Quarter ended March 31, 2016 Highlights

(All quoted figures in CAD$)

• Progress at the Renard Diamond Project continues in line with the planned schedule and budget.
• Incurred costs and commitments at quarter-end totalled $615.3 million, or 79% of budget.
• Construction progress stood at 83.4% compared to the (re-baselined) plan of 77.6% at the end of the quarter, and at 92.1% compared to 84.1% at the end of April.
• On site manpower during the month of March averaged 522 workers, of which 14.8% were Crees of the Eeyou Istchee.
• Mining in the Renard 2-3 and Renard 65 open pits stood at 7,504,923 tonnes, or 102% of plan, with 194,416 tonnes of ore stockpiled. Underground mine development stood at 1,218 meters, or 74% of plan.
• During the quarter the project’s liquefied natural gas (“LNG”) power plant was completed and fully commissioned and all principal crushing and diamond recovery equipment for the process plant was received and installed. At quarter-end project construction was focused on mechanical, piping, electrical and instrumentation installation in the process plant, primary crusher, water treatment facility and processed kimberlite load-out.
• For the three-month period ended March 31, 2016, the Corporation reported a net loss of $22.6 million or $0.03 per share basic and $0.03 per share fully diluted.
• Cash, cash equivalents and short-term investments stood at $219.1 million. On March 30 the drawdown of the third and final US$90m tranche of diamond stream funding from Orion Mine Finance, Caisse de dépôt et placement du Québec and Blackstone Tactical Opportunities occurred as planned. Excess financing capacity available to complete the project, comprising surplus cash and available cost-overrun facilities, is now forecast to be $116 million, assuming the satisfaction of all covenants and conditions precedent relating to future funding commitments and a CAD$:US$ conversion rate of $1.25.

Matt Manson, President and CEO, commented: “Construction at Renard during, and subsequent to, the first quarter has continued to exceeded expectations. Progress in March and April alone was an impressive 9.4% and 8.7% respectively. This puts us well within the already re-baselined schedule for first ore processing by the end of September. With final equipping of the process plant proceeding well, our critical path activity has become mining and the supply of ore on a schedule commensurate with the earlier than expected plant availability. To this end, our open pit mining is tracking to plan and challenges in the development of the ramp in December and February appear now to have been overcome. With market reports indicating a strengthening in rough diamond prices  and our project execution continuing well, our outlook for project completion and first diamond production later this year is positive.”

Financial Summary

Stornoway ended the quarter with cash, cash equivalents and short-term investments of $219.1 million, compared with $209.1 million at the end of the previous quarter. The third and final tranche of payment deposits under Stornoway’s streaming agreement with Orion Mine Finance, the Caisse de dépôt et placement du Québec and Blackstone Tactical Opportunities was received on March 30, 2016. Stornoway now expects to draw on its $100 million senior secured loan from Investissement Québec to complete mine development. Stornoway’s current cash resources and committed funds are sufficient to cover planned mine development expenses, financing and corporate costs during calendar 2016.

The Corporation currently forecasts excess funding capacity available to complete the project of $116 million, comprised of $68 million of cash, undrawn debt facilities, receivables and expected mine tax credits, and $48 million of undrawn cost overrun facilities. This forecast assumes the attainment of commercial production by December 31, 2016, a project cost of $775 million (which includes assumed levels of escalation and contingencies), the satisfaction of all covenants and conditions precedent for future funding, and a CAD$: US$ exchange rate of $1.25 for retained US dollar funds. The forecast excludes US$26 million of revenue previously forecast to fall within the pre-production period and which, given the acceleration of the expected date of commercial production, will now fall outside of the capital expenditure period. It further excludes the proceeds from the potential exercise of the Corporations’ outstanding warrants and share purchase options. As construction of the Renard Diamond Project progresses, this forecast is expected to change quarter to quarter based on the timing of expenditures and receipts, volatility in the CAD$:US$ exchange rate, and any change to the forecast cost of the project. Capital expenditures incurred during the quarter were of $100.5 million, with capital expenditures to date of $615.3 million having been incurred or committed against the total project cost.

Net loss for the three months ended March 31, 2016 totalled $22.6 million, or $0.03 per share basic and $0.03 per share fully diluted, and includes other income (expenses) of $(19.6) million. Net losses were impacted by several items not reflective of Stornoway’s underlying operating performance, including changes in the fair value of a derivative and unrealized gains and losses from foreign exchange. Operating expenses for the three month period totalled $3.0 million.

Construction Highlights

As at March 31, 2016, overall construction progress stood at 83.4% based on man-hour estimates compared to the re-baselined plan of 77.6% (and the initial plan of 72.7%). Engineering is now completed at 100%. By the end of April, construction progress had advanced further to 92.1%, compared to the re-baselined plan of 84.1% (and the initial plan of 77.3%). One loss time incident (“LTI”) was recorded during the quarter, for a project-to-date LTI rate of 1.5 for contractors and 0.3 for Stornoway employees. 

