Vancouver, British Columbia — June 30, 2015 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 nonbrokered 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
Website: www.lunagold.com
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