Stornoway Announces Third Quarter Production and Sales Results

LONGUEUIL, Qu?(C)bec, Oct.10, 2017(GLOBE NEWSWIRE) -- Stornoway Diamond Corporation (TSX:SWY) (the "Corporation" or "Stornoway") is pleased to provide production and sales results at the Renard Diamond Mine for the quarter ended September 30, 2017.Highlights include:

• 442,154 carats produced from the processing of 506,381 tonnes of ore with an attributable grade of 87 carats per hundred tonnes ("cpht"), compared to a plan of 422,475 carats from 540,000 tonnes at 78 cpht (+5%, -6% and +12% respectively).
  
  
• Average processing rate of 5,957 tonnes per day achieved during the quarter.
  
  
• 438,632 carats sold in two sales (2017 sales #6 and #7) for gross proceeds¹ of C$51.6 million², at an average price of US$94 per carat (C$118 per carat²).

Matt Manson, President & CEO commented: "The third quarter at the Renard diamond mine saw continued robust carat production with a 12% beat on recovered grade compared to our mine plan. On a project to date basis our recovered grades are reconciling well with the overall expected resource model, and reflecting a positive geological reconciliation in the Renard 2-Renard 3 open pit. During the quarter we saw growth in carats sold, gross sales revenue, and average pricing compared to the first half of the year, despite a rough market correction at the end of the quarter which served to slow the rate of increase. At the process plant, we are achieving steady name-plate capacity in processing, and have broken ground on our new ore/waste sorting circuit that we expect will positively impact the quality of our diamond production and achieved pricing at sale. Third quarter financial results, including operating costs and earnings, will be released after market on Thursday, November 2, 2017."

Diamond Production

During the quarter, 506,380 tonnes of ore were processed compared to the plan of 540,000 tonnes (-6%). However, better than expected ore grades in the Renard 2-Renard 3 open pit led to higher diamond production than planned, with 442,154 carats produced at 87 cpht compared to 422,475 carats at 78 cpht (+5% and +12% respectively).

From the beginning of ore processing at the Renard Mine in July 2016 to September 30, 2017, 1.83 million tonnes of ore have been delivered to the process plant resulting in the production of 1.69 million carats of diamonds at 92 cpht. This compares favourably with the March 2016 mine plan of 1.68 million tonnes and 1.50 million carats at 89 cpht (+10%, +13% and +4% respectively).

The average processing rate of the plant during the third quarter was 5,957 tonnes per day, excluding a 7 day scheduled annual maintenance shutdown in July. The nameplate capacity of the plant is 6,000 tonnes per day at 78% utilization.

Diamond Sales and Market Commentary

Two tender sales were completed during the quarter. In total, 438,632 carats were sold for gross proceeds¹ of C$51.6 million², at an average price of US$94 per carat (C$118 per carat²). This compares to an average price of US$81 achieved in the first quarter and US$87 per carat in the second quarter (Table 1).

Table (1) Sales Data FY2017

At the beginning of third quarter Stornoway completed its 6^th sale of the year, with 151,135 carats sold at an average price of US$101 per carat (C$128 per carat⁶). Following the traditional summer recess for the rough diamond market in August, Stornoway completed its 7^th and largest sale to date, with 287,497⁶ carats sold at an average price of US$90 per carat (C$112 per carat⁷). During this period the rough diamond market experienced a price correction after several months of gains, estimated at between 6% and 8% on an average weighted basis. This is reflected in the prices achieved in Stornoway's tender sales at the beginning and end of the quarter.

The average pricing achieved in the Renard diamond tender sales is impacted by, amongst other things, the proportion of small diamonds in the sales mix, market factors, and the ongoing issues of diamond breakage in the process plant, which reduces the proportion of larger diamonds available for sale and influences the average quality assortment. Despite the steady increase in pricing achieved during the course of the year on a quarter by quarter basis, it is likely that the annual average price for the fiscal year ending December 31, 2017 will fall below Stornoway's 2017 pricing guidance of US$100 to US$132 per carat given the outlook for the rough diamond market for the remainder of the year. Stornoway will hold two further tender sales in the fourth quarter.

Processing Update

Since ore processing at Renard began, the project has experienced high levels of diamond breakage. This is manifested most directly in the proportion of larger diamonds recovered, and in the average quality profile. Both factors negatively impact the achieved average diamond price at sale.

