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Stornoway Corporate and Renard Project Update for May 28, 2013


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Stornoway marketing presentation as of May 28th, 2013. Includes a corporate, diamond market, and Renard Project overview.

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Stornoway Corporate and Renard Project Update for May 28, 2013

  1. 1. BUILDING QUÉBEC’S FIRST DIAMOND MINEUpdate May 28th 2013Matt 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 themeaning 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 theseforward-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 anyperiod; (iii) net present value and internal rates of return of the mining operation; (iv) assumptions relating to capital costs, operating costs and other costmetrics set out in the Feasibility Study or the Optimization Study; (v) assumptions relating to gross revenues, operating cash flow and other revenuemetrics set out in the Feasibility Study or the Optimization Study; (vi) 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; (vii) mine expansion potential and expected minelife; (viii) expected time frames for completion of permitting and regulatory approvals and making a production decision; (ix) the expected time frames fordelivery of a winter road by the Québec Ministère des Transports, construction of a mining grade road by Stornoway and completion generally of theRoute 167 extension and the financial obligations or costs incurred by Stornoway in connection with such road extension; (x) future exploration plans; (xi)future market prices for rough diamonds; and (xii) sources of and anticipated financing requirements. Any statements that express or involve discussionswith respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, usingwords or phrases such as “expects”, “anticipates”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives” or variationsthereof 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 ofthese 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, couldcause the actual results, performances or achievements of Stornoway to be materially different from future results, performances or achievementsexpressed or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future businessstrategies and the environment in which Stornoway will operate in the future, including the price of diamonds, anticipated costs and ability to achievegoals. Certain important factors that could cause actual results, performances or achievements to differ materially from those in the forward-lookingstatements include, but are not limited to: (i) estimated approval date of 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 on acceptableterms within commonly experienced time frames; (v) the assumption that a production decision will be made, and that decision will be positive; (vi)anticipated timelines for the commencement of mine production; (vii) anticipated timelines related to the delivery of a winter road by the Québec Ministèredes Transports, construction of a mining grade road by Stornoway and completion generally of the Route 167 extension and the impact on thedevelopment schedule at Renard; (viii) anticipated timelines for community consultations and the impact of those consultations on the regulatory approvalprocess; (ix) market prices for rough diamonds and the potential impact on the Renard Project’s value; and (x) future exploration plans and objectives.When 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, whether written ororal, 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:SWYStrong Base Case EconomicsWorld Class Resource UpsideAll-Season Access Road Under ConstructionMining Lease and Certificate of Authorization Issued.Strong Public Support in Québec; IBA in PlaceExcellent Diamond Supply & Demand Fundamentals100% Ownership in Renard, Québec’s FirstDiamond MineOne of the World’s Few New DiamondProjects Under DevelopmentIn Project FinancingOn Track for Construction Start-up in 2013
  4. 4. 4Yves PerronVP Engineering& ConstructionZara BoldtCFO and VPFinancePat GodinCOO & DirectorMatt MansonPresident, CEO& DirectorMichel BlouinIndependent/IQ DesignateYves HarveyIndependentJohn LeBoutillierIndependent/IQ DesignateMonique MercierIndependent/IQ DesignatePeter NixonIndependentEbe ScherkusIndependent/Board ChairmanSerge VézinaIndependentExecutive OfficersNon-Executive DirectorsKey ManagersGhislainPoirierVP Public AffairsBrian GloverVP AssetProtectionMartin BoucherVP SustainableDevelopmentGuy BourqueChief MiningEngineerHeleneRobitailleDirector, HRHead Office: Longueuil, QuébecExploration Office: North Vancouver, BCCommunity Offices: Mistissini & Chibougamau QuébecJohnArmstrongSenior GeologistPatrick HouleManager,Community Dev.Stornoway’s Board and Management TeamRobinHopkinsVP Exploration
