VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 01/28/13 -- Stornoway Diamond Corporation (TSX: SWY) is pleased to report the completion of a mine design and cost optimization exercise (the "Optimization Study") for the Renard Diamond Project, Stornoway's 100% owned mining development project located in north-central Quebec. The Optimization Study incorporates certain design refinements undertaken since the release of the project's Feasibility Study in November 2011 (the "Feasibility Study"), including the deferral of shaft access for the underground mine and a modified underground mining sequence and draw point design. As a result of these design changes, project operating and capital cost estimates have been restated, and a revised production schedule established. The Optimization Study also contains an updated project development schedule and financial model incorporating, amongst other things, the terms of the March 2012 Mecheshoo Agreement with the Cree Nation of Mistissini, the Grand Council of the Crees (Eeyou Istchee), and the Cree Regional Authority, and the November 2012 Renard Mine Road financing agreement with the Government of Quebec. Highlights of the Optimization Study are as follows:
-- A revised initial capital cost of C$752 million, including contingencies, in October 2012 terms, a reduction of C$50 million from the previous estimate which was expressed in June 2011 terms.-- A revised operating cost averaging C$57.63/tonne (C$76.63/carat) life of mine in October 2012 terms, an increase of C$2.92/tonne from the previous estimate.-- Base case estimates of Net Present Value ("NPV") of C$683 million at a 7% discount rate and Internal Rate of Return ("IRR") of 20.3% before taxes and mining duties, and C$391 million and 16.3% after taxes and mining duties, all improvements from the previous estimates.-- 11 years reserve-based mine life with diamond production averaging 1.6 million carats/annum life of mine, real terms net revenue of C$4,046 million, and a cash operating margin of C$2,693 million (67% compared to 68% in the previous estimate).
Matt Manson, President and CEO, commented: "The Optimization Study reported today confirms a robust project with strong cash flows. Since the release of the project's Feasibility Study, we have been able to bring down our initial capital cost estimate with only a modest impact on the project's operating costs. We are particularly pleased that the project has so successfully absorbed the kind of post-feasibility design adjustments and operating agreements that can negatively impact a project's value. The deferral of the shaft has been achieved without compromising the future development of the project's substantial resource upside, and the refinements made to the underground mining sequence provide greater confidence in the operating parameters for this critical part of the overall mine plan. With our Mining Lease and Quebec Certificate of Authorization in hand, and the Renard Mine Road under development, we can now move towards finalizing our project financing arrangements, and initiating project construction in the third quarter of this year."
The Optimization Study restates the project's Probable Mineral Reserves at 17.9 million carats (23.8 Mtonnes at 75 carats per hundred tonnes, or "cpht"), a reduction of 0.1 million carats after allowance for revised mining dilution and ore recovery estimates. The new study does not incorporate any changes to the project's underlying National Instrument ("NI") 43-101 compliant Mineral Resources, and does not include the results of the ongoing bulk sampling program at the Renard 65 kimberlite. Including Renard 65, the project contains 17.5 million carats (31.1 Mtonnes at 56 cpht) of Inferred Mineral Resources, much of which lies within the envelope of the planned mine infrastructure. Since mineral resources that are not mineral reserves do not have demonstrated economic viability, these have not been incorporated into the Optimization Study mine plan, in compliance with Canadian reporting standards. However, the project's design, processed kimberlite storage capacity, permits and Mining Lease contemplates the eventual mining of all NI 43-101 Mineral Resources over an extended mine life. In addition to the Mineral Resources, 23.5 to 48.5 million carats of non-resource exploration upside (55.1 to 75.5 Mtonnes at grades ranging from 23 to 188 cpht) has been estimated to 775 meters depth, below which each kimberlite remains open. Readers are cautioned that the potential quantity and grade of any such exploration target is conceptual in nature, there has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the target being delineated as a mineral resource (an Optimization Study Support Material presentation is available at http://stornowaydiamonds.com/_resources/feasibility_support_materials_20130128.pdf).