BUILDING QUÉBEC S FIRST DIAMOND MINE. Vancouver Resource Investment Conference, January 23 rd, 2012

Transcription

1 BUILDING QUÉBEC S FIRST DIAMOND MINE Vancouver Resource Investment Conference, January 23 rd, 2012 Matt Manson President and CEO

2 Forward-Looking Information 2 This presentation 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 This information and these statements, referred to herein as forward-looking statements, are made as of the date of this presentation 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) capital costs and operating costs; (v) mine expansion potential and expected mine life; (vi) expected time frames for completion of permitting and regulatory approvals and making a production decision; (vii) future exploration plans; (viii) future market prices for rough diamonds; and (ix) 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 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 completion date for 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 Route 167 extension and the impact on the development schedule at Renard; (viii) anticipated timelines for community consultations and the conclusion of an Impact and Benefits Agreement; (ix) market prices for rough diamonds and the potential impact on the Renard Project s value; and (x) future exploration plans and objectives. Additional risks are described in Stornoway's most recently filed Annual Information Form, annual and interim MD&A, and other disclosure documents available under the Company s profile at: 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.

3 3 Stornoway s Board and Management Team Additional Management Robin Hopkins, VP Exploration Dave Skelton, VP Project Development Ghislain Poirier, VP Public Affairs Matt Manson President, CEO & Director Pat Godin COO & Director Nominee Zara Boldt CFO and VP Finance Nick Thomas, Manager, Investor Relations Tony Walsh Chairman Michel Blouin Independent/ IQ Designate Yves Harvey Independent John leboutillier Independent/ IQ Designate Monique Mercier Independent/ IQ Designate Peter Nixon Independent Ebe Scherkus Agnico-Eagle Serge Vézina Independent

4 Why Stornoway? 4 100% Ownership in Renard: One of the World s Best Development Stage Diamond Projects In Québec, one of the World s Best Mining Jurisdictions Renard Strong Feasibility Base Case Economics Extensive Resource Upside Diamonds Excellent Long Term Fundamentals Few New Mining Projects Stornoway Experienced Team Strong Québec Backing

5 5 Renard Kimberlite Bodies Kilometers N Kilometers Laforge 2 Laforge 1 R10 LG2 R7 Hibou LG4 LG3 Foxtrot Property R1 Wemindji Eleonore R65 R4 Renard Western Troy Eastmain Mine Strateco R8 R9 R2 Brisay Troilus Mine R3 Temiscamie Mistissini Lynx Matagami Kimberlite Bodies with Probable Reserves Kimberlite Bodies with Inferred Resources Kimberlite Bodies with Resource Potential Chibougamau Legend LEGEND: Stornoway Properties HydroQuébec Facility HydroQuébec Powerlines Renard Kimberlites Route 167 Extension Kimberlitic Dyke Road Regional Kimberlites Exploration/ Mining Projects

6 Summary of Feasibility Results Released November 16 th, Valuation NPV 7% and IRR of C$672m and 18.7% (Pre-Tax) and C$376m and 14.9% (After-Tax) Mining and Production Parameters 11 year reserve-based mine life Peak diamond production reaching 2.1Mcarats per year, averaging 1.7Mcarats over LOM, and at a weighted average US$180/carat Operating cash flow of C$2.7B Costs Initial Capital Cost Estimate of C$802m including contingencies LOM Operating Cost Estimate of C$54.71/tonne (C$70.27/carat) giving a 68% operating margin Reserves and Resources 1 Probable Mineral Reserve of 18.0 Mcarats (23.1Mtonnes at an average 78 cpht) Inferred Mineral Resources of 17.5 Mcarats (31.1Mtonnes at an average 56 cpht) Key Assumptions C$1=US$1, Oil US$90/barrel, 2.5% real terms diamond price growth Q311-Q425, 83.5% ore recovery, 19.4% mining dilution, 0cpht dilution grade, January effective date for NPV and IRR calculation. 1 Reserve and Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability.