  5. 5. 5MAJOR SHAREHOLDINGS*12 MONTH ANALYST TARGETSMarket Capitalization:(based on voting and non-voting shares)C$ 100 millionTotal Shares Outstanding:(Basic and Non-voting convertible shares)163 millionTotal Options & Warrants Outstanding:(10m Options $0.60-$2.40 25m warrants $1.20)35 millionCash and Short Term Deposits:(as of January 31, 2013)C$ 36 millionDebt:($100m Standby Facility with IQ undrawn)C$ 46 millionIQ**(common shares)(non-voting convertible shares)25.0%--------35.4%Agnico-Eagle 10.5% 9.0%Caisse de dépôt et placement duQuébec8.1%(est)7.0%(est)Float 56.4% 48.6%FullyDilutedBasicRBCDes Kilalea,May 21st, 2013Outperform-Speculative Risk$1.20BMOEd SterckMay 7th 2013Market Perform $1.00DesjardinsJohn HughesApril 16th, 2013Speculative Buy $1.70LaurentianEric LemieuxMay 7th 2013Buy $2.40National BankPaolo LostrittoDecember 11th, 2012Outperform-Speculative Risk$2.00BALANCE 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 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 $0.61 on May 27th 2013**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 regionStornoway’s Platform for Project Development and Financing
  6. 6. 66The Diamond Market
  7. 7. 7Major Diamond Mines and Development Projects WorldwideFew Enough Mines to Fit on One MapSouth 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)• AK6 (Lucara Diamonds)Angola• Catoca (Alrosa)Democratic Republic of Congo• Mbuyi-MayiSierra Leone• Koidu, (Steinmetz Group)Lesotho• Letseng (Gem Diamonds)• Kao (Namakwa Diamonds)• Liqhobong (Firestone)• Mothai (Lucara)
  8. 8. 8Diamond Jewelry Demand is Forecast to Grow DramaticallyShare of World Diamond Jewelry Market, 2005 to 2020US49%Japan14%Europe10%India (andAsia-Arabia)13%China (andAsia-Pacific)10%Others4%2005: $62BUS42%India (andAsia-Arabia)18%China (andAsia-Pacific)15%2010: $74BUS27%India (andAsia-Arabia)25%China (andAsia-Pacific)32%2020F: $128BSource: AllanHochtreiter after De Beers, Tacy Ltd.,1 CAGR estimates after Alrosa October 2011. Nominal TermsDiamond JewelryCAGR of 5.6%12010-2020Rough DiamondCAGR of 10%12010-2020
  9. 9. 9Future Rough Diamond Supply020406080100120140160180Produciton/SupplyMctProduction and Supply Forecast (Rio Tinto)AlluvialOpen CutU/G3x increase inU/G caratsHigher costDe Beers Production Forecast Rio Tinto Production ForecastAlmost all rough diamond production forecasts show flat or declining production long term. De Beers seeproduction 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 early1990s. The movement to underground mining in Russia, South Africa and Canada will lower overall industrymargins.
  10. 10. 10Rough Diamond Pricing Since 2003Rough and Polished Diamonds Against a Basket of Indicators, 2003-May 2013Source: LME, IMF, Rough Diamond Price data after WWW International Diamond Consultants Limited Indexed to October 2003. CAGR in Nominal Terms. WWW R.I. to April/138% CAGR inRough Prices2003-2012
  11. 11. 11Diamond Industry Cost Curve(Source: Published FY2012 Results, Life of Reserve Data and Company Estimates)Renard Against CurrentCanadian MinesRenard Against CurrentCanadian Mines
  12. 12. 1212Towards Québec’s First Diamond Mine
  13. 13. 13LynxR10NR7R1HibouR4R9R2R3R65R8Kimberlite Bodies withProbable ReservesHibouLynxR4R9R2R3R65Kimberlite Bodies withResource PotentialR1HibouLynxLegendStornoway PropertiesHydro-Québec FacilityRenard KimberlitesKimberlitic DykeRegional KimberlitesHydro-QuébecPowerlinesRoute 167 Extension/Renard Mine RoadRoadExploration/ MiningProjectsLEGEND:0 1 2Kilometers60 0 60 120KilometersRenardLG3LG2LG4Laforge 1Laforge 2BrisayFoxtrot PropertyStratecoEastmain MineWestern TroyTroilus MineEleonoreTemiscamieMistissiniChibougamauMatagamiWemindjiRenard Kimberlite BodiesKimberlite Bodies withInferred Resources
  14. 14. 14Key Project Parameters24 mcarat Indicated Mineral Resource17 mcarat Inferred Mineral Resource24-49 mcarat Exploration UpsideReserve Based Mine Plan(Feasibility Study Nov. 2011, Optimization Jan. 2013)Mine Life 11 yearsMineral Reserve 17.9 mcaratsInitial Cap-ex $752mOperating Cost $58/t ($76/carat)Operating Margin 67%Operating Cash Flow $2.7BAverage Diamond Price $180/caratAverage Diamond Production 1.6 mcarats/yrAfter Tax NPV (7%; Jan 1 2013) $391mAfter Tax IRR 16.3%Production Startup December 2015Long Term Plan(Basis of Mine Permitting)Includes the mining of the 17mcarat InferredResources within the scope of the Feasibility Studymine infrastructure: Extended mine life, increasedannual production, increased project valuation*Key Assumptions: C$1=US$1, Oil US$95/barrel, 2.5% real terms diamond price growthQ311-Q425, 82.9% ore recovery, 23.8% mining and internal dilution, 0cpht dilution grade,January 1 2013 effective date for NPV and IRR calculation.Notes: 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.Renard 453/44cphtRenard 947cphtRenard 6529cphtRenard 2103/118cphtRenard 3106/118cpht0m100m200m400m600m710m500m300m
  15. 15. 15Mine PlanA Combined Open Pit and Underground MineRenard 4Renard 2Renard 3Renard 65View looking NortheastRenard 2 Renard 3Open Pit Mining(years 1-2).Underground Mining(years 3-11).Underground method: Blast HoleShrinkage, Panel Retreat with wastebackfill from pits.Ramp access 610 meter level.6,000 tpd plant capacity (2.2Mtonnes/year)expandable to 7,000 tpd (2.5Mtonnes/year).Pit at Renard 65 (initially) as a borrow-pitand waste water sump, pending resourceconversion.
