Stornoway Diamond Corporation (TSX:SWY) is pleased to announce that
its wholly-owned subsidiary Les Diamants Stornoway (Canada) Inc.
has entered into a Framework Agreement and an associated Letter of
Intent (collectively the "Agreement") with the Government of Quebec
for the financing and completion of the Route 167 Extension under
Stornoway's direct management. The Agreement is designed to ensure
timely road access to the Renard Diamond Project and the
commencement of mine construction during 2013, as previously
contemplated. Key features of the new Agreement are as follows:
-- Stornoway to assume the completion of segments "C" and "D" of the Route
167 Extension as a single lane mining grade road; and
-- Quebec to provide Stornoway with an unsecured credit facility of up to
C$77m to complete the work, at an annual interest rate of 3.35% percent,
amortized over 15 years, with a repayment schedule based upon planned
commencement of commercial production at Renard.
In addition, and in support of Stornoway's construction schedule
for Renard, Quebec has agreed that:
-- The Quebec Ministere des Transports ("MTQ") shall continue with the
construction of a winter road this season as previously planned,
providing temporary road access to Renard by March 2013; and
-- The Quebec Ministere du Developpement Durable, de l'Environnement, de la
Faune et des Parcs and the MTQ shall transfer all relevant
authorizations for Stornoway to commence mining road construction by
April 2013.
As a result of the Agreement, Stornoway now anticipates first
all-season vehicle access to the Renard project site by the 4th
Quarter of 2013, compared to July 2013 previously.
Matt Manson, Stornoway's President and CEO commented: "Today's
news represents the removal of a major element of uncertainty over
the Renard Diamond Project. With Stornoway now responsible for the
completion of the project's access road, we will be in full control
of our overall development schedule for the first time. The
financing terms that we have negotiated to complete this work are
beneficial to Stornoway, and are expected to have a minimal impact
on the project's overall valuation and financing capacity. This is
an excellent example of government and the mining industry working
in partnership to achieve a common goal." Mr. Manson continued:
"Since Stornoway's October 29th announcement of the potential for a
delay in the completion of the Route 167 Extension, we have moved
quickly to re-establish a viable plan for road access to Renard
during 2013. The Agreement announced today achieves this, and
allows us to continue moving forward with our project financing and
development activities. This positive outcome will benefit our
shareholders, our community partners and Quebec in equal
measure."
Construction on the 240km long Route 167 Extension began in
February of this year, and is being undertaken in four segments,
"A" to "D". Under the terms of the Framework Agreement executed
today with the MTQ, the Quebec Ministere des Ressources Naturelles
("MRN"), and the Quebec Ministere des Finances et de l'Economie
("MFE"), Quebec will complete the first 143km of the road over
segments A and B as a 70km/hr two-lane gravel highway, as
previously planned. Starting in April 2013, Stornoway will commence
construction of a 50km/hr single lane mining road over the
remaining 97km covered by segments C and D. To facilitate this
schedule, the MTQ has committed to complete a winter road by March
2013, allowing temporary access to Renard and the mobilization of
fuel, road construction equipment and camps. Given the reduced
scope of the mining road that will be built on segments C and D,
and the progress that has been made to date on segments A and B, it
is expected that this construction plan will allow all-season road
access to be available to Renard starting in the 4th Quarter of
2013 and mine construction to commence forthwith. Maintenance costs
on segments C and D will be borne by Stornoway, and by Quebec on
segments A and B.
The cost of a mining road on segments C and D has been estimated
by Stornoway at C$77 million, including a 15% contingency. Under
the terms of the Letter of Intent between Stornoway and the MFE,
this cost will be financed by way of an unsecured credit facility
to be provided to Stornoway by the MFE, bearing an annual interest
rate of 3.35% and amortized over a fifteen year period. In order to
provide additional cost contingency, the MFE is agreeing to provide
Stornoway with a second facility, with the right to draw a further
C$7.7 million, bearing an annual interest rate of 6.3%, for total
credit facilities of up to C$84.7 million. Stornoway's schedule of
loan repayments is based upon the schedule of financing and
construction of the Renard Diamond Project, commencing upon the
attainment of commercial production. Finalisation of these terms is
dependent upon the conclusion of a definitive Financing Agreement
between Stornoway and the MFE, which is currently under
negotiation. Stornoway's obligations under the Framework Agreement
are conditional upon the execution of the definitive Financing
Agreement.
The Agreement provides for the termination of, and replaces, the
two pre-existing agreements between Stornoway and Quebec dated
August 1st 2011, wherein Stornoway agreed to contribute C$44
million to the construction of the Route 167 Extension at a 6.3%
interest rate over 10 years, and up to C$1.215 million per year to
the road's maintenance.
About the Renard Diamond Project
The Renard Diamond Project is located approximately 250 km north
of the Cree community of Mistissini and 350 km north of Chibougamau
in the James Bay region of North-Central Quebec. In November 2011,
Stornoway released the results of a Feasibility Study for Renard
that highlighted the potential of the project to become a
significant producer of high value rough diamonds over a long mine
life. NI 43-101 compliant Probable Mineral Reserves stand at 18.0
million carats, with a further 17.5 million carats classified as
Inferred Mineral Resources, and 23.5 to 48.5 million carats
classified as non-resource exploration upside. All kimberlites
remain open at depth. Pre-production capital cost stands at an
estimated C$802 million, with a life of mine operating cost of
C$54.71/tonne giving a 68% operating margin over an initial 11 year
mine life. Readers are referred to the technical report dated
December 29, 2011 in respect of the Renard Diamond Project for
further details and assumptions relating to the project.
