Stornoway Company Update November 19, 2012


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Update on Stornoway Diamond Corporation and the Renard Diamond Project.

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Stornoway Company Update November 19, 2012

  1. 1. BUILDING QUÉBEC’S FIRST DIAMOND MINEUpdate November 19th 2012Matt MansonPresident , CEO & Director
  2. 2. 2Forward-Looking InformationThis 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 hereinas “forward-looking statements”, are made as of the date of this presentation and the Company does not intend, and does not assume anyobligation, 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 andinclude, but are not limited to, statements with respect to: (i) the amount of mineral resources and exploration targets; (ii) the amount of futureproduction over any period; (iii) net present value and internal rates of return of the mining operation; (iv) capital costs and operating costs; (v) mineexpansion potential and expected mine life; (vi) expected time frames for completion of permitting and regulatory approvals and making aproduction decision; (vii) future exploration plans; (viii) future market prices for rough diamonds; and (ix) sources of and anticipated financingrequirements. 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 statementsof 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 bysuch statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and theenvironment in which Stornoway will operate in the future, including the price of diamonds, anticipated costs and ability to achieve goals. Certainimportant factors that could cause actual results, performances or achievements to differ materially from those in the forward-looking statementsinclude, but are not limited to: (i) estimated completion date for the Environmental and Social Impact Assessment; (ii) required capital investmentand estimated workforce requirements; (iii) estimates of net present value and internal rates of return; (iv) receipt of regulatory approvals onacceptable terms within commonly experienced time frames; (v) the assumption that a production decision will be made, and that decision will bepositive; (vi) anticipated timelines for the commencement of mine production; (vii) anticipated timelines related to the Route 167 extension and theimpact on the development schedule at Renard; (viii) anticipated timelines for community consultations and the conclusion of an Impact andBenefits Agreement; (ix) market prices for rough diamonds and the potential impact on the Renard Project’s value; and (x) future exploration plansand objectives. Additional risks are described in Stornoways most recently filed Annual Information Form, annual and interim MD&A, and otherdisclosure documents available under the Company’s profile at: relying on our forward-looking statements to make decisions with respect to Stornoway, investors and others should carefully consider theforegoing factors and other uncertainties and potential events. Stornoway does not undertake to update any forward-looking statement, whetherwritten or oral, that may be made from time to time by Stornoway or on our behalf, except as required by law.
  3. 3. 3Stornoway Diamond Corporation TSX:SWY 100% Ownership in Renard:The World’s Most Advanced New Diamond Mine Under DevelopmentOn Track for Construction Start-up in 2013 Renard Strong Base Case Economics World Class Resource Upside All-Season Access Road Under Construction Permitting Nearing Completion Diamonds Excellent Long Term Supply & Demand Fundamentals Few New Mining Projects
  4. 4. 4The Route 167 ExtensionNovember 15th 2012: Stornoway Assumes Management of Road Completion On November 15th 2012 Stornoway announced an agreement by which the Government of Quebec will provide $77m of financing to Stornoway to complete Renard segments “C” and “D” of the Route 167 Extension as a Segments C & D mining grade road. Stornoway This agreement puts Stornoway in charge of the Renard 97km of Mining project’s overall project schedule for the first time. Grade Road (50km/hr) All season access is now scheduled for Q4 2013. Construction, September 2012 Segments A & B Ministry of Transport 143km of Regional Highway (70km/hr)
  5. 5. 5 Stornoway’s Board and Management TeamExecutive Officers Head Office: Longueuil Québec, Exploration Office: North Vancouver, BC Matt Manson Pat Godin Zara Boldt Community Office: Mistissini, Québec President, CEO COO & Director CFO and VP & Director FinanceNon-Executive Directors Ebe Scherkus Michel Blouin John LeBoutillier Monique Mercier Independent/ Independent/ Yves Harvey Independent/ Independent/ Peter Nixon Serge Vézina Board Chairman IQ Designate Independent IQ Designate IQ Designate Independent IndependentKey Managers Ghislain Yves Perron Robin Dave Skelton Brian Glover John Martin Boucher Guy Bourque Helene Patrick Houle Nick Thomas Poirier VP Engineering Hopkins VP Project VP Asset Armstrong Manager, Chief Mining Robitaille Manager, Manager,VP Public Affairs & Construction VP Exploration Development Protection Senior Geologist Sust. Dev Engineer Director, HR Community Dev. Investor Relations