  16. 16. 16Waste RockProcessed KimberliteContainment (PKC)OverburdenStockpileR2-R3Ore StockpileR65CampPlantRoad from ChibougamauGeneral Project ArrangementSmall Project Footprint of 3.1km2, Modest Environmental Impact
  17. 17. 17Permitting and Social AcceptabilityStrong Regulatory and Public Support for Québec’s First Diamond MineSocial LicencePermittingMarch 2012: Impact and Benefits Agreement(“IBA” or the “Mecheshoo Agreement”) with theCree Nation of Mistissini and the Grand Councilof the Crees (EI).July 2012: Partnership Agreements Signed withChibougamau and Chapais.May 2013: Settlement of future Québec miningtax regimeOct. 2012: Québec Mining license issued.Dec. 2012: Québec Certificate of Authorization issued.May 2013: Federal Canadian “Comprehensive StudyReport“ issued, concluding that the Renard Project is “notlikely to cause significant adverse environmental effects”.Environmental Assessment Decision expected shortly.
  18. 18. 18Mine Plan Production Schedule and Cash Flow(Mineral Reserves Only)-500,0001,000,0001,500,0002,000,0002,500,000201320142015201620172018201920202021202220232024202520262027OreTonnage(t)Open Pit & Underground MiningR2 Pit R3 Pit R2 UG R3 UG R4 UG-500,0001,000,0001,500,0002,000,0002,500,000201320142015201620172018201920202021202220232024202520262027Diamonds(carats)Diamond ProductionR2 R3 R4-100,000200,000300,000400,000500,000600,000201320142015201620172018201920202021202220232024202520262027Revenue(kC$)Gross Revenue (Real Terms)R2 R3 R4
  19. 19. 19The Feasibility: 11years of miningPermitting and LongTerm Business PlanThe Vision: Deposit stillOpen406080100120140Millionsof Tonnes200Exploration Target High RangeInferred ResourceExploration Target Low RangeProbable ReserveNotes: Reserve and Resource categories are compliant with the "CIM DefinitionStandards on Mineral Resources and Reserves". Mineral resources that are notmineral reserves do not have demonstrated economic viability. The potential quantityand grade of any Exploration Target is conceptual in nature, and it is uncertain iffurther exploration will result in the target being delineated as a mineral resource.Renard’s Resource UpsideA Project with a Long Resource Tail and Very Long Mine Life PotentialThe resource upside at depth at Renard is world class.Although highly accretive, the project’s Inferred MineralResources are not included in the Feasibility Studyeconomic analysis in accordance with NI 43-101.Renard 453/44cphtRenard 947cphtRenard 6529cphtRenard 2103/118cphtRenard 3106/118cpht0m100m200m400m600m710m500m300m
  20. 20. 20Renard is Continuing to GrowRenard 65 Bulk Sample: Expansion in the Project ReserveRenard 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 to41.6 mtonnes at 23 to 33 cpht)Stornoway recently completed a successful 5,000tonne bulk sample at Renard 65 in July 2012.Diamond recovery of 963 carats with a March 2013valuation of US$180/ct (with sensitivities of $203 & $169).It is expected that these results will allow the successfulconversion of Inferred Resources at R65 to Indicatedby end Q2 2013 and subsequently, if warranted, aMineral Reserve.The additional Reserve could be incorporated into themine plan in two ways:1. add 1 year to the LOM and increase theproduction rate to 2.5Mt/a or2. add 3 years to the LOM as a reserve tail at aproduction rate of 2.1Mt/aThe cost of developing a 75m deep pit at Renard 65 isalready contained within the Feasibility Study.Renard 2Renard 3Renard 9Renard 4Renard 65Three Renard 65 diamonds: 9.78 ct and 6.41 ctdiamonds recovered from the 2012 bulksample and a 4 carat stone discovered indrillcore in 2003
  21. 21. 21Renard’s DiamondsRecent Valuation Conducted by WWW International Diamond Consultants Ltd. March 2013Renard kimberlite pipes have a diamond population with a coarse size distribution and highproportion of large white gems.99% by weight gem/near-gem quality. 1% industrial quality boart.Value Upside in Large Gems• 17 stones recovered to date larger than 5 carats with average price of $3,100/ct. Model prices assumes $1,920to $2,240 per carat for 5-10ct stones. Potential c.15% revenue upside.• Diamonds larger than 10.8ct (“Specials”) estimated at three to six 50-100ct stones and one to two +100ctstones every 100,000 carats (two weeks). Not accounted for in the revenue model,KimberliteBodySize ofValuationSample(carats)WWW March2013 SamplePrice(US$/carat)1WWW March2013 BaseCase PriceModel(US$/carat)1Sensitivities(Minimum to High)Renard 2 1,580 $180 $190 $151 to $214Renard 3 2,753 $173 $151 $141 to $185Renard 4 2,674 $100 $104 ($150)2$98 to $168Renard 65 997 $250 $180 $169 to $203Notes1. All prices in US$/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 distributionequal 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.10.15 carat gemqualityoctahedronRenard 3 Bulk Sample Stones largerthan 2 carats. “Run of Mine”
