camp & Catering $24.5 Freight and duties $5.5 Contingency $64.7 Total Initial Capital $752.1 Escalation Allowance on Initial Capital $45.1 Pre-Production Revenue $(25.0) Deferred & Sustaining Capital2 $175.9 Deferred Capital (Route 167 Extension) $0.0 Renard Mine Road2 $78.0 Salvage Value2 $(13.3) Total LOM Capital $1,012.9 Site Prep. & General 7% Mining 32% Plant 37% Onsite utilities and infrastruc. 24% Direct Costs (C$474m) Owner’s Cost 34% Spares 3% EPCM 17% Field, Vendor reps 12% Camp 9% Freight 2% Contin. 23% Indirect Costs (C$278m) Notes 1. Optimization Study, released January 28th 2013. 2. After Escalation
  • 33. 33 Optimization Study Financial Analysis Operating Costs Notes: 1. Optimization Study, released January 28th 2013. Costs are expressed in October 2012 terms. Totals may not add due to rounding. 2. Unit cost per processed tonnes. Open Pit Unit Costs1 $/tonne Open Pit 21.22 Processing 15.29 G&A2 and Infrastructure 18.27 Total Open Pit3 54.78 Underground Unit Costs1 $/tonne Underground 23.64 Processing 15.29 G&A2 and Infrastructure 18.27 Total Underground3 57.20 Life of Mine Operating Costs1,4 (Real Terms) Total Operating Cost (C$M) 1,352 Diamond Prod. (Mcarats) 17.6 Production Cost3 57.63 C$/ t 76.63 C$/ ct 3. G&A unit costs do not include closure cost 4. “Life of Mine Operating Costs” exclude diamond production prior to Commercial Production and exclude pre-production operating costs, which are capitalized. Open Pit, $10m, 1% UG Mine, $555m, 41% Plant, $359m, 26% G&A, $429m, 32% Operating Cost (C$1,352m)
  • 34. 34 Optimization Study Financial Analysis Carat Production and Revenue Revenue Parameters1 (Real Terms) Total Gross Revenue (C$m) $4,268 Marketing Costs (%) 2.7% DIAQUEM Royalty (%) 2.0% Cash Operating Margin (C$m) $2,693 % Operating Margin 67% Taxes and Mining Duties and IBA Payments (C$m) $625 Cumulative After Tax Cash Flow (C$m) $1,084 Production Parameters1 (Mcarats) Renard 2 Open Pit 1.24 Renard 3 Open Pit 0.67 Total Open Pit 1.91 Renard 2 Underground 13.62 Renard 3 Underground 0.84 Renard 4 Underground 1.58 Total Underground 16.03 Total 17.95 11% 89% Diamond Production by Mining Method Open Pit Underground 83% 8% 9% Diamond Production by Kimberlite Pipe Renard 2 Renard 3 Renard 4 Notes: 1. Optimization Study, released January 28th 2013.
  • 35. 35 Optimization Study Financial Analysis Project Valuation Sensitivities 80% 90% 100% 110% 120% Operating Cost 19.6% 18.0% 16.3% 14.6% 12.8% Capital Cost 21.2% 18.6% 16.3% 14.4% 12.6% Revenue 9.5% 13.1% 16.3% 19.3% 22.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%After Tax IRR 80% 90% 100% 110% 120% Operating Cost 24.3% 22.3% 20.3% 18.3% 16.1% Capital Cost 26.0% 22.9% 20.3% 18.0% 16.0% Revenue 12.1% 16.4% 20.3% 23.9% 27.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 80% 90% 100% 110% 120% Operating Cost 526,139 460,174 391,480 320,039 245,911 Capital Cost 506,817 449,806 391,480 331,668 272,020 Revenue 99,135 246,431 391,480 535,409 677,695 0 100 200 300 400 500 600 700 80% 90% 100% 110% 120% Operating Cost 891,143 789,142 683,499 574,143 461,111 Capital Cost 845,695 764,629 683,499 601,269 519,031 Revenue 231,318 457,408 683,499 909,511 1,135,60 0 200 400 600 800 1,000 1,200Pre-Tax IRR After Tax NPV Pre-Tax NPV
  • 36. 36 Liquefied Natural Gas Power Plant Feasibility Study Released October 2013 With a view to project optimization, Stornoway has been investigating more cost efficient alternatives for on-site power supply than traditional diesel fuelled gen- sets. A Hydro-Québec powerline has been ruled out in the short term due to high cap-ex cost. On October 21st Stornoway announced it will proceed with an LNG fuelled gen-set option, made possible by the ability to receive regular cryogenic LNG shipments on the Renard Mine Road. The Renard LNG plant will comprise seven 2.1MW rated gas gen-sets, providing sufficient power generation capacity for the project’s normal operating specification of 9.5MW.