7 Feasibility Study Contributors 7 Capital and Operating Cost Estimates, Onsite Infrastructure Design, Construction Strategy, Risk Assessment Process Plant, Underground Mine Design and Underground Reserve Open Pit Design, Open Pit Reserve and Financial Analysis Geotechnical, Processed Kimberlite Containment, Waste Water Management Environmental, Social and Permitting Considerations Rock Mechanics, Hydrogeology NI Resource Human Resources, Operating Plan, Marketing Plan

8 General Project Arrangement Small Footprint of 3.1km 2 8 R65 Processed Kimberlite Containment (PKC) Waste Rock Plant R2-R3 Overburden Stockpile Ore Stockpile Camp Route 167 Extension

9 Mine Plan A Combined Open Pit and Underground Mine 9 Open Pit Mining at Renard 2 & 3 (years 1-2) Renard 65 Underground Mining Renard 2, 3 & 4 (years 3-11) Blast Hole Shrinkage with waste backfill from pits. Ramp & shaft access 6,000 tpd plant capacity, (2.2mtonnes/annum). Renard 3 Pit at Renard 65 (initially) as a borrowpit and waste water sump, pending resource conversion. Renard 4 Renard 2 Renard 2 Renard 3

10 Production and Revenue Schedule 2,500 Open Pit & Underground Mining Schedule (Ktonnes of Ore) 2,000 1,500 1, R4 UG R3 UG R2 UG R3 Pit R2 Pit ,500 Carat Production (Kcarats) 2,000 1,500 R4 1,000 R3 500 R2 2,500 2,000 1,500 1, Plant Feed (Ktonnes) R4 R3 R Gross Revenue (C$M, Real) R4 R3 R2

11 Project Comparables Diamond Industry Cost Curve (Anglo American November 2011 after De Beers 2010) 11 COST/REVENUE Renard with Powerline Renard

12 Renard NI Mineral Reserves and Resource Resource announced January 24 th, Reserve announced November 16 th, PROBABLE RESERVE Drill Delineated Micro/Macro Diamond Sampling Bulk Sampling for Value Renard 65 29cpht Renard 2 103/118cpht Renard 3 106/118cpht 18 million carats INFERRED RESOURCE Lower Resolution Drilling, or no Bulk Sample 17 million carats Renard 4 53/44cpht Renard 9 47cpht EXPLORATION UPSIDE Lower Resolution Diamond Sampling, or no Drilling million carats Notes: Grades illustrated are for Indicated and Inferred Mineral Resources respectively at a +1DTC sieve size cut-off. Reserve and Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantity and grade of any Exploration Target (previously referred to as a Potential Mineral Deposit ) is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.

13 Renard s Resource Upside A Project with a Long Resource Tail and Very Long Mine Life Potential 13 Millions (Tonnes, Carats, $) Expenditures ($) Carats (IND+INF) Tonnes Conceptual Tonnes PMD High 100 The Vision: Deposit still Open 80 Tonnes PMD Low Tonnes Inferred Resource 80 Tonnes Indicated Resource Tonnes Probable Reserve Permitting and Long Term Business Plan The Feasibility: 11 years of mining Notes: Reserve and Resource categories are compliant with the "CIM Definition Standards on Mineral Resources and Reserves". Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantity and grade of any Exploration Target (previously referred to as a Potential Mineral Deposit ) is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource.

14 Permitting and Development Schedule H 1H 2H 1H 2H 1H 2H 1H 2H BFS ESIA Community Hearings COMEX and CEAA Review Specific Mine Permits (50) Detailed Engineering Project Financing Road Construction First Vehicle Access Mine Construction Commissioning and Ramp-up Commercial Production

15 Infrastructure: Power and Road Access A Canadian Diamond Project with an All Season Highway and Potential Grid Power 15 Road: The Québec Ministry of Transportation Route 167 Extension, connecting Renard to the provincial highway to the south. Initial road construction cost of $332m will be funded by Québec. Stornoway will contribute $44m amortized over 10 years, starting in Additional Industry contributions expected. Road ground-breaking expected shortly. Vehicle access is expected to be available to the Renard site to commence project construction by mid Power: Separate feasibility study on a 165km 161kV powerline connecting Renard to the Laforge-1 generating station is ongoing. The powerline would add capital cost to the project but offers substantial operating cost savings. Hydro-Québec expect to complete their study in 2012, and the impact of the powerline on the Renard Diamond Project will be assessed at that time. Route 167 Extension Existing Winter Road Stornoway Claims Mining/Exploration Projects LG2 LG3 Eleonore (Goldcorp) Eastmain 1 Hydro Facility Existing Hydro Line Potential Hydro Line Route 167 Extension (268km) Troilus (Inmet) Mistissini Laforge 1 LG4 Mirage Camp McLeod Lake (Western Troy) Chibougamau Laforge 2 Temiscamie Caniapiscau Brisay Potential Powerline Renard Eastmain (Eastmain) Matoush (Strateco) Existing Winter Road Kilometers Scale: 1:3,000,000