  22. 22. 22Project ScheduleBFS (Complete)ESIA (Complete)Community Hearings (Complete)Certificates of AuthorizationSpecific Operating Permits (50)Detailed EngineeringProject FinancingRoad ConstructionSite ConstructionCommissioning and Ramp-upCommercial Production20112H 2H 2H 2H2H 1H 1H 1H1H2012 2013 2014 20152H1H2016First Vehicle Access
  23. 23. 23The Route 167 Extension and the Renard Mine RoadA Canadian Diamond Project with Road Access.50 kmRenard ProjectExplor./Mining ProjectsStornoway PropertiesAlbanel-Témiscamie-Otish ParSegment A: 0-82kmSegment B: 82-143kmSegment C: 143-195kmSegment D: 195-240kmLegendRenardWesternTroyEastmainAbitexStratecoMistissiniLacMistassiniLacNaococaneLac HeclaLacAlbanelKm 0Km82Km240Km195Km143An all-season access road connecting Renard to theQuébec Highway network is under construction.Segments A & B of this road are being constructed byQuébec as a 2-lane highway. Segments C & D arebeing constructed by Stornoway as the single lane“Renard Mine Road”.To complete this work, Québec has providedStornoway up to $85m of debt financing, repayableupon commercial production at Renard.Work is proceeding well. All season access toRenard is on target for Q4 2013.Segments C & DStornoway97km of MineRoad (50km/hr)Segments A & BMin. of Transport143km of RegionalHighway (70km/hr)Eastmain Bridge,March 2013Transportation of Pre-Fabricated Bridge SpansMarch 2013
  24. 24. 24Stages of Road Construction“Slashing” or Tree Clearing Preparation of RoadFoundationBridges or Culverts onStream CrossingsCompleted Culvert Completed Road, Segment B,September 2012Grading
  25. 25. 25What to ExpectSignificant Development and FinancingMilestones in the next 6 monthsRegular Development Milestones• Road/Operating Licenses/Early WorksRenard Resource Update• Due end of Q2Guidance on Project Financing• Project debt syndicate announced onSeptember 6th 2012 for a senior facility of up to$475m (BMO, Scotia, NedBank, SocGen, EDC,Caterpillar, IQ)• Stornoway is currently pursuing the balance offinancing based on a combination of equity andthe forward sale of diamonds.Stornoway is Targeting ConstructionMobilization in 2013
  26. 26. 260%100%200%300%400%500%600%6-Sep-956-Mar-966-Sep-966-Mar-976-Sep-976-Mar-986-Sep-986-Mar-996-Sep-996-Mar-006-Sep-006-Mar-016-Sep-016-Mar-026-Sep-026-Mar-036-Sep-036-Mar-046-Sep-046-Mar-056-Sep-056-Mar-066-Sep-066-Mar-076-Sep-07BA. 1994-1995 – Discovery of A21, A154S, A154N, A418 pipesB. July 1995 – Bulk Sample CompletedC. September 1996 – Pre-Feasibility CompletedD. July 1999 – Announces equity financing of $100.0m with Tiffany and Co and Off-Take DealE. July 1999 – Feasibility CompletedF. November 1999 – Principal Permits ReceivedG. December 2000 – Sells minority stake in Snap Lake Project to De Beers for $173.00 mm,H. November 2001 – Bank financing of $230.0 mI. January 2003 – First ProductionACDEHIPost Financing,De-Risking PhaseAber Diamond Corporation Stockprice Index Sept. 95 to Sept. 07ProductionGFWhy Invest in Stornoway?The Lassonde Curve: Value Creation through Project Financing and Development4x Return1999-2004Stornoway’sObjective is to BuildShareholder Value byBuilding RenardSWY December 2008 to January 2013Discovery/ResourceGrowthPre-Feas/Feas Post-FeasPre-FinancingLow Point
  27. 27. 2727Appendix 1: NI 43-101 Mineral Reserves and Mineral Resources
  28. 28. 28Renard NI 43-101 Mineral Resource EstimateAnnounced January 24th, 2011Notes: Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not havedemonstrated 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 sizecut-off.KimberliteGrade(cpht)Tonnes(millions)Contained Carats(Millions)Renard 2 103 17.63 18.09Renard 3 106 1.75 1.85Renard 4 53 7.25 3.81Renard 9 -- -- --Lynx Dyke -- -- --Hibou Dyke -- -- --Total Indicated 89 26.63 23.76Renard 2 118 5.21 6.14Renard 3 118 0.54 0.64Renard 4 44 4.76 2.09Renard 9 47 5.70 2.69Renard 65 29 12.94 3.72Lynx Dyke 107 1.80 1.92Hibou Dyke 144 0.18 0.26Total Inferred 56 31.12 17.45
