Stornoway Provides Update On Renard Powerline Study

NEWS RELEASE.

July 4, 2012: Montreal, Quebec – Stornoway Diamond Corp. (Stock Profile – TSX: SWY) reported that it received the results of a feasibility study on a 161kV powerline to supply grid power to the Renard Diamond Project, Stornoway’s 100% owned flagship asset located in north-central Québec.

The powerline study was conducted on behalf of Stornoway by Hydro-Québec, the provincially owned utility. Capital cost is estimated at $173.6 million for a 159 kilometer long line between Renard and the Laforge 1 hydro-electric generating station. The December 2011 Renard Project Feasibility Study contemplates on-site power generation using diesel fueled gensets, with a pre-production capital cost of C$802 million and an average operating cost of C$54.71/tonne. A powerline would represent additional capital cost to the project, but a potential saving in operating cost. Based on a Hydro-Québec tariff “L” of $0.0583/kWh, it is estimated that the operating cost savings would be approximately C$9/tonne based on the operating parameters contained within the Feasibility Study.

The Hydro-Québec powerline has been designed to support multiple users, including potential mine development projects located to the south of Renard. Hydro-Québec will require that Stornoway finance the powerline’s cost upfront, and have proposed a capital rebate should these other projects be connected in the future. On this basis, Stornoway estimates that the powerline as currently configured will yield only a marginal net economic benefit to the Renard Project over the initial 11 years of Mineral Reserve-based mine life, but will produce a more positive economic return over the longer mine life that would be achieved should the project’s total Mineral Resource be developed.

Consequently, Stornoway will not proceed with the powerline proposal as presented by Hydro-Québec, and will pursue the initial development of Renard based on the diesel fueled genset configuration contained within the Renard Feasibility Study. Stornoway will seek to develop a powerline to Renard on a more cost efficient basis as a second phase capital investment following the completion of mine construction, and based upon the future potential development of the project’s large Inferred Mineral Resource and exploration upside.

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