Transformative Agreement Includes Project Consolidation, Credit Support and Bought Deal Equity Financing

VANCOUVER, BRITISH COLUMBIA, Dec 14, 2010 (Marketwire via COMTEX News Network) --

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Stornoway Diamond Corporation (TSX:SWY)("Stornoway") is pleased to report that it has entered into an agreement with DIAQUEM Inc. ("DIAQUEM") for the acquisition of DIAQUEM's 50% interest in the Renard Diamond Project ("Renard"), Stornoway's feasibility-stage diamond project in north-central Quebec (the "Acquisition"). Under the terms of the Acquisition, DIAQUEM will become a significant shareholder of Stornoway, and will receive a direct royalty interest on future diamond production. DIAQUEM is a wholly-owned subsidiary of SOQUEM INC., itself a wholly-owned subsidiary of Societe generale de financement du Quebec ("SGF"), the Quebec government's main industrial and financial holding company. In conjunction with the Acquisition, SGF has further agreed to enter into a credit support agreement with Stornoway with respect to future project debt financing of a minimum of $100 million. Upon closing of the Acquisition, which is subject to shareholder approval, Stornoway will have acquired sole ownership of Renard, a major undeveloped diamond deposit, and will have established a firm foundation for the project's future financing and development.

Stornoway is also pleased to announce that it has entered into an agreement with a syndicate of underwriters led by RBC Capital Markets Ltd. ("RBC") who have agreed to purchase, on a bought deal basis, 57,400,000 common shares of Stornoway at a price of $0.61 per common share for aggregate gross proceeds of $35 million (the "Offering"). The net proceeds of the Offering will be used for Renard feasibility and pre-development costs, and for general corporate purposes. Closing of the bought deal offering is anticipated to occur on or about January 6, 2011 and is subject to the receipt of applicable regulatory approvals, including approval of the Toronto Stock Exchange ("TSX").

Details of the proposed transactions are as follows:

--  Stornoway to issue common voting shares to DIAQUEM equal to 25% of
    Stornoway's issued and outstanding common shares.

--  Stornoway to also issue newly created non-voting convertible shares to
    DIAQUEM such that DIAQUEM's total interest in Stornoway will be equal to
    37% on a fully diluted basis.

--  DIAQUEM's interest in Stornoway to be calculated on a pro-forma basis
    following completion of the $35 million Offering.

--  Stornoway to grant DIAQUEM a 2% gross revenue royalty on life of mine
    production from Renard.

--  SGF to provide Stornoway with C$100 million of credit support towards
    the establishment of a project debt facility to fund project
    construction and development costs. The credit support will bear an
    annual commitment fee of 175 bps undrawn, and will take the form of a
    direct project loan ranking pari passu with concurrent senior lenders
    or, as appropriate, on a stand alone basis on terms no less favourable
    than prevailing commercially reasonable market terms.

--  Stornoway to expand the size of its Board of Directors to 11 members and
    SGF to nominate three candidates.

Matt Manson, President and CEO of Stornoway, commented: "The agreement announced today establishes several key pillars for the future growth of Stornoway: 100% ownership of the Renard Diamond Project, credit support for future project debt, and a new, sponsoring shareholder strongly motivated to assist in the development of Quebec's first diamond mine. In the past eighteen months we have established Renard as a large diamond resource with compelling economics. With today's news, Stornoway and SGF are demonstrating the platform upon which this project will now be advanced."

For his part, Pierre Shedleur, President and General Manager of SGF commented: "For the past several years, SGF has supported Quebec's diamond exploration and development activities through SOQUEM, one of its wholly-owned subsidiaries. We are proud to support Stornoway's future growth and contribute to the Renard diamond development project in Quebec. The realization of this considerable project and the support we offer Stornoway are true to SGF's mission."

Agnico Eagle Mines Limited and the Lundin family (indirectly via Lorito Holdings), representing approximately 20.8% of the issued and outstanding shares of Stornoway, have entered into agreements to vote their shares in favour of the Acquisition at a forthcoming extraordinary meeting of shareholders.

The Acquisition has been approved by the boards of directors of both Stornoway and SGF following consultation with their respective financial and legal advisors. Stornoway's Board of Directors undertook a comprehensive review and analysis of the proposed transaction and concluded that it is fair to Stornoway's shareholders and is in the interest of Stornoway, and has unanimously resolved to recommend that Stornoway's shareholders vote their shares in favour of the proposed transaction. The decision and recommendation of the Board of Directors is based, in part, on fairness opinions received from RBC and NCP Northland Capital Partners Inc., which are to the effect that the consideration to be paid by Stornoway in connection with the Acquisition is fair, from a financial point of view, to the shareholders of Stornoway.

Investor Conference Call

Stornoway will host a conference call to answer questions on the transactions announced today on Tuesday, December 14, 2010 at 4:30 pm Eastern Standard Time. To participate in the call, dial 1-866-696-5910 within North America (local access 416-340-2217) or 800-8989-6336 internationally, participant access code 7272863. A playback will be made available until December 28, 2010 by dialing 1-800-408-3053 (local access 416-695-5800) with the access code 4675200.