  29. 29. 29Notes: 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 explorationwill result in the target being delineated as a mineral resource. The exploration upside for the Renard kimberlite pipes has been determined by projecting reasonable kimberlitevolumes 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 ofknown drill intersections of kimberlite for which insufficient diamond sampling exists to adequately estimate a diamond resource grade.KimberliteGrade(cpht)Tonnes(millions)Contained Carats(Millions)Renard 2 103 to 188 4.0 to 4.6 4.1 to 8.6Renard 3 107 to 168 0.8 to 1.6 0.8 to 2.8Renard 4 38 to 79 11.1 to 15.3 4.2 to 12.1Renard 9 45 to 50 3.9 to 6.3 1.7 to 3.2Renard 65 23 to 33 29.5 to 41.6 6.8 to 13.7Lynx Dyke 96 to 120 3.1 to 3.2 3.0 to 3.8Hibou Dyke 104 to 151 2.7 to 2.9 2.9 to 4.3Total ExplorationUpside55.1 to 75.5 23.5 to 48.5Renard Exploration UpsideAnnounced January 24th, 2011
  30. 30. 30Renard Resource UpsideInferred Resources and TFFE Not in Reserve Case Mine Plan0m100m200m400m600m710m500m300mInferred ResourceExploration TargetIndicated Resource0.8 to 2.8mcarats0.6 mcarats6.1mcarats4.1 to 8.6mcarats3.7 mcarats2.7 mcarats6.8 to 13.7mcarats4.2 to 12.1mcarats1.7 to 3.2mcaratsNotes: 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 havedemonstrated 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 iffurther exploration will result in the target being delineated as a mineral resource.Renard’s Inferred Resources and TFFErepresent a potential increase over thecurrent Indicated Resource of 170% to280%.Each kimberlite remains open at 770mdepth
  31. 31. 31Probable Mineral ReserveMining Recovery Factors Utilized in the ReserveCalculationKimberliteGrade(cpht)Tonnes(millions)ContainedCarats(Millions)InternalDilutionMiningRecoveryMiningDilutionRenard 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%RevenueR2 , 77%R3, 7%R4, 16%TonnageR2 , 83%R3, 8%R4, 9%CaratsNI 43-101 Probable Mineral ReservesRestated January 28th 2013
  32. 32. 3232Appendix 2: Feasibility Studies and Project Sensitivities
  33. 33. 33Chronology of Renard StudiesFeasibility StudyReleased on November 16th 2011. National Instrument (“NI”) 43-101 Technical Report filed December29 2011 [insert hyperlink].11 Year Mine Plan based on 18 million carat Mineral Reserve.Long Term Business PlanCompanion study to the Feasibility Study with an extended mine plan incorporating the project`s 17.5million 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 standardsOptimization StudyReleased on January 28th, 2013. NI 43-101 Technical Report, representing an amended FeasibilityStudy, to be filed within 45 days.Refined of Feasibility mine design, including shaft deferral and a modified underground miningsequence.11 Year Mine Plan based on 17.9 million carat Mineral Reserve.
  34. 34. 34Feasibility Study ContributorsCapital and Operating Cost Estimates, Onsite Infrastructure Design,Construction Strategy, Risk AssessmentProcess Plant, Underground Mine Design and Underground ReserveOpen Pit Design, Open Pit Reserve and Financial AnalysisGeotechnical, Processed Kimberlite Containment, Waste Water ManagementEnvironmental, Social and Permitting ConsiderationsRock Mechanics, HydrogeologyNI 43-101 ResourceHuman Resources, Operating Plan, Marketing Plan
  35. 35. 35Financial AnalysisProject Assumptions, Valuation and Pay-BackKey Assumptions in the Financial Model1MiningParametersReserve Carats (M) 17.9Tonnes Processed (M) 23.8Recovered Grade (cpht) 75Average Ore Recovery (%) 82.9%Average Mining Dilution (%) 17.9%Dilution Grade (cpht) 0Processing Rate (Mtonnes/annum) 2.2Mine Life (years) 11CostParametersInitial Cap-ex (C$M)2 $752LOM Cap-ex (C$M)4 $1,013Oil Price (US$/barrel)2 $95LOM Op-ex (C$/tonne)2 $57.63LOM Op-ex (C$/carat)2 $76.63RevenueParametersGross Revenue (C$M)2 $4,268Marketing Costs 2.7%DIAQUEM Royalty 2.0%Cash Operating Margin (C$M)2 $2,693% Operating Margin 67%Income Tax, Mining Duties and IBAPayments (C$M)1 $625After Tax Net Cash Flow (C$M) $1,084DiamondPriceParameters3Renard 2 and Renard 3 (US$/carat) $182Renard 4 (US$/carat) $164Diamond Price Escalation 2.5%Exchange rate 1C$=1US$ScheduleParametersEffective Date for NPV Calculation Jan. 1 2013Construction Mobilization/Early Works Aug. 1 2013Plant Commissioning Commences Dec. 1 2015Commercial Production Declared Jun. 1 2016Valuation Results5(C$m)Pre-Tax After TaxNPV5% $894 $537NPV7% (Base Case) $683 $391NPV9% $514 $274IRR 20.4% 16.3%Pay-Back (years) 4.69 4.82Notes1. Optimization Study, released January 28th 2013.2. Expressed in October 2012 terms.3. Expressed in May 2011 terms.4. Expressed in nominal terms.5. Expressed in Dde-escalated nominal terms.
