Stornoway Diamond Corporation First Quarter Financial Statements and Interim Management Discussion and Analysis


Stornoway Diamond Corporation (TSXV:SWY) has filed its interim consolidated financial statements and its Management Discussion and Analysis (Form 51-102F1) for the three months ended July 31, 2004 with the regulatory authorities through SEDAR ( and has mailed them to shareholders whose names appear on its Supplemental List. The interim financial statements were prepared by management in accordance with Canadian generally accepted accounting principles and were not reviewed by Stornoway's auditors. This news release is being issued pursuant to National Instrument 54-102.

Highlights of Stornoway's diamond exploration activities during its first quarter for fiscal 2005 are:

  • Spring 2004 drilling on the Aviat Joint Venture helped to further delineate the AV-1 kimberlite, increasing its size, and has provided approximately 2.3 tonnes of kimberlite from the unexposed Lake Zone for micro and macrodiamond analysis. Preliminary till sampling results from 2003 have identified numerous kimberlitic indicator mineral anomalies throughout the landholdings and provide strong evidence for the presence of additional kimberlite bodies at Aviat. In particular, visual picking results have defined a prominent roughly east-west trending zone of highly anomalous samples, referred to as the "Tremblay Corridor", that extends for more than 75 km and varies between 3 and 8 km in width. A total of 330 samples analysed to date have returned probe confirmed kimberlitic grains, including several samples with high proportions of G10 garnets suggestive of possible provenance from diamondiferous source bodies. A total of 607 pyrope garnets have been probeconfirmed from Aviat to date, approximately 30% of which are classified as G10 garnets.
  • Prospecting at Aviat has identified more than 70 new kimberlite float occurrences along a 20 km long, 1.5 km wide trend in the vicinity of but distinct from the AV-1 and AV-2 diamondiferous kimberlites. Three of the new float occurrences, AV-3, AV-4 and AV-5 consist of multiple boulders and cobbles ranging from 5 cm up to 1.5 m in size and suggest proximal sources. Diamond and indicator mineral analysis from these occurrences is ongoing.
  • Option agreement entered into with Strongbow Exploration Inc., pursuant to which Stornoway can earn a 51% interest in the LDG, Starfish and Daring Lake properties situated in the Lac de Gras region, by spending $3 million within three years, and may increase this interest to 60% by completing a feasibility study.
  • In mid July 2004, a field crew was mobilized to the Churchill Diamond Project area to conduct ground geophysical surveys; glacial interpretation and mapping; and detailed till sampling in areas within and up-ice from high diamond potential G10 indicator mineral plumes and float occurrences.
  • The 2004 exploration program on Stornoway's landholdings in the Coronation diamond district commenced in July. This program will consist of till sampling, prospecting, ground geophysical surveys and drilling.

Corporate highlights include:

  • In May, 2004, Stornoway closed a $20 million financing underwritten by Raymond James Ltd., with a syndicate of underwriters, including Canaccord Capital Corporation, TD Securities Inc. and BMO Nesbitt Burns Inc. Stornoway issued 8,000,000 Units each comprised of one common share and one-half of one share purchase warrant. Each whole warrant is exercisable for one common share at a price of $3.00 per share until May 13, 2005.
  • Stornoway has increased the number of directors from five to seven. Anthony (Tony) Walsh, CA and Jeff Stibbard, P. Eng. were elected directors at the Company's annual meeting held August 19, 2004.

The Company's loss from operations for the three months ended July 31, 2004 totaled $283,726, a loss of $0.01 per share, as compared to a loss of $434,703 for the three months ended June 30, 2003, a loss of $0.03 per share. Assets increased from $39,754,098 as at April 30, 2004 to $60,297,711 as at July 31, 2004. Capitalized resource property costs also increased, from $15,506,905 as at April 30, 2004 to $20,651,452 as at July 31, 2004. The Company's cash and short-term deposits increased from $23,291,730 as at April 30, 2004 to $37,209,419 as at July 31, 2004. The increase in the Company's cash position is attributable to proceeds from a private placement completed during the first quarter, as well as stock option and warrant exercises.

The Company's working capital as at July 31, 2004 was $34,576,160 as compared to working capital of $21,781,221 as at April 30, 2004. During the three months ended July 31, 2004, cash and equivalents increased by $13,917,689, from $23,291,730 as at April 30, 2004 to $37,209,419 as at July 31, 2004. In the comparative period, cash and equivalents decreased by $953,441 to $4,375,749 as at June 30, 2003. Cash provided from operating activities during the current fiscal period totaled $1,067,593, as compared to cash used in operating activities of $585,816 as at June 30, 2003.

On behalf of the Board
/s/ "Eira Thomas"
Eira Thomas

For further information, please contact the Company at 604-331-2259 or (888) 338-2200
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The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this press release. This news release may contain forward looking statements, being statements which are not historical facts, including, without limitation, statements regarding potential mineralization, exploration results, resource or reserve estimates, anticipated production or results, sales, revenues, costs, "best-efforts" financings or discussions of future plans and objectives. There can be no assurance that such statements will prove accurate. Such statements are necessarily based upon a number of estimates and assumptions that are subject to numerous risks and uncertainties that could cause actual results and future events to differ materially from those anticipated or projected. Important factors that could cause actual results to differ materially from the Company's expectations are in Company documents filed from time to time with the TSX Venture Exchange and provincial securities regulators, most of which are available at