http://www.financialpost.com/news-sectors/mining/story.html?id=2714065MONTREAL - As Canada's annointed queen of diamonds, Eira Thomas led the exploration team that discovered the Diavik diamond reserve in the Northwest Territories. More than a decade later, she is poised to launch Quebec's first diamond mine.

Deep in the Otish Mountains and only accessible by air, the Renard project site has the potential to yield some of the world's largest, high-value gems, the geologist said. And what was thought a marginal mining pit in Quebec's traditional Cree territory may be a bigger deal than anyone realized.

Stornoway Diamond Corp., the Vancouver-based junior miner Ms. Thomas leads as its executive chairwoman, said yesterday the project in Quebec's north-central region could be nearly twice as profitable to develop than once thought. The finding plants Renard on the path to realization, Ms. Thomas said.

"We've now got enough resource that we're very confident we're going to be building Quebec's first diamond mine," Ms. Thomas said in an interview from Toronto, adding the company will drill more on the site in the near future. "Stay tuned because this won't be it for Renard. We've got $4-billion in-situ value here that we're very confident will work. But we've also got exploration upside now. We've got new targets that we're going to be focusing on as a result of the success we've had."

Stornoway said in a news release that new projections show the Renard mine may generate a pre-tax internal rate of return of 24.8%, twice the 14.2% return estimated during an initial preliminary assessment in 2008. New drilling last year found the site has three times as many diamond deposits as first thought.

The company estimates the site could run for 25 years, yielding 1.8 million tonnes of kimberlite every 12 months and a total diamond production of 30 million carats. That's up from an earlier estimate of a seven-year lifespan. A higher processing capacity supported by a bigger overall project would reduce operating cost per tonne by as much as 22%, the company said.

Shares in Stornoway rose 26% in Toronto Stock Exchange trading to close the day at 63¢.

The next step for Renard is a full feasibility study, in which all the same parameters are measured to a higher level of detail, said Stornoway chief executive Matt Manson. The company last month filed initial documents in a mine-permit process that is expected to take between 18 and 24 months. It hopes to start production by the end of 2013.

Canada has four diamond mines currently in operation, including De Beers Canada Inc.'s Victor mine in Ontario. Since the industry took hold in 1995, domestic producers have generated more than $12-billion worth of gems accounting for 13% of global output, the Mining Association of Canada says.

It was not long ago that Stornoway was in the same financial predicament as other junior miners. When commodity prices crashed in 2008, its stock hit a 5¢ bottom and its board faced a choice: Hunker down, fire staff and ride it out or find more money.

It chose to find more money, raising $4-million in so-called flow-through tax breaks from the Quebec government. Stornoway's joint-venture partner in Renard, Soquem Inc., a mining investment firm owned by the province, matched it. The new cash infusion funded more prospecting work at the Renard site.

"It's taken nine years to get to where we are now," Mr. Manson said. "A lot of drilling. A lot of sampling. A lot of studies. But it's all been worthwhile because now we're sitting on ... a major deposit. One of the best in the world."

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