  36. 36. 36Diamond Price AssumptionsThe Diamond Market, January 2010 to March 201310015020025030035001/01/10 01/01/11 01/01/12 31/12/12Indexto2009=100WWW Rough Index, CPI Adjusted Renard Model Price GrowthWWW R.I. CPI Adj Base PriceMay 2011 Mar 2013+20%-10%+10%-20%May 2011 Valuationutilized in the FS basedon the average of 5diamantaires c.10%below the WWW roughindex priceA tracking of the diamond market since the publication of the November 2011 FS indicates rough diamondprices have generally remained within the bounds of sensitivities contained within the FS financial model(May 2011 spot prices and a 2.5% real terms annual price escalator).
  37. 37. 37Financial AnalysisCapital CostsCapital Costs1(C$m)Site Preparation & General $32.7Mining $151.2Mineral processing plant $175.4Onsite utilities and infrastructures $114.8Owner’s Cost $94.7Spares, fills, tools $7.1EPCM services $47.9Field indirect costs, vendor representatives $33.9Construction camp & Catering $24.5Freight and duties $5.5Contingency $64.7Total Initial Capital $752.1Escalation Allowance on Initial Capital $45.1Pre-Production Revenue $(25.0)Deferred & Sustaining Capital2 $175.9Deferred Capital (Route 167 Extension) $0.0Renard Mine Road2 $78.0Salvage Value2 $(13.3)Total LOM Capital $1,012.9Site Prep.& General7%Mining32%Plant37%Onsiteutilitiesandinfrastruc.24%Direct Costs (C$474m)Owner’sCost34%Spares3%EPCM17%Field,Vendorreps12%Camp9%Freight2%Contin.23%Indirect Costs (C$278m)Notes1. Optimization Study, released January 28th 2013. 2. After Escalation
  38. 38. 38Financial AnalysisOperating CostsNotes:1. Optimization Study, released January 28th 2013. Costs areexpressed in October 2012 terms. Totals may not add dueto rounding.2. Unit cost per processed tonnes.Open Pit Unit Costs1$/tonneOpen Pit 21.22Processing 15.29G&A2 and Infrastructure 18.27Total Open Pit3 54.78Underground Unit Costs1$/tonneUnderground 23.64Processing 15.29G&A2 and Infrastructure 18.27Total Underground3 57.20Life of Mine Operating Costs1,4(Real Terms)Total Operating Cost (C$M) 1,352Diamond Prod. (Mcarats) 17.6Production Cost357.63 C$/ t76.63 C$/ ct3. G&A unit costs do not include closure cost4. “Life of Mine Operating Costs” exclude diamond production prior to CommercialProduction 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$1,352m)
  39. 39. 39Financial AnalysisCarat Production and RevenueRevenue Parameters1(Real Terms)Total Gross Revenue (C$m) $4,268Marketing Costs (%) 2.7%DIAQUEM Royalty (%) 2.0%Cash Operating Margin (C$m) $2,693% Operating Margin 67%Taxes and Mining Duties and IBA Payments (C$m) $625Cumulative After Tax Cash Flow (C$m) $1,084Production Parameters1(Mcarats)Renard 2 Open Pit 1.24Renard 3 Open Pit 0.67Total Open Pit 1.91Renard 2 Underground 13.62Renard 3 Underground 0.84Renard 4 Underground 1.58Total Underground 16.03Total 17.9511%89%Diamond Production by Mining MethodOpen PitUnderground83%8%9%Diamond Production by Kimberlite PipeRenard 2Renard 3Renard 4Notes:1. Optimization Study, released January 28th 2013.
  40. 40. 40Financial AnalysisProject Valuation Sensitivities80% 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 TaxIRR80% 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 526,139 460,174 391,480 320,039 245,911Capital Cost 506,817 449,806 391,480 331,668 272,020Revenue 99,135 246,431 391,480 535,409 677,695010020030040050060070080% 90% 100% 110% 120%Operating Cost 891,143 789,142 683,499 574,143 461,111Capital Cost 845,695 764,629 683,499 601,269 519,031Revenue 231,318 457,408 683,499 909,511 1,135,6002004006008001,0001,200Pre-TaxIRRAfter TaxNPVPre-TaxNPV
  41. 41. 41Financial AnalysisRenard Diamond Valuation. Conducted by WWW May 9th to 13th 2011Conducted by WWW International DiamondConsultants Ltd. May 9th-13th 20111The Renard Feasibility Study of November 2011 and the January 2013 Optimization Study, consistent with the NI 43-101 compliant Mineral Resource ofJanuary 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 $164/carat. All samples utilize a +0.85mm (+1 DTC) cutoff.KimberliteBodyValuationSample(carats)Achieved Prices for the Valuation Samples WWW Price ModelingNumber ofIndependentValuationsAverage ofIndependentValuations(US$/carat)WWWValuation(US$/carat)WWW BaseCase Model(US$/carat)WWW "High"Model(US$/carat)WWW"Minimum"Model(US$/carat)Renard 2 1,580 5 $173 $195 $182 $236 $163Renard 3 2,753 5 $171 $190 $182 $205 $153Renard 4 2,674 5 $100 $107 $1121$185 $105The November 2011 Feasibility Study employed a diamond valuation exercise conducted under theauspices of WWW International Diamond Consultants in May 2011, with a diamond price escalation of 2.5%between Q3 2011 and Q4 2025. No change has been adopted for the January 2013 Optimization Study.
