Stornoway Options Qilalugaq Diamond Property


Host To The Largest Diamondiferous Kimberlites In The Eastern Arctic

Stornoway Diamond Corporation and BHP Billiton are pleased to announce that they have entered into an option agreement to further explore BHP Billiton’s 1.04 million acre Qilalugaq Diamond Property on the Melville Peninsula in Nunavut, where ten diamondiferous kimberlites with large tonnage potential have been identified since 2003.

The Qilalugaq Property was acquired by BHP Billiton in 2001 and has undergone several phases of exploration using airborne geophysics (magnetics, electromagnetics and gravity surveying) together with property wide till sampling, drilling and limited minibulk sampling. Eleven kimberlites have been discovered to date as a result of this work, ten of which have been analysed and have proven diamondiferous.

The largest kimberlite identified by BHP Billiton is a complex made up of the Qilalugaq 1, 2, 3, and 4 pipes which coalesce to form a body with an approximate area of 14 ha. Other drill confirmed bodies range in size from 0.8 to 11.0 ha based on interpretation of geophysical data. A mini-bulk sample 229.7 dry tonnes of kimberlite extracted from the Qilalugaq 1-4 complex, returned a total of 61.37 carats, greater than 1.1 mm, indicating a calculated sample grade of 0.27 c/t. The Qilalugaq 1 body, approximately five ha in size, was not tested with RC drilling and is therefore under represented in the mini-bulk sample and may be the subject of future assessment.
The Qilalugaq bodies share geological similarities with the Aviat bodies and appear to be the same age. The strong working relationship established between BHP Billiton and Stornoway on the Aviat project will allow for the quick integration of the existing exploration datasets and it is the Company’s intention to conduct a short summer field program at Qilalugaq consisting primarily of prospecting and till sampling beginning in late July.

Eira Thomas, President and CEO commented: “We believe that a continued investigation of the known, large tonnage bodies at Qilalugaq is warranted along with systematic evaluation of the the prospective, unexplained kimberlite indicator anomalies with diamond stability chemistry.  The Qilalugaq kimberlites are the largest diamondiferous bodies identified in the eastern Arctic to date while the kimberlites identified on our 70% owned Aviat Project are amongst the highest grade. We see tremendous synergies between Qilalugaq and Aviat and believe this is a great opportunity to consolidate our exploration efforts on the Melville Peninsula to the benefit of both projects”.

Under the terms of an option agreement signed between Stornoway and BHP Billiton on July 10, 2006, Stornoway may earn up to a 50% interest in the Qilalugaq Diamond Property by spending a total of $9 million before December 31, 2011. Thereafter, a joint venture will be formed whereby the partners agree to jointly fund the next $6 million in property expenditures over two years. After $6 million in expenditures have been incurred, BHP Billiton shall have a one time election to earn a further 15% interest in the project (bringing its total interest to 65%) by incurring the next $15 million in expenditures within three years of the formation of the joint venture.

Stornoway is one of Canada’s premier diamond exploration companies with extensive landholdings (approximately 18 million acres) focused in key project areas in northern Canada and Botswana. Stornoway has been involved in the discovery of 63 kimberlites since 2002, 30 of which have proven diamondiferous.

Stornoway’s diamond exploration programs are conducted under the direction of Robin Hopkins, P.Geol. (NT/NU), a Qualified Person under NI 43-101.

On behalf of the Board
/s/ “Eira Thomas”
Eira Thomas