Stornoway Sets The Record Straight


Stornoway Diamond Corporation (TSX: SWY) is issuing this press release to clarify statements and characterizations made in a letter dated September 11, 2006 (the "Shareholder Letter"), sent to shareholders of Ashton Mining of Canada Inc. (TSX: ACA) on behalf of the board of directors of Ashton and in the advertisements paid for by Ashton and published in the National Post and the Globe and Mail on September 11, 2006 regarding Stornoway's offer to acquire all the outstanding shares of Ashton.

"We strongly disagree with a number of the statements and characterizations about our proposed transaction that are made by Ashton and included in the Shareholder Letter and advertisements", said Eira Thomas, Stornoway's President and CEO. "The proposed combination of Ashton, Stornoway and Contact provides Ashton shareholders with an exceptional early stage opportunity to participate in the creation of Canada's premier, diamond exploration and development Company."

The Shareholder Letter states the Ashton offer will "dilute your interest in Ashton's crown jewels and leave you holding a small stake in a combined entity with increased risk." The facts are that Ashton's minority shareholders will have the opportunity to participate in the full range of the combined company's future prospects, including the Renard Project and several advanced exploration projects owned by Stornoway and Contact Diamond Corporation (TSX: CO), if the Contact offer is completed. The combination will create Canada's leading, mid-cap, pure diamond exploration and development company with an expected pro forma market capitalization in excess of $200 million, a large and diverse shareholder base, no controlling shareholder and an enhanced capital market profile. The combination is expected to result in significant value creation for all shareholders. The new company will have a world-class management team and the technical advice of Agnico-Eagle Mines Limited, Stornoway's strategic investor and an invaluable asset should the Renard Project advance to the mining stage.

The Shareholder Letter states "your ownership stake in [Ashton's key properties] would be reduced from 48% to 12%". This number is based on a number of assumptions Ashton does not fully articulate in the Shareholder Letter. The facts are that, all Ashton shareholders (Rio Tinto and the minority shareholders) will receive a total of approximately 35% of the outstanding shares of the combined entity after giving effect to the combination of Stornoway and Ashton and approximately 31% after giving effect to the three-way combination of Stornoway, Ashton and Contact. The exact percentage breakdown between Rio Tinto and the minority Ashton shareholders is dependent upon how many shareholders elect each of the Cash Alternative and the Share Alternative under the offer. If all minority Ashton shareholders wish to participate in the benefits of the combined company and elect the Share Alternative and tender prior to the initial expiry time of the offer, they will receive almost the full 35% or 31%, respectively, of the outstanding shares of the combined entity and Rio Tinto will receive almost all cash. Ashton notes that the expected refinancing of the bridge loan will create additional dilution. Although it has not yet been determined how the bridge loan will be refinanced, if it is refinanced by an issuance of Stornoway shares at the offer price of $1.25 per Stornoway share, all Ashton shareholders (Rio Tinto and the minority shareholders) will continue to hold approximately 30% of the shares of the combined entity after giving effect to the combination of Stornoway and Ashton and approximately 27% after giving effect to the three-way combination of Stornoway, Ashton and Contact. Again, the exact percentage breakdown between Rio Tinto and the minority Ashton shareholders is dependent upon how many Ashton minority shareholders elect the Cash Alternative or Share Alternative and tender prior to the initial expiry time of the offer.

The Shareholder Letter states "the consideration under Stornoway's offer is inadequate". The facts are that Rio Tinto, one of the world's largest, most sophisticated mining companies and Ashton's controlling shareholder, has determined to tender its 52% interest in Ashton to the Stornoway offer. The facts are that Agnico-Eagle, a leading mine developer and operator in the Province of Quebec and a sophisticated investor in the mining sector, has offered its strong support for Stornoways' assets and for the proposed combination of Stornoway and Ashton by subscribing for $22.5 million in subscription receipts exchangeable into Stornoway shares at a price of $1.28 per share. It has also endorsed Stornoway's concurrent offer for Contact by tendering its 31% interest in Contact in exchange for Stornoway shares at the same deemed price as under the Ashton offer.

Ashton's Shareholder Letter and advertisements have compared the total numbers of large diamonds recovered by Ashton to those recovered by Stornoway. The facts are that the incidence of large stones is only one measure of a diamond resource, and their occurrence in exploration-sized samples is primarily a function of sample size. The total number of large stones recovered in any deposit is a meaningless statistic when viewed in isolation without consideration of, amongst other things, the total tonnage processed to recover those large stones. Many factors contribute to the viability of a diamond project, and each of the advanced-stage projects of both Stornoway and Contact, including Aviat, Qilalugaq, Churchill and Timiskaming, along with Ashton's development track Renard project, offer the potential to contribute future resources to the combined company. 

Finally, the Shareholder Letter states "the vast majority of [minority shareholders canvassed by the company] have indicated they do not support the Stornoway bid and will not be tendering their shares." The facts are that the majority of Ashton minority shareholders with which Stornoway has met or communicated have indicated to Stornoway that they are supportive of the transaction and are expected to tender their Ashton shares to the Stornoway offer. Moreover, we encourage Ashton shareholders to carefully consider the views of all analysts and opinion writers and not just those touted by Ashton. These analysts include Jacques Wortman (GMP Securities), Eric Zaunscherb (Raymond James) and Matthew O'Keefe (Westwind Partners).