  • 37. 37 Liquefied Natural Gas Power Plant Feasibility Study Released October 2013 An LNG fuelled powerplant for Renard offers many advantages over diesel: • Greatly reduced annual operating costs of $8m to $10m per year, for a small incremental capital cost of $2.6m. • Up to 43% less greenhouse gas emissions. • Long term, stable supply market utilizing existing commercial distribution network within Quebec. • Elimination of on-site propane, as LNG will be used for building and underground mine heating. Diesel will continue to be used for the mobile mining fleet and construction activities Cost Improvements with LNG Jan 2013 Optimization Study with Diesel Jan 2013 Optimization Study with LNG Unit Power Cost (C$/kWh) 1 $0.299 $0.188 (-37%) Unit Operating Cost (C$/tonne) 1,2 $57.63 $53.84 (-7%) Initial Capital Cost (C$m) 1 $752.1 $754.0 (+0.3%) Life of Mine Capital Cost (C$m) 1,3 $1,013 $1,010 (-0.3%) Annual Diesel Consumption (million litres) 27.5 5.9 (-79%) Annual LNG Consumption (thousand m3 /annum) n/a 41.7 Annual Propane Consumption (thousand m3 /annum) 3.5 n/a Notes 1. January 2013 Optimization Study costs expressed in October 2012 terms. 2. Excludes capitalized preproduction costs. 3. Includes all initial, sustaining and deferred capital, contingencies and escalation Key Assumptions Based on the 11 year reserve-based mine life (17.9 mcarats) contained within the January 2013 Optimization Study, with a normal operating load of 9.49MW, C$1=US$1, Oil US$95/barrel
  • 38. 3838 Appendix 3: Project Comparables
  • 39. 39 Diamond Industry Cost Curve Source: Published FY2012 Results, FS Life of Reserve Data and Company Estimates World Diamond Project Comparables Cost/Revenue
  • 40. 40 Project Comparables Recent Canadian Diamond Mines Compared as of the Date of each FS Source: Company Reports and Stornoway Estimates. Excludes resource and diamond price upside from both projects. Excludes diamond price escalators. Assumes similar diamond recovery and mining dilution parameters. Ekati (1998) BHPB, As Built Estimates Diavik (1999) Rio-Tinto, As Built Estimates Victor (2008) De Beers, As Built Estimates Renard FS Optimization Study (2013) Resource Parameters Resource (m carats) 161 133 No data 41 Resource (US$) $10B $6.7B No data $7.2B Resource Grade (cpht) 110 360 No data 72 Average Resource Diamond Price $60 $50 No data $175 Resource Mine Life 25 25 No data n/a Reserve Parameters Reserve (carats) 72 102 6 17.9 Reserve (dollars) $6B $5.5B $2.4B (est) $3.2B Reserve Grade (cpht) 109 400 20 75 Average Reserve Diamond Price $84 $55 $400 $180 Average Reserve Ore Value (US$) $92 $220 $80 $136 Reserve Mine Life 17 19 12 11 Production Parameters Annual Production (mCarats) Up to 3.6 Up to 7 0.5 1.7 Annual Revenue (US$m) $302 $385 $215 $306 LOM Op-ex (Cdn$/tonne) $100 to $60 $100 No data $58 LOM Op-ex (Cdn$/carat) $92 to $55 $25 No data $76 Canadian-US Dollar c.$0.75 $0.67 c.$1.00 $1.00 Pre-Production Cap-ex (Cdn$) $900m $1.3B $982m $752m
  • 41. 41 Project Comparables Recent Canadian Diamond Development Projects Compared as of the Date of each FS Gahcho Kué FS (2010) De Beers/Moun. Prov. Star-Orion FS (2011) Shore Gold Renard FS Optimization Study (2013) Resource Parameters Resource (m carats) 61 43 41 Resource (US$) $5.1B $11B $7.2B Resource Grade (cpht) 168 12 72 Average Resource Diamond Price $85 (WWW Apr 10) $65 (DTC Apr 10) $256 (WWW Feb 11) $175 (WWW May 11) Resource Mine Life n/a n/a n/a Reserve Parameters Reserve (carats) 49 34 17.9 Reserve (dollars) $3.7B $8.2B $3.2B Reserve Grade (cpht) 157 12 75 Average Reserve Diamond Price $75 $242 $180 Average Reserve Ore Value (US$) $118 $30 $136 Reserve Mine Life 11 20 11 Production Parameters Annual Production (mCarats) 4.5 1.7 1.7 Annual Revenue (US$m) $338 $411 $306 LOM Op-ex (Cdn$/tonne) $49 $14 $58 LOM Op-ex (Cdn$/carat) $31 $114 $76 Canadian-US Dollar 0.96 0.945 1.00 Pre-Production Cap-ex (Cdn$) $550m ($800m De Beers Dec 11) $1.9B $752m Source: Company Reports. Excludes resource and diamond price upside from both projects. Excludes diamond price escalators. Assumes similar diamond recovery and mining dilution parameters.
