SOURCE: Luna Gold Corp.

Luna Gold Corp.

June 30, 2015 17:40 ET

Luna Gold Announces Closing of Restructuring and Financing

VANCOUVER, BC--(Marketwired - June 30, 2015) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES

Luna Gold Corp. (TSX: LGC) (LMA: LGC) (OTCQX: LGCUF) ("Luna" or the "Company") is pleased to announce today that it has closed the previously announced $30 million financing with Pacific Road Resources Funds ("Pacific Road"), restructured its existing gold steam and debt facility with Sandstorm Gold Ltd. ("Sandstorm"), and raised an additional $2.47 million of equity financing (collectively, the "Luna Restructuring"). Concurrently with closing of the Luna Restructuring, the Company has repaid and settled its existing debt facility with Société Générale (Canada Branch) and Mizuho Corporate Bank.

The Company expects to use the remainder of the proceeds from the Luna Restructuring: (i) to commence an infill drilling program, prepare engineering studies and submit updated permits at Aurizona; and (ii) for general working capital and corporate purposes.

Highlights

With a restructured gold stream and recapitalized balance sheet, Luna will be in a position to undertake a work program that will have the ultimate goal of restarting operations at the Aurizona gold mine ("Aurizona"). The proposed 18-month work program will involve significant infill drilling, updating the geological model, calculating a new resource estimate, formulating a new, optimized mine plan, producing an updated prefeasibility study incorporating an upgraded crush and grind circuit and continuing the on-going licensing and permitting process to ultimately secure all the needed permits to restart Aurizona. The work program has a particular focus on continuing to build capacity in the local community, with the continuation of skills training programs and the launch of new initiatives to encourage agricultural entrepreneurship in the communities surrounding Aurizona.

Pacific Road Financing Terms

Senior Secured Note

Pacific Road has provided Luna with a $20 million senior secured loan evidenced by a note bearing interest at a rate of 10% per annum (the "Note"), payable quarterly in arrears in cash or shares at Pacific Road's election. The Note is secured by first-ranking liens and encumbrances and will mature on June 30, 2020. If Luna were to default on the Note the interest rate would increase to 15% per annum. All outstanding amounts, including remaining principal and accrued interest, will be payable at maturity. Luna has also agreed to provide Pacific Road with 200 million class B common share purchase warrants, exercisable for a term of 5 years at C$0.10 (the "Class B Warrants"). Pacific Road has the right to apply principal of the Note in payment of the exercise price of the Class B Warrants.

Private Placement

Pacific Road also acquired 100 million units in the capital of Luna ("Units") at a price of $0.10 per Unit in a non-brokered private placement (the "Private Placement") for a purchase price of $10 million. Each Unit consists of one common share and one class A common share purchase warrant (each, a "Class A Warrant"). The Class A Warrants have an exercise price of $0.125 per Luna common share and are exercisable for a term of 5 years. Sandstorm also participated in the Private Placement by subscribing for 24.7 million Units at a purchase price of $2.47 million.

On closing, Pacific Road received a fee equal to 4% of the principal amount of the Note and 2% of the gross proceeds from Pacific Road's subscription to the Private Placement.

Sandstorm Gold Stream Restructuring

Sandstorm's 17% gold stream (the "Gold Stream") on Luna's Aurizona project, has been replaced by two net smelter return royalties ("NSR") (the "Aurizona Project NSR" and the "Greenfields NSR") and a convertible debenture. The Aurizona Project NSR covers the entire Aurizona Project, including the current 43-101 compliant Resources, and all adjacent exploration upside that is processed through the Aurizona mill net of third party refining costs. The Aurizona Project NSR pays Sandstorm a sliding scale royalty based on the price of gold as follows:

  • 3% if the price of gold is less than or equal to US$1,500 per ounce;
  • 4% if the price of gold is between US$1,500 per ounce and US$2,000 per ounce; and
  • 5% if the price of gold is greater than US$2,000 per ounce.

The Greenfields NSR covers the approximately 200,000 hectares of exploration ground held by Luna and is a 2% NSR. Luna has the right to purchase one-half of the Greenfields NSR for US$10 million at any time prior to achieving commercial production.

Sandstorm also received a US$30 million debenture with interest at a rate of 5% per annum ("Debenture"). The Debenture will be payable in three equal annual tranches of US$10 million plus accrued interest beginning June 30, 2018. Luna has the right to convert principal and interest owing under the Debenture into common shares of Luna as long as Sandstorm owns less than 20% or more of the outstanding common shares of Luna. Luna can choose to postpone the payment of any instalment until a point when the issuance of shares would not result in Sandstorm owning more than 20% of the common shares of Luna.

Further, the existing Sandstorm Debt Facility was amended so that the maturity date of the debt facility was extended from June 30, 2017 to June 30, 2021, the interest rate was revised to 5% per annum, payable in cash on the maturity date, and subject to a default rate of interest equal to 10% per annum.