  6. 6. 6Stornoway’s Platform for Project Development and Financing BALANCE SHEET* Market Capitalization: C$ 81 million 12 MONTH ANALYST TARGETS (based on voting and non-voting shares) RBC Total Shares Outstanding: Outperform- 161 million Des Kilalea, $2.05 (Basic and Non-voting convertible shares) Speculative Risk November 5th 2012 Total Options & Warrants Outstanding: 31 million Paradigm David Davidson Buy $3.15 Nov 17th 2011 Cash and Short Term Deposits: C$ 41 million (as of July 31st 2012) BMO Ed Sterck Market Perform $1.00 Debt: November 15th 2012 C$ 20 million ($100m Standby Facility with IQ undrawn) Desjardins Brian Christie Speculative Buy $1.70 Basic Fully November 15th 2012 MAJOR SHAREHOLDINGS* Diluted Laurentian (common shares) 25.0% Eric Lemieux Buy $2.75 IQ** 33.7% (non-voting convertible shares) -------- November 16th 2012 Agnico-Eagle 10.6% 8.9% National Bank Outperform- Eldon Brown $2.00 Caisse de dépôt et placement du 9.0% 7.5% Speculative Risk October 31st 2012 Québec (est) (est) Float 55.4% 49.9%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 InvestissmentQuébec, 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 rankingpari 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 $0.50 on November 16th 2012**IQ: Investissement Québec, the Québec governments industrial and financial holding company whose mission is to foster the growth of investment in Québec, thereby contributing toeconomic development and job creation in every region
  7. 7. 7 12 Months of Milestones Achieved Moving Forward with Québec’s First Diamond Mine2011 2012 Nov 2011:Feasibility Study Completed Dec 2011: ESIA Filed Feb 2012: Road Construction Commences Mar 2012: IBA (Mecheshoo Agreement) Signed Mar to May 2012: $40m Debt/Equity Raised May 2012: $28.4m Pre-Development Program Announced May 2012: Head Office Moved to Montreal July 2012: Partnership Agreement with Chibougamau and Chapais July 2012: Commencement of R65 Bulk Sample Aug 2012: Community Hearings Completed Sept 6th 2012: Mandate Letter Signed for $475m Debt Financing Oct 18th 2012: Mining Lease Issued
  8. 8. 8The Renard Diamond Project
  9. 9. 9Renard Kimberlite Bodies 0 1 2 Kilometers N 60 0 60 120 Kilometers Laforge 2 Laforge 1 R10 Brisay LG4 LG2 R7 LG3 Foxtrot Property Hibou R1 Eleonore Wemindji Renard R65 Western Troy Eastmain Mine R4 Strateco R8 R9 R3 Troilus Mine R2 Temiscamie Lynx Mistissini Matagami Chibougamau Kimberlite Bodies with Probable Reserves Legend LEGEND: Kimberlite Bodies with Stornoway Properties HydroQuébec Inferred Resources HydroQuébec Facility Powerlines Renard Kimberlites Route 167 Extension Kimberlite Bodies with Road Kimberlitic Dyke Resource Potential Exploration/ Mining Regional Kimberlites Projects
  10. 10. 10 Key Project Parameters Renard 65 November 2011 Feasibility Study* 29cpht Renard 3 106/118cpht Mine Life 11 years Mineral Reserve 18 mcarats Initial Cap-ex $802m Operating Cost $55/t ($70/carat) Operating Margin 68% Operating Cash Flow $2.7B Diamond Valuation $180/carat Peak Diamond Production 2.1 mcarats/yr After Tax NPV (7%; Jan 1 2012) $376m After Tax IRR 14.9% Project Startup July 2015 *Key Assumptions: C$1=US$1, Oil US$90/barrel, 2.5% real terms diamond price growth Q311-Q425, 83.5% ore recovery, 19.4% mining dilution, 0cpht dilution grade, January 1 2012 effective date for NPV and IRR calculation. Renard 4 53/44cpht Renard 2 Renard 9 Long Term Plan 47cpht 103/118cpht (Basis of December 2011 ESIA) 24 mcarat Indicated Mineral Resource Includes the mining of the 17mcarat Inferred Resources within the scope of the Feasibility Study mine infrastructure: Extended mine life, increased 17 mcarat Inferred Mineral Resource annual production, increased project valuation 24-49 mcarat Exploration UpsideNotes: 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 DefinitionStandards 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 ExplorationTarget (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.
  11. 11. Renard’s Resource Upside 11A Project with a Long Resource Tail and Very Long Mine Life Potential Renard 65 Millions 29cpht Renard 3 of Tonnes Exploration Target High Range 106/118cpht 140 Exploration Target Low Range Inferred Resource 120 Probable Reserve 100 The Vision: Deposit still 80 Open 60 Permitting and Long Term Business Plan 40Renard 453/44cpht Renard 2 Renard 9 103/118cpht 47cpht 20 The Feasibility: 11 years of miningThe resource upside at depth at Renard is world class. 0 Notes: Reserve and Resource categories are compliant with the "CIM DefinitionAlthough highly accretive, the project’s Inferred Mineral Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantityResources are not included in the Feasibility Study and grade of any Exploration Target is conceptual in nature, and it is uncertain ifeconomic analysis in accordance with NI 43-101. further exploration will result in the target being delineated as a mineral resource.