During the quarter the project’s LNG fueled power plant was completed and commissioned. Power requirements on site are now being fully met by low-carbon natural gas, making the Renard Project the first such mine in Canada. Temporary diesel gensets have been placed on standby.

During and subsequent to the quarter, principal equipment at the diamond processing plant, such as crushers, high pressure grinding rolls, rotary scrubber, dense media separation cyclones, X-ray recovery modules, TOMRA XRT large diamond recovery module, ore bins and conveyors had been successfully delivered and installed. Ongoing construction at the process plant, the primary crusher and the processed kimberlite load out, is now focussed on piping, mechanical, electrical and instrumentation installation ahead of anticipated pre-operational verification during the second and third quarters.

Daily manpower at site in March averaged 522 workers with a peak of 576, of which 14.8% were Crees of the Eeyou Istchee. Stornoway employees stood at 381 as at March 31, including 307 with the on-site development team, of which 17% were Crees, 22% were from Chibougamau and Chapais, and 61% were from outside the region.

Mining

As at March 31, 2016, a total of 7,504,923 tonnes of overburden, waste rock and ore had been extracted from the Renard 2-Renard 3 and Renard 65 open pits, compared to a plan of 7,376,351 tonnes (102%). A total of 194,416 tonnes of ore have been delivered to the stockpile compared to a plan of 207,799 tonnes (94%).

Development of the ramp for the underground mine stood at 1,218 meters on March 31 compared to a plan of 1,643 meters (74%). Progress on the ramp during the first part of the quarter continued to be affected by water inflow on a fault structure that required extensive grouting. The structure was first intersected in November and December, and then again in February as the ramp made its first turn. Progress since the middle of March has met or exceeded plan after the structure was successfully circumvented.

Exploration Update

Exploration programs are ongoing on generative diamond exploration projects in Canada, which are 100% owned by the Corporation, including the Adamantin Project located approximately 100 km south of the Renard Diamond Project and 25 km west of the Route 167 Extension road. Till sampling during 2015 at Adamantin confirmed the presence of indicator mineral anomalies interpreted to be sourced from undiscovered kimberlites with diamond potential, with one till sample including a diamond from the +0.25mm-0.50mm size fraction. On May 5, 2016 Stornoway announced that kimberlite had been intersected in 18 of 78 drill holes (including 7 lost holes) testing 72 geophysical targets. These intersections are interpreted to represent at least 11 discrete kimberlite bodies. Of the 18 kimberlite intersections, 14 returned intersections of undiluted (100%) hypabyssal kimberlite chips between 1.5m and 13.7m in length. Intersections of mixed chips of kimberlite and country rock were also returned up to 22.9m in length.  Of note, drilling at adjacent geophysical anomalies AD-50, 51 and 52 suggests the presence of a single, shallowly dipping (5-10 degrees), tabular body with an apparent true thickness of approximately 10 meters. This body lies 6-12m below surface, extends over a minimum strike extent of 260 meters and is open in all directions. Samples recovered from AD-50/51/52 and the other new kimberlite bodies have been sent for diamond recovery. Stornoway’s claim position at Adamantin now stands at 15,139 hectares after recent additional ground acquisition.

Financial Summary

Key Financial and Operating Highlights

The Corporation’s consolidated Financial Statements are prepared in Canadian dollars in accordance with International Financial Reporting Standards. Condensed Interim Consolidated Financial Statements for the quarter ended March 31, 2016, and Management’s Discussion and Analysis have been posted on the Corporation’s website www.stornowaydiamonds.com and on SEDAR at www.sedar.com .

Annual General Meeting

Stornoway will host the Corporation's Annual General Meeting of shareholders on Monday May 16, 2016 at 4:00 pm at the Sofitel Montreal Golden Mile Hotel. Upon the conclusion of the official business of the meeting, a presentation on the Corporation and construction progress at the Renard Diamond Project will be given by Matt Manson, President and CEO, and Patrick Godin, COO. For the benefit of shareholders not able to be present in Montreal, this presentation will be webcast at; 

http://www.stornowaydiamonds.com/English/investors/events/default.aspx .

The webcast is anticipated to begin at approximately 4:30 pm.  An archived version of the webcast will be made available on the Stornoway website following the Annual General Meeting.

About the Renard Diamond Project

The Renard Diamond Project 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 Québec. On July 8, 2014, Stornoway announced the completion of a $946 million project financing transaction to fully fund the project to production, and construction commenced on July 10, 2014. First ore is scheduled to be delivered to the plant at the end of September 2016, with commercial production scheduled for December 31, 2016.

