Stornoway Diamond* (SWY : TSX :
.77), Net Change: 0.14, % Change: 22.22%, Volume: 10,289,636

And that’s not all. Stornoway continued its upswing, rising nearly 55% in the last two days after releasing an updated preliminary economic assessment (PEA) for the 50% owned Renard diamond project in Northern Quebec. Key points: 1) A conceptual mine life of 25-years based on a production rate of 1.8 million tonnes per year and a total diamond production of 30 million carats. 2) Production rate increased to 5,000 t/d after year three from 3,500 t/d. 3) Initial open pit and ramp-access underground followed by shaft access. 4) Base case (March 2009 diamond pricing) estimates of pre-tax NPV(8%) of $885 million and Internal Rate of Return of 24.8%. This equates to an estimated 5-year payback on $511 million capex and highlights that project has shown considerable improvements in performance metrics since December 2008 PEA. Going forward, the company appears to have excellent exploration potential particularly in Renard 65 and Renard 4 pipes at depth to be tested this summer. Stornoway plans to go to full feasibility and production decision by the end of 2011. Canaccord Adams Senior Mining Analyst Eric Zaunscherb has published several bullish reports on the name, highlighting that his although his modelling captures some of the upside potential not evident in the March 2009 PEA and more recent December 2009 resource estimate, there are a number of sources of potential upside left on the table. These include: 1) As the revised PEA is delivered in Q1/10 and a feasibility study follows, he expects the discount rate to fall as the project is further de-risked. The current 9% discount rate reflects the project’s location in Québec, recognized as one of the best mining jurisdictions globally, the strong financial support available in Québec and the strong support of major shareholder Agnico-Eagle (AEM) – 15% equity interest. 2) Further expansions of Renard 2, 3, 4 and 9 to depth. Zaunscherb understands that drilling to 700 metres in Renard 2 has failed to reach the transition from diatreme (crater) facies to hypabyssal facies. Zaunscherb believes this is a crucial point as more of the higher-value diatreme portion of the Renard cluster is intact than previously thought.