About Stornoway Diamond Corporation
Stornoway is a leading Canadian diamond exploration and
development company listed on the Toronto Stock Exchange under the
symbol SWY. Our flagship asset is the 100% owned Renard Diamond
Project, on track to becoming Quebec's first diamond mine.
Stornoway also maintains an active diamond exploration program with
both advanced and grassroots programs in the most prospective
regions of Canada. Stornoway is a growth oriented company with a
world class asset, in one of the world's best mining jurisdictions,
in one of the world's great mining businesses.
On behalf of the Board
STORNOWAY DIAMOND CORPORATION
Matt Manson, President and Chief Executive Officer
This press release 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 press release 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 capital costs, operating
costs and other cost metrics set out in the Feasibility Study; (v)
assumptions relating to gross revenues, operating cash flow and
other revenue metrics set out in the Feasibility Study; (vi)
assumptions relating to recovered grade, average ore recovery and
other mining parameters set out in the Feasibility Study; (vii)
mine expansion potential and expected mine life; (viii) expected
time frames for completion of permitting and regulatory approvals
and making a production decision; (ix) the expected time frames for
delivery of a winter road by the Quebec Ministere des Transports,
construction of a mining grade road by Stornoway and completion
generally of the Route 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 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 by Stornoway or its consultants and other important
factors that, if untrue, could cause the actual results,
performances or achievements of Stornoway to be materially
different from future results, performances or achievements
expressed or implied by such statements. Such statements and
information are based on numerous assumptions regarding present and
future business strategies and the environment in which Stornoway
will operate in the future, including the price of diamonds,
anticipated costs and ability to achieve 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) estimated approval
date of the Environmental and Social Impact Assessment; (ii)
required capital investment and estimated workforce requirements;
(iii) estimates of net present value and internal rates of return;
(iv) receipt of regulatory approvals on acceptable terms 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 Quebec Ministere des Transports, construction
of a mining grade road by Stornoway and completion generally of the
Route 167 extension and the impact on the development schedule at
Renard; (viii) anticipated timelines for community consultations
and the impact of those consultations on the regulatory approval
process; (ix) market prices for rough diamonds and the potential
impact on the Renard Project's value; and (x) future exploration
plans and objectives.
By their very nature, forward-looking statements involve
inherent risks and uncertainties, both general and specific, and
risks exist that estimates, forecasts, projections and other
forward-looking statements will not be achieved or that assumptions
do not reflect future experience. We caution readers not to place
undue reliance on these forward-looking statements as a number of
important risk factors could cause the actual outcomes to differ
materially from the beliefs, plans, objectives, expectations,
anticipations, estimates, assumptions and intentions expressed in
such forward-looking statements. These risk factors may be
generally stated as the risk that the assumptions and estimates
expressed above do not occur, including the assumption in many
forward-looking statements that other forward-looking statements
will be correct, but specifically include, without limitation, (i)
risks relating to variations in the grade, kimberlite lithologies
and country rock content within the material identified as mineral
resources from that predicted; (ii) variations in rates of recovery
and breakage; (iii) the greater uncertainty of exploration targets;
(iv) developments in world diamond markets; (v) slower increases in
diamond valuations than assumed; (vi) risks relating to
fluctuations in the Canadian dollar and other currencies relative
to the US dollar; (vii) increases in the costs of proposed capital
and operating expenditures; (viii) increases in financing costs or
adverse changes to the terms of available financing if any; (ix)
tax rates or royalties being greater than assumed; (x) results of
exploration in areas of potential expansion of resources; (xi)
changes in development or mining plans due to changes in other
factors or exploration results of Stornoway; (xii) changes in
project parameters as plans continue to be refined; (xiii) risks
relating to receipt of regulatory approvals or the implementation
of the existing Impact and Benefits Agreement with aboriginal
communities; (xiv) the effects of competition in the markets in
which Stornoway operates; (xv) operational and infrastructure
risks; (xvi) technical, environmental, permitting and execution
risk relating to the construction by Stornoway of a mining grade
road forming part of the Route 167 extension, (xvii) weather
conditions or other unpredictable events which may impact the
construction or planned availability of a winter road by March
2013; and (xviii) the additional risks described in Stornoway's
most recently filed Annual Information Form, annual and interim
MD&A, and Stornoway's anticipation of and success in managing
the foregoing risks. Stornoway cautions that the foregoing list of
factors that may affect future results is not exhaustive.
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.
Contacts: Stornoway Diamond Corporation Matt Manson President
and CEO 416-304-1026 Stornoway Diamond Corporation Nick Thomas
Manager Investor Relations 604-983-7754 or Toll Free:
1-877-331-2232 Stornoway Diamond Corporation M. Ghislain Poirier
Vice-president Affaires publiques de Stornoway
418-780-3938gpoirier@stornowaydiamonds.com Stornoway Diamond
Corporationinfo@stornowaydiamonds.com www.stornowaydiamonds.com
Stornoway Diamond Corporation - Media Requests Serge Vallieres
514-589-7214