  12. 12. 12Mine PlanA Combined Open Pit and Underground MineOpen Pit Mining at Renard 2 & 3 Renard 65(years 1-2)Underground Mining Renard 2,3 & 4 (years 3-11)Underground method: Blast HoleShrinkage with waste backfill from pits.6,000 tpd plant capacity,(2.2mtonnes/annum). Renard 3Pit at Renard 65 (initially) as a borrow-pit and waste water sump, pendingresource conversion. Renard 4 Renard 2 Renard 3 Renard 2
  13. 13. 13General Project ArrangementSmall Project Footprint of 3.1km2, Modest Environmental Impact Processed Kimberlite Containment (PKC) R65 Waste Rock R2-R3 Overburden Stockpile Plant Ore Stockpile Camp Route 167 Extension
  14. 14. Renard’s Diamonds 14Valuation Conducted by WWW International Diamond Consultants Ltd. May 8th-13th, 2011 Renard kimberlite pipes have a diamond population with a coarse size distribution and high proportion of large white gems. Lynx and Hibou kimberlite dykes have a finer distribution of browner stones. 99% by weight gem/near-gem quality. 1% industrial quality boart. Coarse size distribution: potential for significant “Specials”, not accounted for in the current resource work. (Three to six 50-100ct stones and one to two +100ct stones every 100,000 carats.) Renard 3 Bulk Sample Stones larger than 2 carats. “Run of Mine” Size of Largest May 2011 Sensitivities Kimberlite Valuation Diamonds Diamond Price (Minimum to 10.15 carat gem Body Sample Recovered (US$/carat)1 High) quality (carats) (carats) octahedron Renard 2 1,580 15.46, 8.80, 8.42 $163 to $236 Renard 3 2,753 10.15, 7.78, 6.36 $182 $153 to $205 Renard 4 2,674 5.92, 5.74, 3.99 $1122 $105 to $1851 Based on an average of five independent valuations conducted between May 9 th and 13th 2011, andsupervised by WWW International Diamond Consultants Limited.2 The Renard NI 43-101 compliant Mineral Resource of January 2011 and the Feasibility Study of November2011 utilize a higher diamond price based on an analysis of diamond breakage and poor plant recovery of theRenard 4 valuation sample, which is $164/carat. All samples utilize a +0.85mm (+1 DTC) cutoff
  15. 15. 15Feasibility Mine Plan Production Schedule and Cash Flow Open Pit & Underground Mining Schedule (Ktonnes of Ore)2,5002,000 R4 UG1,500 R3 UG1,000 R2 UG 500 R3 Pit R2 Pit - 2020 2013 2014 2015 2016 2017 2018 2019 2021 2022 2023 2024 2025 2026 Carat Production (Kcarats) Gross Revenue (C$M, Real)2,500 600.02,000 500.0 400.01,500 R4 R4 300.01,000 R3 R3 200.0 500 R2 R2 100.0 - - 2024 2025 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2026 2016 2013 2014 2015 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
  16. 16. 16Renard will Make Stornoway a Significant Diamond Producer 1 De Beers (Anglo/Botswana) $6,420m 2 Alrosa (Russia) $4,660m 2011 World Diamond 3 BHPB (ASE: BHP) $940m Production Data with 4 Rio Tinto (ASE: RIO) $910m Renard Included at 5 Peak Stornoway (TSX: SWY) $380m Peak Production (2.1mcarats/yr at US$182/carat) 6 Harry Winston (TSX: HW) $350m 7 Gem (L: GEMD) $340m 8 Petra (L: PDL) $250m Others $2,160m De Beers Others 39% 13% Gem Petra 2% 2% Harry Winston Peak 2% Stornoway 2% Rio Tinto BHPB Alrosa 6% 6% 28% Source: Kimberly process, Company Reports and SWY Estimates
  17. 17. 17Renard is Continuing to GrowRenard 65 Bulk Sample: Expansion in the Project Reserve Renard 65 Stornoway commenced a 5,000 tonne bulk sample at Renard 3 Renard 65 in July 2012. The objective is the recovery of a 1,000 carat parcel of diamonds for valuation, to allow conversion of Inferred Resources to Reserve. Renard 65 currently contains: • 3.7 mcarats of Inferred Mineral Resources (12.9mtonnes at 29 carats per hundred tonnes) • 6.8 to 13.7 mcarats of Exploration Target (29.5 to 41.6 Renard 4 mtonnes at 23 to 33 cpht) Renard 9 Renard 2 Renard 65 has a good potential to return large diamonds. A 4 carat, top quality diamond Results are expected by year end. Valuation Q1 2013 recovered from Renard 65 drillcore R65 Pit on September 2nd