  • 42. 4242 Appendix 4: The Diamond Market
  • 43. 43 Major Diamond Mines and Development Projects Worldwide Few Enough Mines to Fit on One Map South Africa • Venetia (De Beers) • Finsch, Premier (Petra Diamonds) • Lace (DiamondCorp) Tanzania • Williamson (Petra Diamonds) Russia • Arkhangelsk District (Alrosa) • Yakutia District (Alrosa) • Grib (LUKOIL) India • Bundar (Rio Tinto) Australia • Argyle (Rio Tinto) • Ellendale (Gem Diamonds) Canada • Ekati (BHPB) • Diavik (Rio Tinto/Harry Winston) • Victor, Snap Lake, Gahcho Kue (De Beers) • Renard (Stornoway) • Star (Shore Gold/Newmont) Botswana • Jwaneng, Orapa (De Beers) • Gope (Gem Diamonds) • Karowe (Lucara Diamonds) Angola • Catoca (Alrosa) Democratic Republic of Congo • Mbuyi-Mayi Sierra Leone • Koidu, (Steinmetz Group) Lesotho • Letseng (Gem Diamonds) • Kao (Namakwa Diamonds) • Liqhobong (Firestone) • Mothai (Lucara)
  • 44. 44 The Rough Diamond Business in Context 1/8th the Size of the Copper Business Source: USGS, LME, Kimberly Process
  • 45. 45 The Diamond Pipeline An Industry with Many Intermediaries Source: Tacy D.I.B.April 2013 Production Cost Production Value Mine Sales to Industry Rough Sales to Cutting Centers Value of Polished Produced Value of Diamonds in Retail Jewelery Sales Retail Sales of Diamond Jewelery Estimated Average Margins after Costs (%) Polishing: -10 to 15% Jewelery Manufac: -10 to 10% Jewelery Retail: 20 to 50% Mine Production Rough Trading and Diamond Polishing Diamond Jewelery Value in US$B terms of each stage of the diamond pipeline Rough Mining: 0 to 50% Rough Dealing: 0 to 10% $6.0B $13.37B $15.5B $15.2B $17.6B $21.9B $72.1B
  • 46. 46 Future Rough Diamond Supply 0 20 40 60 80 100 120 140 160 180 Produciton/SupplyMct Alluvial Open Cut U/G 3x increase in U/G carats Higher cost De Beers Production Forecast Rio Tinto Production Forecast Almost all rough diamond production forecasts show flat or declining production long term. De Beers see production peaking in 2017, and broad reserve depletion thereafter. Rough production is not expected to reach 2008 levels in carat terms again. No large scale diamond mine has been discovered since the discovery of EKATI and Diavik in the early 1990s. The movement to underground mining in Russia, South Africa and Canada will lower overall industry margins.
  • 47. 4747 Rough Diamond Supply and Demand Forecasts An Example: Bain September 2013 Rough Diamond Demand Supply and Demand Rough Diamond Supply Since 2012, Bain & Co in partnership with the Antwerp World Diamonds Center have published an annual review of the diamonds sector. The September 2013 edition forecasts a rough diamond supply CAGR of 2% and a rough diamond demand CAGR of 5.1%.
  • 48. 48 $109 $121 $117 $182 $190 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 0 100 200 300 400 500 600 700 2007 2008 2009 2010 2011 2012 2013 IndexOctober2003=100 Commodity Index Data WWW R.I. Polished Prices Index Gold IMF CPI IMF IPI IMF CPI NonFuel IMF Coal(Aust) IMF Metal IMF Cu S&P TSX Comp Index S&PTSXCompositeIndexWeeklyClosingS&PTSXCompositeIndexWeeklyClosingS&PTSXCompositeIndexWeeklyClosingS&PTSXCompositeIndexWeeklyClosing Rough Diamond Pricing Since 2003 Rough and Polished Diamonds Against a Basket of Indicators, 2003- October 2013 Source: LME, IMF, Rough Diamond Price data after WWW International Diamond Consultants Limited Indexed to October 2003. CAGR in Nominal Terms. WWW R.I. to May 2013 8% CAGR in Rough Prices 2003-2012
  • 49. 4949 Appendix 5: Management Biographies
  • 50. 50 Hume Kyle Independent Zara Boldt CFO and VP Finance Pat Godin COO & Director Matt Manson President, CEO & Director Michel Blouin Independent/ IQ Designate Yves Harvey Independent John LeBoutillier Independent/ IQ Designate Monique Mercier Independent/ IQ Designate Peter Nixon Independent Ebe Scherkus Independent/ Board Chairman Executive Officers Non-Executive Directors Key Managers Head Office: Longueuil, Québec Exploration Office: North Vancouver, BC Community Offices: Mistissini & Chibougamau Québec Stornoway’s Board and Management Team Serge Vézina Independent Orin Baranowsky Director, IR Jean-Charles Dumont Corporate Controller Yves Perron VP Engineering & Construction Ghislain Poirier VP Public Affairs Brian Glover VP Asset Protection Martin Boucher VP Sustainable Development Guy Bourque Chief Mining Engineer Helene Robitaille Director, HR Robin Hopkins VP Exploration Mario Courchesne Construct. Manager Freddie Mianscum IBA Implem. Officer
