Stornoway wheels, deals, gets bigger

The Stornoway Diamond Corp. launched simultaneous takeover bids for two other companies this week, in a move aimed at transforming themselves into an aggressive mid-size diamond company that will be well-positioned to build northern Quebec’s first diamond mine.

“We will be creating a company with a much larger diversified asset base,” said Eira Thomas, Stornoway’s CEO, at a teleconference this week held to explain the deal.

Stornoway is known to most Nunavummiut as the firm that heads the Aviat project, an advanced diamond exploration scheme that takes in a wide swathe of the Melville Peninsula near Hall Beach and Igloolik.

And with Shear Minerals and BHP Billiton, Stornoway is involved in the Churchill and West Churchill diamond projects near Rankin Inlet. Stornoway is also exploring for diamonds in Botswana.

In the first deal, Stornoway will acquire all the shares of Ashton Mining of Canada Ltd., now a subsidiary of the multinational giant Rio Tinto.

The Ashton deal will give them a 50 per cent share of the Renard diamond project in northern Quebec, located just south of Hydro-Québec’s LG4 dam on La Grande River, and just north of the Otish Mountains.

The other 50 per cent of Renard is owned by la Société québécoise d’exploration minière, or “SOQEM,” an agency of the Quebec provincial government.

Thomas said she hopes the Renard project will become Quebec’s first diamond mine, with a diamond resource that’s close in size to De Beers’ Snap Lake Mine in the Northwest Territories.

Under the second deal, Stornoway will acquire all the shares of Contact Diamond Corp., a Toronto-based company whose most valuable asset is a site near Temiskaming where they’ve found eight promising kimberlite pipes.

When the two deals are completed this summer, Stornoway’s market value will double to $200 million, although the new consolidated entity does not yet own any operating mines.

To pay for the deal, they will use a $32.5 million loan from a chartered bank, and raise $22.5 million by selling about 17.6 million shares to Agnico-Eagle, a gold mining company with many assets in Quebec.

Agnico-Eagle will likely end up owning about 14 per cent of Stornoway after the deal is done, while Rio Tinto will own about 15 per cent of the company.

Stornoway will spend $3.6 million on its Aviat project on the Melville Peninsula this summer.

Earlier this month, the company released promising results from small samples taken from its AV6 and AVL sites, but the company says they need to do more work to determine the full extent of the kimberlite body in the area, which may extend for 10 kilometres.