The source of the breakage has been localized primarily in the secondary cone crusher and tertiary high pressure grinding rolls crusher, and appears associated with the high proportion of hard, internal dilution inherent in Renard ore. In early August the Stornoway board of directors approved an extraordinary capital budget of $22 million for a program of plant improvements aimed at improving the quality profile of the Renard production, to be funded from existing financial resources. At the center of this plan is the introduction of an ore/waste sorting circuit, rated at 7,000 tonnes per day and expandable, designed to extract waste rock in the +30mm-200mm size range immediately prior to its introduction to the secondary cone crusher. The ore/waste sorting circuit will include covered conveyors, a gravity fed tower containing primary, secondary and scavenging spectral sorters, and a waste rock load out. Work on the concrete foundations began in August, and all steel work and enclosures are scheduled to be completed by year end. Commissioning is scheduled for the first quarter of 2018. In addition to an improved diamond size and quality profile, the addition of this circuit is expected to have the ancillary benefit of reducing load on the rest of the Renard process plant, allowing for future potential plant expansion.

About the Renard Diamond Mine

The Renard Diamond Mine is Quebec's first producing diamond mine and Canada's sixth. It 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 Qu?(C)bec. Construction on the project commenced on July 10, 2014, and commercial production was declared on January 1, 2017. Average annual diamond production is forecast at 1.8 million carats per annum over the first 10 years of mining. Readers are referred to the technical report dated January 11, 2016, in respect of the September 2015 Mineral Resource estimate, and the technical report dated March 30, 2016, in respect of the March 2016 Updated Mine Plan and Mineral Reserve Estimate 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 and headquartered in Montreal. Our flagship asset is the 100% owned Renard Diamond Mine, Qu?(C)bec's first diamond mine. 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
/s/ "Matt Manson"
Matt Manson
President and Chief Executive Officer

For more information, please contact Matt Manson (President and CEO) at 416-304-1026 x2101
or Orin Baranowsky (CFO) at 416-304-1026 x2103 or Jodi Hackett (Manager, Communications) at 416-304-1026 x2104
or toll free at 1-877-331-2232

Pour plus d'information, veuillez contacter M. Ghislain Poirier, Vice-pr?(C)sident Affaires publiques de Stornoway au 418-254-6550, gpoirier@stornowaydiamonds.com

** Website: www.stornowaydiamonds.com Email: info@stornowaydiamonds.com **

This document contains forward-looking information (as defined in National Instrument 51 102 - Continuous Disclosure Obligations) and forward-looking statements within the meaning of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking information" or "forward-looking statements"). These forward-looking statements are made as of the date of this document and, the Corporation does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by law.