  • 51. 51 PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR STORNOWAY DIAMOND CORPORATION 49 WELLINGTON STREET EAST, SUITE 300 TORONTO, ONT M5E 1C9 TEL. : (416) 304-1026 www.stornowaydiamonds.com TSX:SWY Matt Manson, PhD. Matt Manson was appointed President of Stornoway Diamond Corporation in March 2007 following the acquisition of Ashton Mining of Canada and Contact Diamond Corporation, and subsequently President & CEO in January 2009. As President & CEO, Mr. Manson is responsible for the management of the company as a whole, playing a leadership role in all key business units including finance and budgets, exploration, human resources, investor relations and advanced project development including the Renard Diamond Project. 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 during the feasibility, construction and early production phases of Diavik. Between 2005 and 2007 he was employed by Contact Diamond Corporation, formerly Sudbury Contact Mines and a 40% owned subsidiary of Agnico- Eagle Mines Limited, as President & COO and subsequently President & CEO. Mr. Manson is a graduate of the University of Edinburgh (BSc Geophysics, 1987) and the University of Toronto (MSc Geology 1989 and PhD Geology, 1996), and has over 17 years of experience in diamond exploration, development and production. Appendix: Management Biographies
  • 52. 52 CHIEF OPERATING OFFICER AND DIRECTOR Patrick Godin, Eng., Asc. Pat Godin joined Stornoway as Chief Operating Officer in May 2010 and was appointed to the Board of Directors in October 2011. He is responsible for the development of the Renard Diamond Project in north- central Québec, on track to becoming Québec’s first diamond mine. Prior to joining Stornoway Diamond, Mr. Godin acted as Vice President, Project Development for GMining Services, focused on the development of mining projects in the Americas and West Africa, and was responsible for the developed of the Essakane Mine in Burkina Faso under contract to IAMGOLD. He was previously Vice President of Operations for Canadian Royalties, specifically heading the development of their nickel project in Northern Québec. He was also President and General Manager of CBJ-CAIMAN S.A.S., a French subsidiary of Cambior / IAMGOLD, holder of the Camp Caïman gold mining project located in French Guiana. For many years, he was involved in Cambior’s various Canadian properties in Abitibi- Témiscamingue, through progressive management positions in project development and mine management. He holds a bachelor’s degree in mining engineering from Université Laval in Québec. Mr. Godin is a member of the “Ordre des Ingénieurs du Québec”, of the Certified Directors College and of The Canadian Institute of Mining, Metallurgy and Petroleum (CIM). He is the Chairman of the Board of Geomega Resources and a director of Orbit-Garant Drilling. STORNOWAY DIAMOND CORPORATION 1111 RUE ST. CHARLES O. LONGUEUIL, QUÉBEC J4K 4G4 TEL. : (450) 616-5555 www.stornowaydiamonds.comTSX:SWY Appendix: Management Biographies
  • 53. 53 VICE PRESIDENT, FINANCE AND CFO Zara Boldt, B.A., CGA Zara Boldt was appointed Vice President, Finance with Stornoway in May 2007, after serving as Stornoway’s Controller between 2004 and 2007, and Chief Financial Officer in March 2010. As Vice President Finance and CFO, Ms. Boldt is responsible for the management of the corporate and financial affairs of the corporation, and for the oversight of its regulatory reporting requirements. Ms. Boldt has held positions of progressive responsibility with several mineral exploration companies, in addition to several years of experience with a national investment dealer. 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. She is a director of Troon Ventures Ltd., where she serves as Chair of the Audit Committee. STORNOWAY DIAMOND CORPORATION 980 W FIRST STREET, #116 NORTH VANCOUVER, BC, V7P 3N4 TEL. : (604) 983-7750 www.stornowaydiamonds.comTSX:SWY Appendix: Management Biographies
  • 54. 54 Stornoway Diamond Corporation TSX:SWY Head Office: 1111 Rue St. Charles Ouest, Longueuil, Québec J4K 4G4 Tel: +1 (450) 616-5555 IR Contact: Orin Baranowsky, CFA, Director IR obaranowsky@stornowaydiamonds.com Tel: +1 (416) 304-1026 x103 www.stornowaydiamonds.com Info@stornowaydiamonds.com