  42. 42. 42Financial AnalysisRenard Diamond Valuation SensitivitiesKimberlite BodyWWW BaseCase Model(US$/carat)WWW "High"Model(US$/carat)WWW"Minimum"Model(US$/carat)Renard 2Scenario 1 (Base Case): Utilizing an R2-R3 Size Frequency Model $182 $201 $163Scenario 2 (Alternative): Utilizing an R2 only Size Frequency Model $208 $236 $186Renard 3Scenario 1 (Base Case): Utilizing an R2-R3 Size Frequency Model $182 $205 $168Scenario 2 (Alternative): Utilizing an R3 only Size Frequency Model $165 $183 $153Renard 4Scenario 1 (Base Case): Utilizing an R2-R3 Size Frequency Model $164 $185 $152Scenario 2 (Alternative): Utilizing an R4 only Size Frequency Model $112 $121 $105WWW determine “High” and “Minimum” sensitivities on their Base Case diamond price model.The Feasibility Study and Optimization Study Base Case diamond price of US$182/carat for Renard 2 and 3and US$164/carat for Renard 4 derives from a value modeling approach that assumes a single diamond sizedistribution in the three 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$112/carat for Renard 4. This “Alternative” diamond price model is highly accretive to the project’svaluation given the dominance of Renard 2 in the mine plan. The interpretation of similarity in the diamondpopulations is the more conservative approach.
  43. 43. 43Financial AnalysisRenard Diamond Valuation Sensitivities1Use of the “Alternative” diamond price models are highly accretive to the project’s valuation given thedominance of Renard 2 in the mine plan. The base case assumption of similarity in the diamond sizedistributions between the Renard kimberlite pipes is the more conservative approach.A real-terms diamond price growth factor of 2.5% per annum has been applied between Q3 2011 and Q42025, consistent with well constrained rough diamond supply and demand forecasts and industry best-practice.Kimberlite BodyPre-Tax After-TaxNPV7%(C$m)IRRPay-Back(years)NPV7%(C$m)IRRPay-Back(years)WWW Minimum Model $399 15.5% 5.50 $209 12.3% 5.60Feasibility Study Base Case Model $683 20.3% 4.69 $391 16.3% 4.82Alternative Model $888 23.8% 4.16 $521 19.2% 4.24WWW High Model $1,292 29.3% 3.51 $775 23.9% 3.61Diamond Price Escalation (2012-2025)Pre-Tax After-TaxNPV7%(C$m)IRRPay-Back(years)NPV7%(C$m)IRRPay-Back(years)0% per annum $201 11.8% 6.01 $85 9.3% 6.102.5% per annum (Base Case) $683 20.3% 4.69 $391 16.3% 4.825% per annum $1,295 28.1% 3.77 $774 22.9% 3.85Notes:1. Optimization Study, released January 28th 2013.
  44. 44. 4444Appendix 3: Project Comparables
  45. 45. 45Project ComparablesRecent Canadian Diamond Mines Compared as of the Date of each FSSource: Company Reports and Stornoway Estimates. Excludes resource and diamond price upside from both projects. Excludes diamond price escalators.Assumes similar diamond recovery and mining dilution parameters.Ekati (1998)BHPB, As BuiltEstimatesDiavik (1999)Rio-Tinto, AsBuilt EstimatesVictor (2008)De Beers, AsBuilt EstimatesRenard FSOptimizationStudy (2013)Resource ParametersResource (m carats) 161 133 No data 41Resource (US$) $10B $6.7B No data $7.2BResource Grade (cpht) 110 360 No data 72Average Resource Diamond Price $60 $50 No data $175Resource Mine Life 25 25 No data n/aReserve ParametersReserve (carats) 72 102 6 17.9Reserve (dollars) $6B $5.5B $2.4B (est) $3.2BReserve Grade (cpht) 109 400 20 75Average Reserve Diamond Price $84 $55 $400 $180Average Reserve Ore Value (US$) $92 $220 $80 $136Reserve Mine Life 17 19 12 11Production ParametersAnnual Production (mCarats) Up to 3.6 Up to 7 0.5 Up to 2.0Annual Revenue (US$m) $302 $385 $215 $360LOM Op-ex (Cdn$/tonne) $100 to $60 $100 No data $58LOM Op-ex (Cdn$/carat) $92 to $55 $25 No data $76Canadian-US Dollar c.$0.75 $0.67 c.$1.00 $1.00Pre-Production Cap-ex (Cdn$) $900m $1.3B $982m $752m
  46. 46. 46Project ComparablesRecent Canadian Diamond Development Projects Compared as of the Date of each FSGahcho Kué FS (2010)Mountain ProvinceStar-Orion FS (2011)Shore GoldRenard FS OptimizationStudy (2013)Resource ParametersResource (m carats) 61 43 41Resource (US$) $5.1B $11B $7.2BResource Grade (cpht) 168 12 72Average 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/aReserve ParametersReserve (carats) 49 34 17.9Reserve (dollars) $3.7B $8.2B $3.2BReserve Grade (cpht) 157 12 75Average Reserve Diamond Price $75 $242 $180Average Reserve Ore Value (US$) $118 $30 $136Reserve Mine Life 11 20 11Production ParametersAnnual Production (mCarats) 4.5 1.7 Up to 2.0Annual Revenue (US$m) $338 $411 $360LOM Op-ex (Cdn$/tonne) $49 $14 $58LOM Op-ex (Cdn$/carat) $31 $114 $76Canadian-US Dollar 0.96 0.945 1.00Pre-Production Cap-ex (Cdn$)$550m($800m De Beers Dec 11)$1.9B $752mSource: Company Reports. Excludes resource and diamond price upside from both projects. Excludes diamond price escalators. Assumes similar diamondrecovery and mining dilution parameters.
