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Junior reports sizable diamond resource

Advanced exploration-stage projects on Melville Peninsula offer significant internal growth opportunities for successful explorer

With its flagship Renard project firmly on track to becoming Québec's first diamond mine, Stornoway Diamond Corp. recently demonstrated that it is also making progress in advancing its diamond exploration projects in Nunavut.

In an NI 43-101 technical report recently filed on SEDAR, the explorer reported the first mineral resource estimate for the Q1-4 kimberlite pipe located at the explorer's Qilalugaq project in Nunavut.

The Qilalugaq project includes the Qilalugaq kimberlite pipes and the Naujaat system of kimberlite dikes, and has been the focus of ongoing exploration and assessment work by Stornoway since it was optioned and subsequently acquired from BHP Billiton Diamonds Inc. in July 2006 and July 2010, respectively.

Highlights of the technical report include a total inferred mineral resource for the Q1-4 kimberlite pipe of 26.1 million carats from 48.8 million metric tons of kimberlite with an average plus-1 DTC diamond content of 53.6 carats per hundred metric tons extending from surface to a depth of 205 meters; and additional resource upside has been identified in the form of a target for further exploration for the Q1-4 kimberlite pipe of between 7.9 million to 9.3 million carats from 14.1 million to 16.6 million metric tons total content of kimberlite with an average plus-1 DTC diamond content of 56.1 carats per hundred tons, extending from 205 meters to 305 meters depth.

The reader is cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. In addition, the potential quantity and grade of any target for further exploration 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.

Kimberlites at Qilalugaq

"As we focus on the financing and development of the Renard diamond project in Québec, we continue to nurture our pipeline projects that represent the company's future growth potential," said Stornoway President and CEO Matt Manson.

The Qilalugaq project comprises 114,965 hectares (284,071 acres) of land located 10 kilometers (6 miles) north of Repulse Bay on the Rae Isthmus, which connects the Melville Peninsula to mainland Nunavut.

The property hosts 19 kimberlites, including the 14-hectare (34.6 acres) coalescing Q1-4 bodies, currently the largest known kimberlite in the eastern Arctic and the subject of a previous, large-scale sampling program by BHP. The major discovered eight kimberlites at Qilalugaq between 2003 and 2005.

The permits were initially acquired by BHP in 2001 and since that time the project has undergone several phases of exploration using airborne geophysics (magnetics, electromagnetics and gravity together with property-wide till sampling, drilling and limited mini-bulk sampling. Eleven kimberlites were discovered as a result of BHP's work and the 10 that were tested proved diamondiferous.

Montreal-based Stornoway discovered eight kimberlite dikes since optioning the project and taking over as operator in 2006. From 2006 to 2010, the junior was working to earn a 50 percent interest in the project from BHP.

In May 2010, Stornoway increased its ownership of the project to 100 percent, including 100 percent of the diamond marketing rights, by providing BHP with a 3 percent gross production royalty interest on diamonds and a 3 percent net smelter return royalty on other minerals.

In July 2010 Stornoway discovered a new kimberlite dike on the project. The 650-meter long Naujaat 8 body is represented by a linear series of discontinuous occurrences of frost heaved kimberlite fragments and boulders. Naujaat 8 was identified by prospecting in the vicinity of an anomalous till sample, bringing the total number of kimberlite bodies at Qilalugaq to 19.

Advanced exploration project

"The Qilalugaq project, along with the Aviat project on the Melville Peninsula of Nunavut, is one of our advanced exploration projects where previous work has delineated a large potential inventory of diamonds, but where we have only limited diamond valuation data," said Manson.

The Q1-4 kimberlite complex at Qilalugaq is large, easily accessible from the hamlet of Repulse Bay, and exposed at surface.

"We are very pleased to have reported such a large maiden mineral resource estimate at a project that, with the long-term positive outlook on diamond prices, is becoming increasing compelling," Manson added.

The 12.5 hectare Q1-4 kimberlite, the largest kimberlite pipe in the eastern Canadian Arctic, is situated approximately 8 kilometers (5 miles) from tidewater, and less than 9 kilometers (5.5 miles) from the hamlet of Repulse Bay.

Q1-4 is interpreted as a complex, steep-sided, diatreme to root-zone kimberlite, with a lobate external shape.

It is comprised of five phases of kimberlite: A28a, A48a, A48b, A61a and A88a, and has been geologically modeled to a depth of 305 meters below surface.

The pipe shape was defined from drill-hole data, country rock and kimberlite outcrop exposures, and magnetic geophysical surveys.

Kimberlite geology has been determined using detailed logging of drill core and results of petrographic studies and includes massive volcaniclastic kimberlite classified as "tuffisitic" kimberlitic breccia, lesser coherent "hypabyssal" kimberlite, and varying proportions of country-rock xenoliths.

Resource estimate

The mineral resource estimate was authored by Geostrat Consulting Inc. of Rancho Palos Verdes, Calif., and comprises the integration of kimberlite volumes, density, petrology and diamond content-data obtained from 5,133 meters of diamond drilling, 2,714 meters of reverse circulation drilling, 2.9 metric tons of samples submitted for microdiamond analysis, 257.7 metric tons of samples submitted for macrodiamond sampling with 59.2 carats of diamonds (2,054 stones) recovered from RC drilling, 7.5 carats of diamonds (205 stones) recovered from surface trenching and 2.36 carats of diamonds (69 stones) recovered from HQ diameter diamond drilling.

These data summarize the results of exploration programs conducted on the Qilalugaq Property by BHPB from 2003 to 2005 and by Stornoway from 2006 to 2012.

The technical report recommends proceeding to the collection of a large tonnage surface sample at Q1-4 to establish a diamond price estimate. Stornoway has submitted an application to regulatory authorities to allow it to pursue this program of work, subject to an investment decision to proceed.

Though it continues to pursue growth opportunities at the Aviat and Qilalugaq projects in Nunavut, Stornoway recently said its 2012 focus will be on its new projects in Saskatchewan (Pikoo) and Québec (Aeon), following up pre-2008 indicator anomalies and potential for new kimberlite cluster close to infrastructure.

"Stornoway will continue to progress its grassroots exploration projects as it works to develop Renard," the company said in an investor presentation dated May 14.


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