In January 2013, Stornoway released the results of an Optimized Feasibility Study at Renard, with an Updated Mine Plan and Mineral Reserve Estimate in March 2016. These studies highlight the potential of the project to become a significant producer of high value rough diamonds over an initial 14 year mine life. Probable Mineral Reserves, as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), stand at 22.3 million carats. In accordance with the Corporation’s September 2015 Mineral Resource estimate, total Indicated Mineral Resources, inclusive of the Mineral Reserve, stand at 30.2 million carats, with a further 13.35 million carats classified as Inferred Mineral Resources, and 33.0 to 71.1 million carats classified as non-resource exploration upside. Average annual diamond production is forecast at 1.8 million carats per annum over the first 10 years of mining, at an average valuation of US$155/carat based on March 2016 terms.

Readers are cautioned that the potential quality 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. All kimberlites remain open at depth. Readers are referred to the technical report dated February 28, 2013, in respect of the January 2013 Optimization Study, 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 Project, on track to becoming Québec’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

This press release contains "forward-looking information" within the meaning of Canadian securities legislation. This information and these statements, referred to herein as “forward-looking statements”, are made as of the date of this press release 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 include, among others, statements with respect to Stornoway’s objectives for the ensuing year, Stornoway’s medium and long-term goals, and strategies to achieve those objectives and goals, as well as statements with respect to Stornoway’s beliefs, plans, objectives, expectations, anticipations, estimates and intentions. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

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 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, average ore recovery, internal dilution, mining dilution and other mining parameters set out in the Updated Renard Diamond Project Mine Plan and Mineral Reserve Estimate, Québec, Canada, NI 43-101 Technical Report (the “2016 Technical Report”) ; (v) assumptions relating to gross revenues, operating cash flow and other revenue metrics set out in the 2016 Technical Report; (vi) mine expansion potential and expected mine life; (vii) expected time frames for completion of permitting and regulatory approval related to construction activities at the Renard Diamond Project; (viii)  the expected time frames for the completion of the open pit and underground mine at the Renard Diamond Project; (ix) the expected time frames for the completion of construction, start of mining and commercial production at the Renard Diamond Project and the financial obligations or costs incurred by Stornoway in connection with such mine development; (x) future exploration plans; (xi) future market prices for rough diamonds; (xii) the economic benefits of using liquefied natural gas rather than diesel for power generation; (xiii) sources of and anticipated financing requirements; (xiv) the effectiveness, funding or availability, as the case may require, of the Stream, the Senior Secured Loan, the COF and the Equipment Facility and the use of proceeds therefrom; (xv) the Corporation’s ability to meet its Subject Diamonds Interest delivery obligations under the Purchase and Sale Agreement; and (xvi) the impact of the Financing Transactions on the Corporation’s operations, infrastructure, opportunities, financial condition, access to capital and overall strategy.;  (xvii) the foreign exchange rate between the US dollar and the Canadian dollar; and (xviii) the availability of excess funding for the construction and operation of the Renard Diamond Project . 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 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) receipt of regulatory approval on acceptable terms within commonly experienced time frames; (iv) anticipated timelines for completion of construction, commencement of mine production and development of an open pit and underground mine at the Renard Diamond Project, which heavily depends, among other things, on adequate availability and performance of skilled labour, engineering and construction personnel, performance of mining and construction equipment and timely delivery of components;‎ (v) anticipated geological formations; (vi) market prices for rough diamonds and the potential impact on the Renard Diamond Project; (vii) the satisfaction or waiver of all conditions under each of the Senior Secured Loan, the COF and the Equipment Facility to allow the Corporation to draw on the funding available under those financing elements for the completion of the development and construction of the Renard Diamond Project; (viii) Stornoway’s interpretation of the geological drill data collected and its potential impact on stated Mineral Resources and mine life; (ix) future exploration plans and objectives; (x)  the Corporation’s ability to meet its delivery obligations under the Steaming Agreement; and (xi) the continued strength of the US dollar against the Canadian dollar. 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 Corporation’s profile at: www.sedar.com.

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, kimberlite lithologies and country rock content within the material identified as Mineral Resources from that predicted; (ii) variations in rates of recovery and 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 and operating 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) changes in project parameters as plans continue to be refined; (xiii) risks relating to the receipt of regulatory approval or the implementation of the existing Impact and Benefits Agreement with aboriginal communities; (xiv) the effects of competition in the markets in which Stornoway operates; (xv) operational and infrastructure risks; (xvi) execution risk relating to the development of an operating mine at the Renard Diamond Project; (xvii) failure to satisfy the conditions to the effectiveness, funding or availability, as the case may require, of each of the Stream, the Senior Secured Loan, the COF and the Equipment Facility; (xviii) changes in the terms of the Stream, the Senior Secured Loan, the COF or the Equipment Facility; (xix) the funds of the Stream, the Senior Secured Loan, the COF or the Equipment Facility not being available to the Corporation; (xx) the Corporation being unable to meet its delivery obligations under the Stream; (xxi) future sales or issuance of Common Shares lowering the Common Share price and diluting the interest of existing shareholders;  and (xxi) the additional risks described in Stornoway's most recently filed Annual Information Form, annual and interim MD&A 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 unforeseeable, new risks may arise from time to time.