16 Québec s Plan Nord : Launched May 9th 2011 One of the World s Best Mining Jurisdictions 16 The Renard Diamond Project is at the center of the Plan Nord, the visionary initiative to sustainably develop Québec north of the 49th parallel through infrastructure investment, community development and biodiversity conservation. Investments include: $1.2b for infrastructure projects, including the Route 167 Extension $434m for social measures $500m for direct investments through Investissement Québec The Route 167 Extension and Investissement Québec s investment in Stornoway are key planks of the Plan Jean Charest, Premier of Québec, and Matt Manson, CEO of Stornoway, in Chibougamau on August 1 st for the announcement of Route 167 Extension Financing Agreement. Mr. Charest is holding core from Renard 65 containing a four-carat diamond.

17 Stornoway s Project Pipeline 17 Stornoway possess a strong pipeline of advanced and grassroots exploration projects. Internal growth opportunities through the advanced Aviat and Qilalugaq Projects focus: new projects in Saskatchewan ( Pikoo ) and Québec ( AEON ) following up pre-2008 indicator anomalies: potential for new kimberlite cluster close to infrastructure. New LG4-Consorem Project in Québec with three partners. Virginia Mines Inc. operator. Ongoing follow-up at Hammer kimberlite discovered in Nunavut in Mineral resources that are not mineral reserves do not have demonstrated economic viability. The potential quantity and grade of any nonresource potential mineral deposit ( PMD ) is conceptual in nature, and it is uncertain if further exploration will result in the target being delineated as a mineral resource. Qilalugaq (100%) Advanced Project Hammer (75%) Discovery Project Pikoo (100%) Grassroots Exploration AEON (100%) Grassroots Exploration Aviat (90%) Advanced Project mcarats PMD LG4-Consorem (25%) Grassroots Exploration Renard (100%) NI Resource 24 mcarats Indicated 17 mcarats Inferred mcarats PMD

18 Stornoway s Platform for Project Development and Financing 18 BALANCE SHEET* Market Capitalization: (based on voting and non-voting shares) Total Shares Outstanding: (fully diluted) Cash and Short Term Deposits: (as of October 31 st 2011) Debt Facility: (undrawn) PRO-FORMA SHAREHOLDING* IQ** (common shares) (non-voting convertible shares) C$ 162 million 146 million C$ 20 million C$ 100 million Basic 25.0% Fully Diluted 21.0% 16.0% Agnico-Eagle 10.8% 9.1% Rio Tinto plc 5.3% 4.4% Lorito Holdings (Lundin Family) 3.5% 2.9% Float 55.4% 46.6% ANALYST COVERAGE RBC Des Kilalea, January 11 th, 2012 Raymond James Bart Jaworski Nov 21st, 2011 Paradigm David Davidson Nov 17th, 2011 BMO Ed Sterck Nov 17th, 2011 Desjardins Brian Christie Nov 17th, 2011 Laurentian Eric Lemieux January 18, 2012 Outperform- Speculative Risk $2.05 Outperform $2.50 Buy $3.15 Market Perform $1.50 Speculative Buy $2.00 Buy $3.40 Notes: Debt Facility: In December 2010 Stornoway announced a credit support agreement with a subsidiary of Société générale de financement du Québec, now Investissment Québec, with respect to future project debt financing of a minimum of $100 million. The credit support bears an annual commitment fee of 175 bps undrawn, and will take the form of a direct project loan ranking pari passu with concurrent senior lenders or, as appropriate, on a stand alone basis on terms no less favourable than prevailing commercially reasonable market terms. *Based on market close of $1.11 on January 17 th, 2012 **IQ: Investissement Québec, the Québec government's industrial and financial holding company whose mission is to foster the growth of investment in Québec, thereby contributing to economic development and job creation in every region

19 Value Creation Through Project Financing Aber Diamond Corporation, Feasibility Study July 1999 Market Low

20 BUILDING QUÉBEC S FIRST DIAMOND MINE Appendix Materials