  18. 18. 18Moving Forward
  19. 19. 19Permitting and Development Schedule 2011 2012 2013 2014 2015 2H 1H 2H 1H 2H 1H 2H 1H 2H BFS (Complete) Following Stornoway’s November ESIA (Complete) 14th Agreement with Quebec, first road access is expected to Renard by Community Hearings Q4 2013 compared to July 2013 in the November 2011 Feasibility Study COMEX and CEAA Review Specific Mine Permits (50) Detailed Engineering Project Financing Road Construction First Vehicle Access Mine Construction Commissioning and Ramp-up Commercial Production
  20. 20. 20The Route 167 ExtensionConstruction Images September 2012
  21. 21. 21PermittingOn-Track for Completion in 2012 Renard falls under the environmental protection regime of the James Bay and Northern Québec Agreement (JBNQA) and the Canadian Environmental Assessment Act. Permitting Milestones: • December 2011: Filing of the Renard Environmental and Social Impact Assessment (ESIA) • June/August 2012: Successful public hearings in Mistissini and Chibougamau • October 2012: Mining Lease Issued by the Quebec Ministry of Natural Resources Renard is on track for the receipt of its Certificate of Authorization within 2012. The Renard ESIA describes a limited-footprint project with modest impacts on the local environment, all of which are well within existing Québec and federal standards. Stornoway has published the complete ESIA, the Environmental Baseline Study, and the project Closure Plan online.
  22. 22. The “Mecheshoo” Agreement (IBA) 22Renard’s Social Licence The Renard Diamond Project is situated close to the Cree Nation of Mistissini (CNM). In March 2012 Stornoway concluded an Impacts and Benefits Agreement, the “Mecheshoo Agreement”, with the CNM and the Grand Council of the Crees (EI). The Mecheshoo Agreement provides for employment and business opportunities for the Crees, fosters cultural, environmental and social protection, and provides for the Crees’ participation in the project’s long term financial success. From left: Chief Richard Shecapio, of the Cree Nation of Mistissini, Grand Chief Matthew Coon-Come, of the Crees of “Stornoway has demonstrated an immense openness Eeyou Itschee, and Matt Manson, CEO of Stornoway, in and has been willing to adapt the project in a manner Mistissini on March 27th, 2012, on the occasion of the signing of the Mecheshoo Agreement. that respects the Crees of Mistissini, our interests, ourvalues, our culture and our way of life…At this point, wecan assure without a doubt that this project has a clear social acceptability from Mistissini” Chief Richard Shecapio, CNM, March 2012.
  23. 23. 23What to ExpectSignificant Development and Financing Milestones in the next 12 monthsCompletion of Project Permitting • Certificate of Authorization in Q4 2012Capital Cost Optimization • Shaft/Ramp Tradeoff Study Q4 2012Reserve Growth through R65 • Results Q4 2012. Valuation Q1 2013Completion of Project Financing • Completion of Project Debt Financing Announced on September 6th 2012 • Balance on “Minimum Capital/Minimum Equity Terms Stornoway is Targeting Construction Mobilization in 2013
