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


Stornoway Diamond Corporation (TSX:SWY) has filed its Interim Consolidated Financial Statements and its Management Discussion and Analysis (Form 51-102F1) for the three months ended July 31, 2005 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 2006 are:

·         The Company, along with joint venture partners Strongbow Exploration Inc. ("Strongbow") and BHP Billiton Diamonds Inc. ("BHP Billiton"), commenced an exploration program at the Wales Island Project and a kimberlite was intersected on the first drill hole.

·         The Company, along with joint venture partners Shear Minerals Ltd. ("Shear") and BHP Billiton announced diamond results from 11 kimberlites, four float occurrences and one kimberlite outcrop that had been discovered in 2005 on the Churchill Diamond Project. Continued exploration has resulted in the discovery of four diamonds larger than 500 microns in one dimension from a 76.45 kg kimberlite sample. In addition, recent prospecting has discovered a new kimberlite outcrop and six kimberlite float occurrences on the property (see news release 05-19 dated September 12, 2005).

·         The Company, along with joint venture partners BHP Billiton and Hunter Exploration Group has started the 2005 summer exploration program on the Aviat Project with drilling of approximately 20 targets, prospecting, till sampling, and additional ground geophysical surveys.

The Company's loss from operations for the three months ended July 31, 2005 (the "Current Period") of $281,521 ($0.00 per share) was slightly less than the loss in the three months ended July 31, 2004 (the "Comparative Period") of $283,729 ($0.01 per share). The results of operations were largely influenced by stock based compensation expense (Current Period - $118,000; Comparative Period - $126,899), interest income (Current Period - $163,306; Comparative Period - $259,571), salaries and benefits (Current Period - $97,829; Comparative Period - $57,866), and investor relation expenses (Current Period - $92,737; Comparative Period - $136,290). General and administrative expenses decreased slightly from $471,494 in the Comparative Period to $467,563 in the Current Period. Capitalized resource property costs increased, from $29.6 million at April 30, 2005 to $34.4 million at July 31, 2005. During the Current Period, the Company expended $4.2 million to acquire and explore its resource properties (Comparative Period - $5.1 million).

The Company's working capital at July 31, 2005 was $23.7 million, consisting mostly of cash and short term investments. During the Current Period the cash position decreased by $5.8 million to $24.6 million at July 31, 2005. 

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