Additional Details of the Acquisition

In connection with the Acquisition, Stornoway has agreed to assume and perform and be bound by all of the obligations and liabilities accruing to DIAQUEM as the former owner of a 50% interest in Renard, or arising under any agreement to which DIAQUEM or SGF is a party or bound by virtue of being a party in the Renard joint venture. SGF has agreed to a standstill obligation as a result of which SGF will not be permitted to increase, directly or indirectly, its ownership interest in Stornoway beyond 25% of the issued and outstanding common shares, except in certain limited circumstances, including in the context of a take-over bid for, or merger involving, Stornoway for the purposes of making a superior proposal, or otherwise with the prior consent of Stornoway. In addition, DIAQUEM will be entitled to a pre-emptive right in respect of common shares issued by Stornoway so as to maintain its percentage of common share ownership. The pre-emptive right will end on the date of commencement of commercial operations at Renard.

Closing Conditions of the Acquisition

In addition to customary closing conditions for transactions of this nature, completion of the proposed Acquisition is subject to the receipt of any regulatory and other approvals required to finalize the Acquisition, including TSX approval, and to the condition that the parties shall have entered into the credit support agreement, an investor agreement and a royalty agreement substantially in the forms appended as schedules to the acquisition agreement. DIAQUEM and SGF may elect not to complete the Acquisition if, among other things, there shall have been or occurred a material adverse change with respect to Stornoway, or if the Offering is not completed.

Shareholder Approval

Completion of the proposed Acquisition is also subject to the receipt of requisite shareholder approval.

The issuance of Stornoway shares to DIAQUEM pursuant to the acquisition agreement and the creation of non-voting convertible shares, among other things, will need to be approved by a simple majority of the Stornoway shareholders.

Stornoway will issue common shares and non-voting convertible shares to DIAQUEM under the acquisition agreement by way of private placement which, calculated on a pro-forma basis following completion of the Offering, will comprise an aggregate 37% interest of Stornoway's issued and outstanding equity on a fully-diluted basis. As such, under the rules of the TSX, Stornoway will be required to obtain the approval of a simple majority of its shareholders for the issuance of such number of common shares pursuant to the Acquisition. In connection with such approval, shareholders will also be asked to approve the increase in the size of the Board of Directors from 8 to 11 members in order to allow for the nomination of the three SGF designees.

Stornoway will call an extraordinary meeting of shareholders to consider the proposed transaction, which is currently expected to be held in Toronto in early February 2011 (the "Meeting"). Proxy materials, including Stornoway's management proxy circular, providing additional details relating to the proposed Acquisition and the agreements being entered into in connection with the transaction are currently anticipated to be mailed to Stornoway shareholders in early January 2011.

Subject to the approval of Stornoway shareholders and satisfaction of other closing conditions, closing of the Acquisition is expected to occur as soon as possible following the Meeting.

Share Consolidation

Concurrently with the Acquisition, Stornoway intends to further propose to shareholders a consolidation of Stornoway's issued and outstanding shares on a basis of up to five for one, consistent with the transformative nature of the proposed transaction and the new phase of Stornoway's development that it represents.

Additional Details of the Offering

The common shares will be offered by way of short form prospectus to be filed in all of the provinces of Canada, and in the United States on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended. This press release is not an offer or a solicitation of an offer of securities for sale in the United States. The common shares have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable registration exemption. Closing of the Offering is not subject to shareholder approval and is not contingent upon closing of the Acquisition.

Advisers

Stornoway's financial adviser is RBC Capital Markets and its legal counsel for the transaction are Ogilvy Renault LLP and DuMoulin Black LLP. SGF's financial adviser is GMP Securities L.P. and its legal counsel is McCarthy Tetrault LLP.

The common shares referred to herein have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any offer, solicitation or sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

About Stornoway Diamond Corporation

Stornoway Diamond Corporation is one of Canada's leading diamond exploration and development companies, involved in the discovery of over 200 kimberlites in seven Canadian diamond districts. The Company benefits from a diversified diamond property portfolio, a strong financial platform and management and technical teams with experience in each segment of the diamond "pipeline" from exploration to marketing.

About SGF

Societe generale de financement du Quebec (sgfqc.com), an industrial and financial holding company, has a mission to carry out economic development projects, particularly in the industrial sector, in cooperation with partners and in compliance with accepted profitability requirements and with the economic development policy of the Quebec government. As part of its new mandate, SGF is authorized by the Quebec government to go beyond its traditional role as an equity investor by offering complementary solutions, such as loans, debentures or preferred or convertible shares. SOQUEM, a wholly-owned subsidiary of Societe generale de financement du Quebec, is to undertake exploration, development and mining activities throughout the province of Quebec.

About the Renard Diamond Project

The Renard Diamond Project is located approximately 250 km north of the Cree community of Mistissini and 350 km north of Chibougamau in the James Bay region of North-Central Quebec. In May 2010, Stornoway filed a National Instrument 43-101 compliant technical report for the Preliminary Assessment at Renard that estimated the project to have the potential to produce approximately 30 million carats of diamonds over a 25 year mine life, with a pre-tax Net Present Value of C$885 million (at an 8% discount rate) and an Internal Rate of Return of 24.8%. Total capital investment was estimated at C$511 million. National Instrument 43-101 compliant Indicated and Inferred Mineral Resources currently stand at 23.0 and 13.3 million carats respectively, with a further 12 to 26 million carats classified as a "potential mineral deposit". All kimberlites remain open at depth. Pending the completion of all ongoing mine feasibility and environmental and social impact assessments, and the receipt of all regulatory approvals, Stornoway currently anticipates being able to make a potential production decision at Renard by the end of 2011. Readers are referred to the technical report in respect of the Renard Diamond Project for further details and assumptions relating to the project.

On behalf of the Board

STORNOWAY DIAMOND CORPORATION

/s/ "Matt Manson"

Matt Manson