  24. 24. 24 Why Invest in Stornoway? The Lassonde Curve: Value Creation through Project Financing and Development Aber Diamond Corporation Stockprice Index Sept. 95 to Sept. 07 600% Post Financing, Production 500% De-Risking Phase Pre-Feas/Discovery/ Feas Post-FeasResource 400%Growth Pre-Financing Low Point 300% I 4x Return B 1999-2004 200% C H G D 100%A E F SWY December 2008 to August 2012 0% 6-Mar-01 6-Mar-96 6-Mar-97 6-Mar-98 6-Mar-99 6-Mar-00 6-Mar-02 6-Mar-03 6-Mar-04 6-Mar-05 6-Mar-06 6-Mar-07 6-Sep-95 6-Sep-96 6-Sep-97 6-Sep-98 6-Sep-99 6-Sep-00 6-Sep-01 6-Sep-02 6-Sep-03 6-Sep-04 6-Sep-05 6-Sep-06 6-Sep-07 A. 1994-1995 – Discovery of A21, A154S, A154N, A418 pipes B. July 1995 – Bulk Sample Completed Stornoway’s B. September 1996 – Pre-Feasibility Completed C. July 1999 – Announces equity financing of $100.0m with Tiffany and Co and Off-Take Deal Objective is to Build E. July 1999 – Feasibility Completed Shareholder Value by F. November 1999 – Principal Permits Received Building Renard G. December 2000 – Sells minority stake in Snap Lake Project to De Beers for $173.00 mm, H. November 2001 – Bank financing of $230.0 m I. January 2003 – First Production
  25. 25. 25Appendix 1: The Diamond Market
  26. 26. 26 Diamond Jewelry Demand is Forecast to Grow DramaticallyShare of World Diamond Jewelry Market, 2005 to 2020 2020F: $128B China (and Asia-Pacific) Rough Diamond 32% US 27% CAGR of 10%1 2010-2020 2010: $74B China (and Asia-Pacific) 15% India (and US Asia-Arabia) 42% 25% 2005: $62B India (and China (and Others Asia-Arabia) Asia- 4% 18% Pacific) Diamond Jewelry 10%India (and US CAGR of 5.6%1 49% Asia- 2010-2020 Arabia) 13% Europe 10% Japan Source: AllanHochtreiter after De Beers, Tacy Ltd., 14% 1 CAGR estimates after Alrosa October 2011. Nominal Terms
  27. 27. 27 Major Diamond Mines and Development Projects Worldwide Few Enough Mines to Fit on One MapCanada• Ekati (BHPB)• Diavik (Rio Tinto/Harry Winston) Russia• Victor, Snap Lake, Gahcho Kue (De Beers) • Arkhangelsk District (Alrosa)• Renard (Stornoway) • Yakutia District (Alrosa)• Star (Shore Gold/Newmont) • Grib (LUKOIL) India • Bundar (Rio Tinto) Australia Sierra Leone • Argyle (Rio Tinto) • Koidu, (Steinmetz Group) • Ellendale (Gem Diamonds) Democratic Republic of Congo Tanzania • Mbuyi-Mayi • Williamson (Petra Diamonds) Angola • Catoca (Alrosa) Lesotho Botswana South Africa • Letseng (Gem Diamonds) • Jwaneng, Orapa (De Beers) • Venetia (De Beers) • Kao (Namakwa Diamonds) • Gope (Gem Diamonds) • Finsch, Premier (Petra Diamonds) • Liqhobong (Firestone) • AK6 (Lucara Diamonds) • Lace (DiamondCorp) • Mothai (Lucara)
  28. 28. 28Future Rough Diamond Production is Forecast to be Static Almost all rough diamond production forecasts show flat or declining production long term. Rough production may not reach 2008 levels in carat terms again. Only 15% Supply Growth No large scale diamond mine has been discovered since the 2010-2020 discovery of EKATI and Diavik in the early 1990s. New production from projects under development such as Renard is not expected to materially impact overall supply. AK6 (LUC) Renard (SWY) Star-Orion (SGF) Koidu (Steinmetz) Gahcho Kue Global Rough Diamond Zimbabwe Production (MMct) 200 (MPV, De Beers) 180 160 140 120 Ct MM 100 80 60 40 20 0 2011E 2012E 2013E 2014E 2015E 2016E 2018E 2019E 2007A 2008A 2009A 2010A 2017E 2006A Angola Australia Botswana Canada DRC Namibia Russia South Afr ica Zimbabwe Other Source: RBC Capital Markets
  29. 29. 29Diamond Prices are GrowingRough and Polished Diamonds Against a Basket of Indicators, 2003-April 2012 Commodity Index Data 700 8% CAGR in16000 Rough Prices 14000 S&P TSX Composite Index Weekly Closing 600 2003-2012 12000 500 Index October 2003 = 100 10000 400 8000 300 Rough6000 Diamonds 200 4000 100 WWW R.I. Polished Prices Index Gold IMF CPI 2000 IMF IPI IMF CPI NonFuel IMF Coal(Aust) IMF Metal IMF Cu S&P TSX Comp Index 0 0 01/01/07 01/01/08 31/12/08 31/12/09 01/01/11 01/01/12Source: LME, IMF, Rough Diamond Price data after WWW International Diamond Consultants Limited Indexed to October 2003. CAGR in Nominal Terms.
