Luna Gold Corp.: Q2 Production Update

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 5, 2011) - Luna Gold Corp. (TSX VENTURE:LGC)(BVLAC:LGC) ("Luna Gold" or the "Company") provides an update on key production outputs for Q2, 2011 at the Aurizona Gold mine operation and an exploration summary at Aurizona.

During the quarter our performance had mixed results, lower than forecast production has been offset by success in rebuilding the operational team and excellent results in exploration.

The management team have developed plans to deliver feasibility levels of gold production and are currently executing this plan. The new management team includes a Vice President Operations, a General Manager Aurizona Gold Mine and Mining Manager Aurizona Gold Mine.

Management evaluation of the Aurizona plant have confirmed the process plant construction did not deliver key process and operational performances as designed. Luna Gold management and our consulting engineers have identified major and minor modifications required to achieve reliable and consistent feasibility design performance. Plant improvements and upgrades will proceed progressively while production continues.

Performance in Q2 was low due to planned downtime to complete upgrades in the SAG mill and other modifications. Changes in the SAG, screens and other mechanical upgrades required re-commissioning the plant causing lower throughput and recoveries.

The production results for Q2 below demonstrate a positive upward trend in all key indicators, particularly tonnes throughput, grade and gold produced. Looking forward to Q3 and Q4 ramping up to feasibility target production of 4,500 to 5,000 ounces of Gold per month will require a 18% increase in mill throughput and a 24% increase in recoveries. Management plans feasibility targets to be achieved in Q3 and produced consistently in Q4.

Production results for Q2 2011 were as follows:

	Apr 11	May 11	Jun 11	Q2 11
Mined waste – tonnes	5,239	-	5,759	10,998
Mined ore – tonnes	4,114	-	108,138	112,252
Ratio of Ore to Waste	1:1.29	-	1:0.05	1:0.1
Ore Grade mined – g/t	1.37	-	1.25	1.25
Processed ore – tonnes	32,465	82,654	95,416	210,526
Average grade processed – g/t	1.02	1.32	1.31	1.27
Average recovery rate %	63	61	69	65
Gold produced (ounces)	671	2,123	2,766	5,560
Gold sold (ounces)	3,215	691	3,018	6,924

NOTE: Production numbers are preliminary and subject to final adjustment

In April the Aurizona Gold mine underwent a planned shutdown to complete an upgrade to the SAG mill and other plant modifications necessary to ramp up production to Feasibility target. The upgrade was completed in 19 days without production.

The feasibility study, for year one of production, is an average of 4,580 ounces per month from 116,000 ore tonnes milled at 1.32 g/t with recoveries of 93%. During May and June operational staff progressively increased throughput and recoveries to deliver consistent and reliable production for the future of the operation.

The April upgrade addressed the following plant improvements;

• Installation of a reduction gearbox to reduce the SAG rotation speed.
• Installation of an inching drive for safe and efficient mill liner changes
• Complete mill reline and ball charge
• Installation of a trash screen and a carbon recovery screen.
• Installation of a pinion and commissioning #4 Ball Mill
• Repairs to the apron feeder
• Replacement of thickener pumps

The speed reduction of the SAG was successfully implemented, however the retro-fit wet seal in the SAG continues to with intermittent downtime. The Company expects limited downtime until this repair is complete, Ausenco Brazil is assisting this repair.

By mutual agreement in March/April 2011, the mining contractor engaged at Aurizona completed a two year contract and demobilized from site. In preparation for the wet season (December to June) Aurizona established a ROM stockpile with capacity for three months ore supply to the mill. In the absence of a mining contractor and the onset of the wet season these stocks were allocated to feed the mill for April, May and June until the mobilization of a new mining fleet to Aurizona which was completed at the end of June 2011. This fleet is now operational.

Strengthening our Operations Management Team

In addition to mechanical improvements at Aurizona, Luna Gold has significantly strengthened the Operational management structure with the addition of three key management positions. Luna Gold will continue to increase the skills of our workforce and engage high quality management to develop a high quality, technically strong management team to deliver shareholder value.

Vice President Operations

Peter Mah joined the Company in June and will lead the operational team through re-commissioning and achieving feasibility level production. Peter is a mining and processing engineer with a Master's degree in Rock Mechanics from UBC. His experience base is from progressive management positions with Gold Corp, Newcrest and Newmont throughout Canada, USA, South East Asia and Africa. Peter will be based in Vancouver BC Canada. Peter has spent significant time at Aurizona with the Operations team.

General Manager – Aurizona Gold Mine

Jim Healy, a well experienced Mining Engineer (New Mexico Institute of Mining & Technology). Jim has worked extensively in engineering and project management with BHP Billiton, INCO, Aura Minerals and JDS Engineering and Mining in the USA, Canada, Australia, Indonesia, Brazil, South America and New Caledonia. Jim is fluent in Portuguese and has direct experience in General Management in Brazil. Jim brings a talent of practical and professional management to our operations and will be based in Brazil.