Strategic Development Plan

As part of the restructuring plan, there have been changes to the composition of Luna's Board of Directors. Mr. Rob Pease, P.Geo. and Mr. Dan Wilton have been added to the Board while Mr. Wayne Kirk and Dr. Bill Lindqvist are stepping down.

Mr. Pease has more than 30 years of experience in global exploration and mine development. He was most recently President and CEO of Sabina Gold and Silver Corp. from November 2011 until his retirement in February 2015. In 2006, Mr. Pease founded Terrane Metals Corp. to develop the Mount Milligan project in BC, Canada. Terrane Metals was acquired by Thompson Creek Metals Company Inc. for $700 million in 2010. Mr. Pease is a former director and strategic advisor to Richfield Ventures Corp. that was exploring the Blackwater gold project in BC, Canada. In 2011, Richfield Ventures was acquired by New Gold Inc. for $500 million. The majority of Mr. Pease's prior career was spent at Placer Dome Inc. His last position there was GM, Canada Exploration & Global Major Projects. In 2010, the Association of Mineral Exploration BC named Mr. Pease their "BC Mining Person of the Year."

In addition to Mr. Pease, Mr. Wilton will also be joining the Board of Directors as a representative for Pacific Road. Mr. Wilton joined Pacific Road in 2013 and has more than 20 years' experience in mergers and acquisition and corporate finance in the mining industry. His transaction experience includes advising on over $10 billion in mergers and acquisition transactions and over $1 billion in corporate financings. Formerly Mr. Wilton was Managing Director and Head of Global Mining and Metals at National Bank Financial Inc., Managing Director in Business Development at General Electric and held other senior financial positions at leading financial institutions.

Marc Leduc, President and CEO, stated, "I want to thank Wayne Kirk and Bill Lindqvist for their service to Luna Gold. They have been active directors during a very difficult time in the history of Luna and their leadership has been invaluable through this transition period. I want to welcome Rob Pease and Dan Wilton to the Board of Directors of Luna. Their vast experience will help us to bridge this transition period as we move forward."

It is anticipated that additional financing will be needed for the construction and restart of the Aurizona mine because it is likely a new crushing and grinding circuit will be required to process the different types of mineralization at the Aurizona mine. The balance of the processing circuit will benefit from the significant capital spent on the Phase 1 plant upgrade, which was stopped by the Company in November 2014, having spent over $40 million on this phase one work.

The updated and revised mine plan will require amendments to some of our existing permits at Aurizona as well as other permitting activities for some off-site infrastructure. Luna will be working diligently with the relevant government authorities in Brazil to advance the permitting process. Many of the required permits will be amendments to existing permits.

Any securities issued under the transactions described in this press release will be subject to a four month hold period which will expire four months plus one day from the closing date.

About Luna Gold Corp.

Luna is a gold production and exploration company engaged in the operation, discovery, and development of gold projects in Brazil.

On behalf of the Company

LUNA GOLD CORP.

Marc Leduc P.Eng. -- President, Chief Executive Officer and Director

This news release does not constitute an offer to sell or a solicitation of an offer to buy securities to, or for the account or benefit of, persons in Canada or elsewhere, including persons in the United States or "U.S. persons" ("U.S. Persons"), as such term is defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"). Any such offer or solicitation will be made at a later date and in compliance with all applicable laws. Our securities have not been and will not be registered under the U.S. Securities Act or any state securities laws, and may not be offered or sold to, or for the account or benefit of, persons in the United States or U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Forward-Looking Statements
This release contains certain "forward looking statements" and certain "forward looking information" as defined under applicable Canadian and U.S. securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "continue", "plans" or similar terminology. Forward-looking statements include, but are not limited to, statements with respect to the use of proceeds from any financing, the Company's ability to continue as a going concern, future or continued mining operations, expected gold production and/or the results of analysis on gold production, expected grades, anticipated tailings facility cost, Luna's ability to secure additional financing and anticipated timing for the release of the new resource and reserve estimates. Forward-looking statements are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in Luna Gold Corp.'s periodic filings with Canadian Securities Regulators. These factors include the inherent risks involved the use of proceeds from and availability of any financing, financial performance or results, suspension and potential restart of operations, the exploration and development of mineral properties, the uncertainties involved in interpreting drill results and other exploration data, the potential for delays in exploration or development activities, the geology, grade and continuity of mineral deposits, the possibility that future exploration, development or mining results will not be consistent with the Company's expectations, accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties with or interruptions in production and operations, fluctuating metal prices, unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, regulatory restrictions, including environmental regulatory restrictions and liability, competition, loss of key employees, uncertainties with respect to non-compliance with credit facility covenants and other related risks and uncertainties. The Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.

Contact Information

  • For further information contact:

    Luna Gold Corp.
    Investor Relations
    +1 (604) 568-7993
    Website: www.lunagold.com