  30. 30. 30Appendix 2: Feasibility Study Sensitivities
  31. 31. 31Feasibility Study Contributors Capital and Operating Cost Estimates, Onsite Infrastructure Design, Construction Strategy, Risk Assessment Process Plant, Underground Mine Design and Underground Reserve Open Pit Design, Open Pit Reserve and Financial Analysis Geotechnical, Processed Kimberlite Containment, Waste Water Management Environmental, Social and Permitting Considerations Rock Mechanics, Hydrogeology NI 43-101 Resource Human Resources, Operating Plan, Marketing Plan
  32. 32. 32Financial AnalysisProject Assumptions, Valuation and Pay-Back Key Assumptions in the Financial Model Reserve Carats (m) 18.0 Tonnes Processed (m) 23.0 Recovered Grade (cpht) 78 Mining Average Ore Recovery (%) 83.5%Parameters Average Mining Dilution (%) 14% Dilution Grade (cpht) 0 Processing Rate (Mtonnes/a) 2.2 Mine Life (years) 11 Pre-Production Cap-ex (C$m) $802 Valuation Results (C$m) Cost LOM Cap-Ex (C$m) $994Parameters Oil Price (US$/barrel) $90 Pre-Tax After Tax LOM Op-ex (C$/tonne) $54.71 NPV5% $899 $534 LOM Op-ex (C$/carat) $70.27 Gross Revenue (C$m) $4,112 NPV7% (Base Case) $672 $376 Marketing Costs 2.7% NPV9% $490 $248 Revenue DIAQUEM Royalty 2.0%Parameters Operating Cash Flow (C$m) $2,677 IRR 18.7% 14.9%(real terms) Operating Margin 68% Pay-Back (years) 4.65 4.80 Total Taxes and Mining Duties (C$m) $571 After Tax Net Cash Flow (C$m) $1,151 Renard 2 and Renard 3 (US$/carat) $182 Diamond Renard 4 (US$/carat) $164 Price Diamond Price Escalation, 2012-2025 2.5%Parameters Exchange Rate 1C$=1US$ Effective Date for NPV Calculation January 1 2012 Schedule Construction Mobilization July 1 2013Parameters Plant Commisioning Commences July 1 2015 Commercial Production Declared January 1 2016
  33. 33. 33Financial AnalysisCapital Costs Capital Costs (C$m) Direct Costs (C$531m)Site Preparation & General $22.9 Onsite Plant utilitiesMining $236.9 and infra. 32%Mineral processing plant $168.4 19%Onsite utilities and infrastructures $102.4Owner’s Cost $86.2Spares, fills, tools $10.2 Site Prep.EPCM services $45.0 & General Mining 4%Field indirect costs, vendor representatives $22.5 45%Construction camp & Catering $25.0Freight and duties $8.1 Field, Indirect Costs (C$271m) $74.3 VendorContingency EPCM reps Total Pre-Production Capital $801.8 17% 8% $57.3 Spares CampEscalation Allowance on Initial Capital 4% 9%Pre-Production Revenue ($24.6) FreightDeferred & Sustaining Capital $138.8 3%Deferred Capital (Route 167 Extension) $44.0Salvage Value2 ($22.9) Owner’s Cost Total LOM Capital $994.4 32% Conting. 27%
  34. 34. 34Financial AnalysisOperating Costs Operating Unit Costs (Real Terms; C$) $/tonne Open Pit Mine $19.99 Underground Mine $24.11 Plant $14.82 G&A $14.69 Total $54.71 ($70.27/ct) Notes: Pit costs incurred before January 1st, 2016 are capitalized Operating Costs LOM Operating Costs (C$1,260m)70 G&A, $334.00 ,60 27% Plant,50 $337.00 , 27%40 Others Open Pit30 Power Mine,20 $40.70 , Labour 3%10 Undergrou nd Mine,0 $547.90 , 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 43%
  35. 35. 35Financial AnalysisValuation Sensitivities 30.0% PRE-TAX IRR 1,200,000 PRE-TAX NPV7% 25.0% 1,000,000 20.0% 800,000 15.0% 600,000 10.0% 400,000 5.0% 200,000 0.0% - 80% 90% 100% 110% 120% 80% 90% 100% 110% 120% Operarting Cost 20.7% 19.7% 18.7% 17.7% 16.7% Operating Cost 808,813 740,372 671,932 603,487 535,040 Capital Cost 23.7% 21.0% 18.7% 16.7% 15.0% Capital Cost 829,526 750,717 671,932 593,125 514,316 Revenue 11.6% 15.4% 18.7% 21.8% 24.6% Revenue 235,672 453,813 671,932 890,040 1,108,14 30.0% AFTER-TAX IRR 700,000 AFTER-TAX NPV7% 25.0% 600,000 500,000 20.0% 400,000 15.0% 300,000 10.0% 200,000 5.0% 100,000 0.0% - 80% 90% 100% 110% 120% 80% 90% 100% 110% 120% Operating Cost 16.5% 15.7% 14.9% 14.0% 13.2% Operating Cost 463,661 419,627 375,577 331,523 287,283 Capital Cost 19.1% 16.8% 14.9% 13.2% 11.8% Capital Cost 488,669 432,381 375,577 318,658 261,323 Revenue 9.2% 12.2% 14.9% 17.4% 19.8% Revenue 94,589 236,370 375,577 513,934 651,296
  36. 36. 36 Financial Analysis Renard Diamond Valuation. Conducted by WWW May 9th to 13th 2011 Conducted by WWW International Diamond Consultants Ltd. May 9th-13th 2011 Achieved Prices for the Valuation Samples WWW Price Modeling ValuationKimberlite Average of Minimum of Maximum of WWW Sample Number of WWW WWW Base WWW "High" Body Independent Independent Independent "Minimum" (carats) Independent Valuation Case Model Model Valuations Valuations Valuations Model Valuations (US$/carat) (US$/carat) (US$/carat) (US$/carat) (US$/carat) (US$/carat) (US$/carat)Renard 2 1,580 5 $173 $143 $195 $195 $182 $236 $163Renard 3 2,753 5 $171 $137 $195 $190 $182 $205 $153Renard 4 2,674 5 $100 $87 $107 $107 $1121 $185 $105 1 The Renard Feasibility Study of November 2011, consistent with the NI 43-101 compliant Mineral Resource of January 2011, utilizes a higher diamond price based on an analysis of diamond breakage and poor plant recovery of the Renard 4 valuation sample, which is $164/carat. All samples utilize a +0.85mm (+1 DTC) cutoff.
