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Canada's Magazine for Financing & Leasing Executives

April 13, 2014

Stornoway Renard Project financing agreement includes massive equipment financing deal for Caterpillar

QUEBEC--Stornoway Diamond Corporation has entered into a binding financing commitment agreement with Orion Co-Investments I Limited, Ressources Québec, a wholly-owned subsidiary of Investissement Québec, and the Caisse de dépôt et placement du Québec for the construction of the Renard Diamond Project.

The Agreement contemplates a series of proposed financing transactions totalling C$944m with funding commitments of US$360m from Orion, C$220m from RQ and C$105m from CDPQ, a marketed offering of common share subscription receipts and an equipment financing facility with Caterpillar Financial.

Each element of the financing transactions is conditional upon the completion of the others and the successful completion of the marketed subscription receipt offering. Additional closing conditions include the approval of Stornoway's shareholders and the settlement of definitive agreements.

The Financing Transactions are designed to provide full funding to project completion. Taken together, they represent the largest ever project financing package for a publicly listed diamond company.

Highlights of the Financing Transactions are as follows. All US dollar ("US$") figures converted into Canadian dollars ("C$") assume an exchange rate of US$1.00 for C$1.10.

A C$427m offering of common share subscription receipts, being:

C$243mto be subscribed for by Orion, RQ and CDPQ by way of private placements in the amounts of US$110m, C$100m and C$22m, respectively; and

C$184mto be offered to the public by way of a concurrent prospectus offering in Canada led by Scotiabank, Dundee Capital Markets and RBC Capital Markets;

A C$275m forward sale of diamonds by way of a Streaming Agreement, being:

US$200m paid by Orion in connection with a 16% streaming interest; and

US$50m paid by CDPQ in connection with a 4% streaming interest;

C$155m in two debt facilities, being:

a C$100m Tranche "A" senior secured loan from RQ, bearing an initial interest rate of prime plus 4.75% with a ten year term; and
a US$50m convertible unsecured loan from Orion bearing an interest rate of 6.25% with a seven year term;

An additional C$48m in committed but initially unfunded cost overrun credit facilities, being:

a C$20m Tranche "B" senior secured loan from RQ; and a C$28m unsecured non-convertible loan from CDPQ.

Stornoway further announces that it has concurrently entered into a mandate letter with Caterpillar to arrange and underwrite an equipment financing facility for a minimum of US$35m for the purchase of certain mine equipment items manufactured by Caterpillar and others, including the project's mobile mining fleet. Closing of the equipment financing facility will be subject to completion of due diligence, underwriting, credit approval, definitive documentation and other customary conditions precedent, including compliance requirements under applicable laws.

Matt Manson, Stornoway's President and CEO, commented: "We are announcing today a comprehensive, one-shot financing package of C$944m designed to fund Renard through construction to the declaration of commercial production, and including all contingencies, capital escalation allowances, working capital requirements, and financing costs. These transactions have been carefully structured through a balance of debt, equity and stream with a goal of allowing full participation by our shareholders in the value that will be created with the project's development. With our permits in hand, and the Renard Mine Road and Aerodrome already in place and ready for use, the successful completion of these transactions will remove the last remaining financing risk for the project and allow principal project construction to commence. We look forward to presenting the financing of Québec's first diamond mine for approval by shareholders at a special meeting to be held in Montreal at the end of May 2014."

The parties to the Financing Transactions include the Orion Mine Finance Group, one of the world's leading mining-focused private equity businesses; the Government of Québec, by way of Investissement Québec; and CDPQ, one of Canada's largest institutional investors. Stornoway's financial advisors in relation to the Financing Transactions are Scotiabank and Dundee Capital Markets Inc. and its legal advisors are Norton Rose Fulbright.

Stornoway's board of directors has determined that the comprehensive financing package set forth in the Agreement is in the Corporation's best interests in that it will allow Stornoway to fully finance the construction of the Renard Diamond Project. This determination was based on a number of factors, including the unanimous recommendation of a special committee of directors formed to consider the Corporation's financing alternatives and a fairness opinion received from Primary Capital Inc. as financial advisor to the special committee.

The proceeds of the C$427m common share subscription receipt offering and US$50m convertible loan, for a total of approximately C$482m, will be fully funded at the closing of the Financing Transactions, which is anticipated to occur in June 2014, and will be immediately available to Stornoway for project construction, subject to fulfilment of the conditions to closing of the Financing Transactions described below under "Closing of the Financing Transactions."

A summary of the key terms of the various elements of the Financing Transactions follows, which are described in greater detail in the Agreement and the preliminary short form prospectus that will be available on the SEDAR website maintained by the Canadian securities administrators at www.SEDAR.com. This summary does not purport to be complete and reference should be made to the full text of the Agreement and the preliminary short form prospectus.



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