These forward-looking statements relate to future events or future performance and include, among others, statements with respect to Stornoway's objectives for the ensuing year, our medium and long-term goals, and strategies to achieve those objectives and goals, as well as statements with respect to our management's beliefs, plans, objectives, expectations, estimates, intentions and future outlook and anticipated events or results. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking statements made in this document include, but are not limited to, statements with respect to: (i) the amount of Mineral Reserves, 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 recovered grade, size distribution and quality of diamonds, average ore recovery, internal dilution, mining dilution and other mining parameters set out in the 2016 Technical Report as well as levels of diamond breakage;(v) assumptions relating to gross revenues, cost of sales, cash cost of production, gross margins estimates, planned and projected capital expenditure, liquidity and working capital requirements; (vi) mine expansion potential and expected mine life; (vii) expected time frames for completion of permitting and regulatory approvals related to ongoingconstruction activities at the Renard Diamond Mine; (viii)the expected time frames for the completion of the open pit and underground mine at the Renard Diamond Mine; (ix) the expected time frames for the ramp-up and achievement of plant nameplate capacity of the Renard Diamond Mine (x) the expectedfinancial obligations or costs incurred by Stornoway in connection with the ongoing development of the Renard Diamond Mine; (xi) future exploration plans; (xii) future market prices for rough diamonds; (xiii) the economic benefits of using liquefied natural gas rather than diesel for power generation; (xiv) sources of and anticipated financing requirements; (xv) the effectiveness, funding or availability, as the case may require, of the Senior Secured Loan and the remaining Equipment Facility and the use of proceeds therefrom; (xvi) the Corporation's ability to meet its Subject Diamonds Interest delivery obligations under the Purchase and Sale Agreement; (xvii) the impact of the Financing Transactions on the Corporation's operations, infrastructure, opportunities, financial condition, access to capital and overall strategy; (xviii) the foreign exchange rate between the US dollar and the Canadian dollar; and (xix) the availability of excess funding for the operation of the Renard Diamond Mine. 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", "schedule" 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 prospects and strategies and the environment in which Stornoway will operate in the future, including the recovered grade, size distribution and quality of diamonds, average ore recovery, internal dilution, and levels of diamond breakage, the price of diamonds, anticipated costs and Stornoway's ability to achieve its goals, anticipated financial performance, regulatory developments, development plans, exploration, development and mining activities and commitments, and the foreign exchange rate between the US and Canadian dollars. Although management considers its assumptions on such matters to be reasonable based on information currently available to it, they may prove to be incorrect. Certain important assumptions by Stornoway or its consultants in making forward-looking statements include, but are not limited to: (i) required capital investment and estimated workforce requirements; (ii) estimates of net present value and internal rates of return; (iii) recovered grade, size distribution and quality of diamonds, average ore recovery, internal dilution, mining dilution and other mining parameters set out in the 2016 Technical Report as well as levels of diamond breakage, (iv) receipt of regulatory approvals on acceptable terms within commonly experienced time frames; (v) anticipated timelines for ramp-up and achievement of nameplate capacity at the Renard Diamond Mine, (vi) anticipated timelines for the development of an open pit and underground mine at the Renard Diamond Mine;?EUR? (vii) anticipated geological formations; (viii) market prices for rough diamonds and their potential impact on the Renard Diamond Mine; (ix) the satisfaction or waiver of all conditions under the Senior Secured Loan and the remaining Equipment Facility to allow the Corporation to draw on the funding available under those financing elements; (x) Stornoway's interpretation of the geological drill data collected and its potential impact on stated Mineral Resources and mine life; (xi) future exploration plans and objectives; (xii) the Corporation's ability to meet its Subject Diamonds Interest delivery obligations under the Purchase and Sale Agreement; and (xiii) the continued strength of the US dollar against the Canadian dollar.

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, size distribution and quality of diamonds, kimberlite lithologies and country rock content within the material identified as Mineral Resources from that predicted; (ii) variations in rates of recovery and levels of diamond breakage; (iii) the uncertainty as to whether further exploration of exploration targets will result in the targets being delineated as Mineral Resources; (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, operating and sustainable capital 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) uncertainty of 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; (xii)risks relating to the receipt of regulatory approvals or the implementation of the existing Impact and Benefits Agreement with aboriginal communities; (xiii) the effects of competition in the markets in which Stornoway operates; (xiv) operational and infrastructure risks; (xv) execution risk relating to the development of an operating mine at the Renard Diamond Mine; (xvi) failure to satisfy the conditions to the funding or availability, as the case may require, of the Senior Secured Loan and the Equipment Facility; (xvii) changes in the terms of the Forward Sale of Diamonds, the Senior Secured Loan or the Equipment Facility; (xviii) the funds of the Senior Secured Loan or the Equipment Facility not being available to the Corporation; (xix) the Corporation being unable to meet its Subject Diamonds Interest delivery obligations under the Purchase and Sale Agreement; (xx) future sales or issuances of Common Shares lowering the Common Share price and diluting the interest of existing shareholders; and (xxi) the additional risk factors described herein and in Stornoway's annual and interim MD&A's, most recently filed AIF, its other disclosure documents 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 and new, unforeseeable risks may arise from time to time, and (xxi) the additional risk factors described herein and in Stornoway's annual and interim MD&A's, most recently filed AIF, its other disclosure documents 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 and new, unforeseeable risks may arise from time to time.

¹ Before stream and royalty.
² Based on an average C$: US$ conversion rate of $1.2520.
³ Excludes 52,681 carats of smaller and lower quality goods carried over from Stornoway's first sale in November 2016.
⁴ Includes 32,989 carats sold during the third quarter's last tender sale, but for which revenues will be realized in the fourth quarter.
⁵ In the first quarter, four out of tender sales were concluded in addition to the three regular tender sales.
⁶ Based on an average C$: US$ conversion rate of $1.2627.
⁷ Based on an average C$: US$ conversion rate of $1.2456.