  37. 37. 37Financial AnalysisRenard Diamond Valuation SensitivitiesWWW determine High and Minimum sensitivities on their Base Case diamond price model. WWW state thatit is unlikely that an actual diamond price achieved for each kimberlite body upon production would fall belowthe “Minimum” sensitivity, but it is possible that the actual diamond price achieved may be higher than the“High” sensitivity, which is not a maximum price.The Feasibility Study Base Case diamond price of US$182/carat for Renard 2 and 3 and US$164/carat forRenard 4 derives from a value modeling approach that assumes a single diamond size distribution in thethree kimberlites.An alternative interpretation, that each kimberlite’s diamond population is unique and is correctly representedby its diamond sample, yields diamond price models of US$208/carat for Renard 2, US$165/carat for Renard3 and US$112/carat for Renard 4. WWW WWW Base WWW "High" "Minimum" Kimberlite Body Case Model Model Model (US$/carat) (US$/carat) (US$/carat) Scenario 1 (Base Case): Utilizing an R2-R3 Size Frequency Model $182 $201 $163 Renard 2 Scenario 2 (Alternative): Utilizing an R2 only Size Frequency Model $208 $236 $186 Scenario 1 (Base Case): Utilizing an R2-R3 Size Frequency Model $182 $205 $168 Renard 3 Scenario 2 (Alternative): Utilizing an R3 only Size Frequency Model $165 $183 $153 Scenario 1 (Base Case): Utilizing an R2-R3 Size Frequency Model $164 $185 $152 Renard 4 Scenario 2 (Alternative): Utilizing an R4 only Size Frequency Model $112 $121 $105
  38. 38. 38Financial AnalysisRenard Diamond Valuation SensitivitiesThis “Alternative” diamond price model is highly accretive to the project’s valuation given the dominance ofRenard 2 in the mine plan. The interpretation of similarity in the diamond populations is the moreconservative approach. Pre-Tax After-Tax Kimberlite Body NPV7% Pay-Back NPV7% Pay-Back IRR IRR (C$m) (years) 1 (C$m) (years) 1 WWW Minimum Model $397 14.6% 5.34 $199 11.5% 5.46 Feasibility Study Base Case Model $672 18.7% 4.65 $376 14.9% 4.80 Alternative Model $871 21.8% 4.07 $502 17.4% 4.20 WWW High Model $1,261 26.5% 3.49 $747 21.4% 3.90 1Calculated on an after-tax basisA real-terms diamond price growth factor of 2.5% per annum has been applied between 2012 and 2025.This is consistent with well constrained rough diamond supply and demand forecasts and industry best-practice. WWW have advised that Stornoway’s assumptions on diamond price and diamond price growthare “reasonable in the context of the overall supply and demand environment” of the diamond industry.The project shows strong sensitivity to future diamond price growth. Pre-Tax After-Tax Diamond Price Escalation (2012-2025)1 NPV7% Pay-Back NPV7% Pay-Back IRR IRR (C$m) (years) 1 (C$m) (years) 1 0% per annum $227 11.8% 5.80 $93 9.2% 5.91 2.5% per annum (Base Case) $672 18.7% 4.65 $376 14.9% 4.80 5% per annum $1,228 25.1% 3.87 $724 20.3% 4.00 1Calculated on an after-tax basis
  39. 39. 39Appendix 3: Project Comparables
  40. 40. 40Project ComparablesDiamond Industry Cost Curve (Anglo American November 2011 after De Beers 2010) COST/REVENUE 2.0 Gahcho Kue (development project) 10.5 Cost/revenue (x) Renard with Powerline Namedeo operations Snap lake 1.0 Damtshaa Renard Orapa Venetia Jwaneng 0.5 0.0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Cumulative revenue (US$m) Source: Anglo-American (After De Beers, November 2011), and Stornoway Estimates
  41. 41. 41Project ComparablesRecent Canadian Diamond Mines Compared as of the Date of each BFS Ekati (1998) Diavik (1999) Victor (2008) Renard FS BHPB, As Built Rio-Tinto, As De Beers, As (2011) Estimates Built Estimates Built Estimates 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 18 Reserve (dollars) $6B $5.5B $2.4B (est) $3.2B Reserve Grade (cpht) 109 400 20 78 Average Reserve Diamond Price $84 $55 $400 $180 Average Reserve Ore Value (US$) $92 $220 $80 $140 Reserve Mine Life 17 19 12 11 Production Parameters Annual Production (mCarats) Up to 3.6 Up to 7 0.5 Up to 2.1 Annual Revenue (US$m) $302 $385 $215 $364 LOM Op-ex (Cdn$/tonne) $100 to $60 $100 No data $55 LOM Op-ex (Cdn$/carat) $92 to $55 $25 No data $70 Canadian-US Dollar c.$0.75 $0.67 c.$1.00 $1.00 Pre-Production Cap-ex (Cdn$) $900m $1.3B $982m $802m Source: Company Reports and Stornoway Estimates. Excludes resource and diamond price upside from both projects. Excludes diamond price escalators. Assumes similar diamond recovery and mining dilution parameters.