Mining Manager – Aurizona Gold Mine

Alberto Reyes will commence with the Company in July to build on the existing technical and managerial strength at Aurizona. Alberto is a mining engineer from Ontario with broad experience in mine operations and mine planning. He brings to the Company extensive experience gained with an International Mining Consultancy, Newcrest Mining Ltd and Gold Fields in Canada, USA, South America, Australia and Africa. Alberto will implement systems and processes into the operations to deliver discipline in grade control and mining efficiencies over the life of the mine. Alberto is fluent in Portuguese, English and Spanish.

Production and Cash Costs and Guidance

Low gold production in the Q2 ramp up will result in higher cash costs per ounce. These are expected to reduce as target production is achieved in Q3. Luna Gold will provide the market with actual cash costs and guidance for 2011 and 2012 in the Q2 MD&A to be released on completion of the half yearly accounts.

Exploration

Luna Gold is engaged in an aggressive exploration program at Aurizona and the Maranhão Greenfields project. At Aurizona seven drills are in operation to increase measured and indicated resources and to date assay results from 39 holes totalling 10,666 meters have been received. All drill holes to date have intersected considerable zones of gold mineralization with some outstanding results and significantly the deposit remains open at depth on all sections. Drilling to date has intersected mineralization at depths of up to –350 meters RL. Drilling will continue and the Company is on target to deliver an updated resource update in Q4, 2011.

Recent drill results include:

• 44.00 meters @ 4.94 g/t Au including 0.50 meters @ 21.40 g/t Au, 0.50 meters @ 14.35 g/t Au and 5.00 meters @ 30.51 g/t Au in BRAZD306 (Press Release 28/06/2011)

• 48.00 meters @ 3.29 g/t Au including 12.00 meters @ 7.93 g/t Au and 1.00 meter @ 9.84 g/t Au in BRAZD299 (Press Release 06/06/2011)

• 55.00 meters @ 4.15 grams/tonne Au including 1.00 meter @ 20.00 grams/tonne Au and 17.00 meters @ 7.80 grams/tonne Au in BRAZD293A (Press Release 18/04/2011)

Previous Press Releases: http://www.lunagold.com/s/NewsReleases.asp

The drill rigs are now testing for eastern and western extensions to the Piaba deposit. Based on the success of the current program and the potential to increase resources at the Piaba deposit the Company has extended the current drill program by 20,000 meters. Luna Gold Exploration is also advancing near mine exploration targets to drill stage and has completed auger and trench programs at several targets. Results from these programs will be provided as assays are received.

At the Maranhão Greenfields areas Luna is focused on advancing gold targets to drill stage for 2012. Recent work has focused on soil gridding, geophysical surveying and geological mapping. The 2012 exploration program will focus on delivering maximum shareholder value through exploration on 100% owned Luna Gold mineral rights in addition to further expanding resources at the Aurizona near mine exploration targets.

On behalf of the Board of Directors

LUNA GOLD CORP.

John Blake – President and CEO

Regulatory Footnotes

Luna operates a rigorous QA/QC protocol on all aspects of sampling and analytical procedure. Drill core is checked, logged, marked for sampling and sawn in half. One half of the HTW (71 mm diameter) core is maintained for future reference and one half of the core is sent for analysis. Samples are collected at approximately 2 meter intervals, which is reduced to 1 meter interval or less when a mineralized zone is encountered. All core and samples are stored in secure locked areas. Samples are transported from the Aurizona project to the ALS Chemex sample preparation facility in Belo Horizonte, Minas Gerais accompanied by Luna personnel. Samples are assayed at ALS Chemex Labs in Lima, Peru using a 50 gram fire assay with AAS finish. Each sample batch contains 10% of randomly inserted internal control samples consisting of certified analytical standards, blanks (barren rock) and duplicates. These QA/QC procedures provide several measures of data quality and assure the Company that the assay data is representative of the original sample. Additional technical information about the Aurizona Project is available in our technical report dated September 1, 2010, filed on SEDAR.

Titus Haggan Ph.D., EurGeol Certified Professional Geologist #746, Luna's Vice President Exploration is the Qualified Person as defined under National Instrument 43-101 responsible for the scientific and technical work on the exploration program and has supervised the preparation of and reviewed the technical disclosure in this press release. Non- qualified persons currently work on Luna's exploration programs under the guidance of Titus Haggan. Dr. Haggan takes responsibility for work, information and advice generated by non-Qualified persons and has taken the steps required to ensure that the work, information and advice is sound.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the United States Securities Act of 1933 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 Company's exploration programs, any planned resource upgrades, production estimates and any planned upgrades to processing facilities. 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. Certain of the statements made herein by Luna Gold Corp. are forward-looking and subject to various risks and uncertainties, both known and unknown, many of which are beyond the ability of Luna Gold Corp. to control or predict. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Forward-looking information is subject to known and unknown risks and uncertainties that may cause Luna Gold Corp.'s actual results, performance or achievements may be materially different from those expressed or implied by such forward-looking information, and are developed based on assumptions about such risks, uncertainties and other factors set out here in, including but not limited to the inherent risks involved in 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, mine development and production costs, the projected life of the Company's mines, future production levels, 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, labour 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, 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.