  47. 47. 4747Appendix 4: Management Biographies
  48. 48. 48PRESIDENT, CHIEF EXECUTIVEOFFICER AND DIRECTORSTORNOWAY DIAMOND CORPORATION49 WELLINGTON STREET EAST, SUITE 300TORONTO, ONT M5E 1C9TEL. : (416) TSX:SWYMatt Manson, PhD.Matt Manson was appointed President of Stornoway Diamond Corporationin March 2007 following the acquisition of Ashton Mining of Canada andContact Diamond Corporation, and subsequently President & CEO inJanuary 2009.As President & CEO, Mr. Manson is responsible for the management of thecompany as a whole, playing a leadership role in all key business unitsincluding finance and budgets, exploration, human resources, investorrelations and advanced project development including the RenardDiamond Project.Between 1999 and 2005 he was employed by Aber Diamond Corporation(now Harry Winston Diamond Corporation) as VP Marketing andsubsequently VP Technical Services & Control, during which time heparticipated in the US$230m project financing for the Diavik DiamondProject and oversaw Abers technical and marketing operations during thefeasibility, construction and early production phases of Diavik. Between2005 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
  49. 49. 49CHIEF OPERATING OFFICERAND DIRECTORPatrick Godin, Eng., Asc.Pat Godin joined Stornoway as Chief Operating Officer in May 2010 andwas appointed to the Board of Directors in October 2011. He isresponsible 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 ofmining projects in the Americas and West Africa, and was responsible forthe developed of the Essakane Mine in Burkina Faso under contract toIAMGOLD.He was previously Vice President of Operations for Canadian Royalties,specifically heading the development of their nickel project in NorthernQuébec. He was also President and General Manager of CBJ-CAIMANS.A.S., a French subsidiary of Cambior / IAMGOLD, holder of the CampCaïman gold mining project located in French Guiana. For many years, hewas involved in Cambior’s various Canadian properties in Abitibi-Témiscamingue, through progressive management positions in projectdevelopment and mine management.He holds a bachelor’s degree in mining engineering from Université Lavalin Québec. Mr. Godin is a member of the “Ordre des Ingénieurs duQuébec”, of the Certified Directors College and of The Canadian Instituteof Mining, Metallurgy and Petroleum (CIM). He is the Chairman of theBoard of Geomega Resources and a director of Orbit-Garant Drilling.STORNOWAY DIAMOND CORPORATION1111 RUE ST. CHARLES O.LONGUEUIL, QUÉBEC J4K 4G4TEL. : (450) 616-5555www.stornowaydiamonds.comTSX:SWYAppendix: Management Biographies
  50. 50. 50VICE PRESIDENT, FINANCE ANDCFOZara Boldt, B.A., CGAZara Boldt was appointed Vice President, Finance with Stornoway in May2007, after serving as Stornoway’s Controller between 2004 and 2007, andChief Financial Officer in March 2010.As Vice President Finance and CFO, Ms. Boldt is responsible for themanagement of the corporate and financial affairs of the corporation, andfor the oversight of its regulatory reporting requirements.Ms. Boldt has held positions of progressive responsibility with severalmineral exploration companies, in addition to several years of experiencewith a national investment dealer. Her most recent resource industry rolesinclude CFO for Sherwood Copper Corporation from May 2006 to May 2007and Controller for the Northair Group of Companies between May 2004and April 2007.Ms. Boldt is a Certified General Accountant and a graduate of theUniversity of Puget Sound in Tacoma, Washington. She is a director ofTroon Ventures Ltd., where she serves as Chair of the Audit Committee.STORNOWAY DIAMOND CORPORATION980 W FIRST STREET, #116NORTH VANCOUVER, BC, V7P 3N4TEL. : (604) 983-7750www.stornowaydiamonds.comTSX:SWYAppendix: Management Biographies