In addressing Ashton's shareholders directly, Eira Thomas concluded: "Ashton's board of directors have recommended against tendering to our offer. They request that you preserve the status quo. We urge all Ashton shareholders to join us in building Canada's leading, forward-looking diamond company, with the best project pipeline, the best management, and the best opportunities for real growth in shareholder value."

The Stornoway offer expires at 8:00 p.m. (Eastern Time) on September 18, 2006.

Ashton shareholders are referred to Stornoway's offer and takeover bid circular dated August 10, 2006, as amended by a notice of variation and change on September 5, 2006, (collectively, the "Circular"). For the purposes of the calculation of an Ashton shareholder's percentage ownership interest in the combined entity as described above, Stornoway has relied on the assumptions set out on page 43 of the Circular, except as otherwise stated above.

How to Tender

Ashton shareholders wishing to accept the Stornoway offer are encouraged to tender their shares by completing the letter of transmittal (green paper) accompanying the documents mailed to them on August 10, 2006 and returning it together with certificates representing their Ashton shares and all other documents to the offices of CIBC Mellon Trust Company in Toronto, Ontario in accordance with the instructions in the letter of transmittal. If Ashton shares are held by a broker or other financial intermediary, Ashton shareholders should contact such intermediary and instruct it to tender the Ashton shares.

Questions About the Offer

For further information about the Stornoway offer, Ashton shareholders should contact Georgeson Shareholder Communications Canada Inc. toll-free at 1-866-390-5139 in North America.

About Stornoway

Stornoway Diamond Corporation has exposure to approximately 18 million acres of prospective diamond properties spanning 40 properties in Canada and Botswana. These include several advanced-stage properties such as Aviat, Qilalugaq, and Churchill, where a total of 77 kimberlites have been discovered since 2002, of which 40 so far have proven diamondiferous. Stornoway's experienced management and technical team have a strong track record of discovery in the north and a history of wealth creation for shareholders.

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

Important Notice:

As a result of restrictions under United States securities laws, Ashton shareholders that (i) are U.S. Persons (as such term is defined in Regulation S under the United States Securities Act of 1933) or (ii) hold Ashton shares on behalf of a U.S. Person (collectively "U.S. Shareholders") shall not be entitled to receive Stornoway shares in connection with the Stornoway offer. Instead, Stornoway shares that would have otherwise been distributed to U.S. Shareholders will be deposited in trust and sold in the market through an orderly sale and the net cash proceeds remitted to U.S. Shareholders.

This press release is not an offer of Stornoway shares or any other securities for sale in the United States. The Stornoway shares will not be registered under the United States Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

Forward-Looking Information:

Certain information included in this press release that expresses management's expectations or estimates of future performance, constitute ‘‘forward-looking information''. This information relates to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. 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'', ‘‘potential'', ‘‘budgets'', ‘‘scheduled'', ‘‘predicts'', ‘‘believes'' 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 information''. Statements concerning mineral resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates of the mineralization that will be encountered if the property is developed. Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable by management are inherently subject to significant business, economic and competitive uncertainties and contingencies. Stornoway cautions the reader that such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the Stornoway to be materially different from the Stornoway's estimated future results, performance or achievements expressed or implied by such forward-looking information and the forward-looking information is not a guarantee of future performance. These risks, uncertainties and other factors include, but are not limited to: financing opportunities, mineral exploration risks, supplies, infrastructure, weather and inflation, market for and marketability of diamonds, title matters, environmental regulations, permits and licenses, operating hazards and risks, competition for properties, economic conditions, dependence on management and conflicts of interest, as well as those factors discussed in greater detail in the Stornoway's Renewal Annual Information Form dated July 11, 2006 on file with the Canadian provincial securities regulatory authorities and in Section 6 of the Circular, ‘‘Risk Factors''.

The following factors, among others, related to the business combination of Stornoway with Ashton could cause actual results to differ materially from forward-looking information: Stornoway shares issued in connection with the Stornoway offer may have a market value lower than expected and will not reflect market price fluctuations, integration of the businesses may not occur as planned, may not occur successfully or such integration may be more difficult, time consuming or costly than expected; the expected combination benefits from the acquisition of Ashton may not be fully realized by Stornoway or not realized within the expected time frame, dissent and appraisal rights may be exercised, Stornoway's interests may differ from those of any remaining minority shareholders, liquidity for Ashton Shares will be reduced, there will be dilution of each shareholder's equity interest in the combined entity, the issuance of a significant number of Stornoway shares could adversely affect the market price of Stornoway shares, the enforcement rights of U.S. Shareholders may be adversely affected, the Stornoway offer may not be completed, the triggering of change of control provisions in agreements, the requirement to repay the bridge facility and the reliability of the information relating to Ashton. These factors are not intended to represent a complete list of the factors that could affect Stornoway and the combination of Stornoway and Ashton. Stornoway's forward-looking information is based on the expectations, beliefs and opinions of management on the date on which the statements are made. Stornoway disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise. For the reasons set forth above, Shareholders should not place undue reliance on forward-looking information.