Stornoway Diamond Corporation reports that it will not proceed with a recent proposal it received for a powerline to supply grid power to its wholly owned Renard Diamond Project in north-central Quebec, and will, instead, pursue the initial development of Renard based on the diesel fueled generator configuration contained within the December 2011 Renard feasibility study.

Powerline Study

Results of a recent 161kV powerline feasibility study, conducted by provincially owned utility Hydro-Quebec, show that the associated capital cost is estimated at $173.6 million for a 159-kilometer-long line between Renard and the Laforge 1 hydro-electric generating station. According to the Renard Project feasibility study, on-site power generation using diesel fueled generators has 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," reports Stornoway.

The study also indicates that the Hydro-Québec powerline has been designed to support multiple users, including potential mine development projects located to the south of Renard. As Hydro-Québec will require Stornoway to finance the powerline's cost upfront, and have proposed a capital rebate should these other projects be connected in the future, 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. However, notes Stornoway, the powerline could 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 has decided not to proceed with Hydro-Québec's powerline proposal and will, instead, as stated above, pursue the initial development of Renard based on the diesel fueled generator configuration.

"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," concludes the Canadian diamond exploration company.

Partnership Accord

In other company news, Stornoway has executed a Declaration of Partnership with the communities of Chibougamau and Chapais in the James Bay Region of Quebec. The Declaration is a statement of cooperation between the partners for the responsible development of the Renard Diamond Project.

The Declaration, based on the principles of environmental protection, social responsibility and economic efficiency, provides for the creation of a Renard Liaison Committee that will address issues of mutual interest such as communication, employment, and the economic diversification of local communities. In particular, the committee will oversee initiatives to attract and retain new residents to the towns of Chibougamau and Chapais.

The Declaration was signed in Chibougamau on July 5 by Mme. Manon Cyr, Mayor of Chibougamau, M. Steve Gamache, Mayor of Chapais, and M. Patrick Godin, Chief Operating Officer of Stornoway.

According to Stornoway, this Declaration of Partnership follows the execution of the Mecheshoo Agreement with the Crees of the James Bay Region in March, which was established on similar principles.