  42. 42. 42Project ComparablesRecent Canadian Diamond Development Projects Compared as of the Date of each BFS Gahcho Kué FS (2010) Star-Orion FS (2011) Renard FS (2011) Mountain Province Shore Gold Resource Parameters Resource (m carats) 61 43 41 Resource (US$) $5.1B $11B $7.2B Resource Grade (cpht) 168 12 72 $85 (WWW Apr 10) Average Resource Diamond Price $256 (WWW Feb 11) $175 (WWW May 11) $65 (DTC Apr 10) Resource Mine Life n/a n/a n/a Reserve Parameters Reserve (carats) 49 34 18 Reserve (dollars) $3.7B $8.2B $3.2B Reserve Grade (cpht) 157 12 78 Average Reserve Diamond Price $75 $242 $180 Average Reserve Ore Value (US$) $118 $30 $140 Reserve Mine Life 11 20 11 Production Parameters Annual Production (mCarats) 4.5 1.7 Up to 2.1 Annual Revenue (US$m) $338 $411 $364 LOM Op-ex (Cdn$/tonne) $49 $14 $55 LOM Op-ex (Cdn$/carat) $31 $114 $70 Canadian-US Dollar 0.96 0.945 1.00 $550m Pre-Production Cap-ex (Cdn$) $1.9B $802m ($800m De Beers Dec 11) Source: Company Reports. Excludes resource and diamond price upside from both projects. Excludes diamond price escalators. Assumes similar diamond recovery and mining dilution parameters.
  43. 43. 43Appendix 4: Management Biographies
  44. 44. 44Appendix: Management Biographies 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.PRESIDENT, CHIEF EXECUTIVEOFFICER AND DIRECTOR 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 Abers 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 SudburySTORNOWAY DIAMOND CORPORATION Contact Mines and a 40% owned subsidiary of Agnico-Eagle Mines Limited, as President & COO and subsequently President & CEO.49 WELLINGTON STREET EAST, SUITE 300TORONTO, ONT M5E 1C9 Mr. Manson is a graduate of the University of Edinburgh (BSc Geophysics, 1987) and the University of Toronto (MSc Geology 1989TEL. : (416) 304-1026 and PhD Geology, 1996), and has over 17 years of experience TSX:SWY diamond exploration, development and production.
  45. 45. 45Appendix: Management Biographies 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.CHIEF OPERATING OFFICER He was previously Vice President of Operations for Canadian Royalties,AND DIRECTOR 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.STORNOWAY DIAMOND CORPORATION He holds a bachelor’s degree in mining engineering from Université Laval1111 RUE ST. CHARLES O. in Québec. Mr. Godin is a member of the “Ordre des Ingénieurs du Québec”, of the Certified Directors College and of The Canadian InstituteLONGUEUIL, QUÉBEC J4K 4G4 of Mining, Metallurgy and Petroleum (CIM). He is the Chairman of theTEL. : (450) 616-5555 Board of Geomega Resources and a director of Orbit-Garant Drilling.www.stornowaydiamonds.comTSX:SWY
  46. 46. 46Appendix: Management Biographies 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 withVICE PRESIDENT, FINANCE AND several mineral exploration companies, in addition to severeal yearsCFO 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 AuditSTORNOWAY DIAMOND CORPORATION Committee.980 W FIRST STREET, #116NORTH VANCOUVER, BC V7P 3N4TEL. : (604) TSX:SWY