LUNA GOLD ANNOUNCES RESTRUCTURING OF SANDSTORM STREAM AND $30 MILLION FINANCING
BY PACIFIC ROADNOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR
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Vancouver, British Columbia — May 8, 2015 Luna Gold Corp. (TSX-LGC, LMA-LGC, OTCQX-LGCUF, “Luna” or the
“Company”) announced today that the Company has executed a definitive agreement (the “Transaction
Agreement”) with Pacific Road Resources Funds (“Pacific Road”) for a proposed C$20 million debt and C$10
million private placement equity financing which, upon closing, will result in the Company receiving gross
proceeds of C$30 million (the “Proposed Financing”). As well, the Company has executed definitive agreements
for the previously announced restructuring of Sandstorm Gold Ltd.’s (“Sandstorm”) existing gold stream and
debt facility (the “Restructuring”). The closing of the Proposed Financing and the Restructuring remains subject
to a number of conditions, including among others, the raising of an additional C$10 million of equity. As part of
the Proposed Financing, Luna expects to complete a concurrent private placement (the “Concurrent Equity
Financing”) of up to C$15 million which the Company intends to offer to new and existing shareholders.
HighlightsWith 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.
Marc Leduc, Luna’s CEO said "The fundamentals of the Aurizona asset remain strong and the economics of the
project will be enhanced with the replacement of the old 17% gold stream with the much lower NSR royalties
and optimization of the mining plan. We have a new team of senior managers in place, that includes a
committed core of existing Brazilian management that together are ready to move the project development
forward. With the closing of both the Pacific Road financing and the Sandstorm restructuring, the Company
expects to have the financial resources and working capital necessary to fund the work programs currently
outlined. Additionally, the Company has two long-term committed shareholders/partners in Pacific Road and
Sandstorm to further strengthen our financial and technical mining expertise. Finally, we will extinguish our
existing bank debt and rebuild the capital structure of the Company.”
The Company expects to use the proceeds from the Proposed Financing to: (i) repay its existing debt facility with
Société Générale (Canada Branch) and Mizuho Corporate Bank (the “Senior Lenders”); (ii) commence an infill
drilling program, prepare engineering studies and submit updated permits at Aurizona; and (iii) for general
working capital and corporate purposes.
The Proposed Financing, Concurrent Equity Financing and Restructuring are subject to a number of conditions,
including the approval from Luna’s shareholders. If the Proposed Financing and Restructuring are not
completed, the Senior Lenders’ agreement to forbear from commencing enforcement actions against the
Company and its assets will terminate and the Senior Lenders will have the immediate right to commence such
actions, including, without limitation, the initiation of legal proceedings that could result in an insolvency
proceeding against the Company and its subsidiaries. The Company cannot give any assurance that the Senior
Lenders will continue to forbear from taking such actions if the Proposed Financing, Concurrent Equity Financing
and Restructuring fail to complete, whether due to an absence of shareholder approval of the transactions or
otherwise.
Pacific Road Financing TermsSenior Secured NoteUnder the terms of the Proposed Financing, Pacific Road will provide Luna with a C$20 million senior secured
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 required to be secured by first-ranking liens and encumbrances and is
expected to mature on June 30, 2020 and if Luna were to enter into default on the Note the interest rate would
increase to 15% per annum. All outstanding amounts, including principal and any remaining 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”).
Subject to the receipt of all required approvals, Pacific Road will have the right to reduce the Note outstanding
as satisfaction of the exercise proceeds of the Class B Warrants.
Private PlacementPacific Road has also agreed to acquire C$10 million of units in the capital of Luna (“Units”) in a non-brokered
private placement (“Private Placement”). Each Unit will consist of one common share and one whole class A
common share purchase warrant (each, a “Class A Warrant”). Subject to receipt of all required approvals, the
issue price of each Unit will be C$0.10 per Unit. The Class A Warrants will have an exercise price of C$0.125 per
Luna common share and will be exercisable for a term of 5 years.
It is anticipated that an offer will be made to existing shareholders, including Sandstorm, and to new investors,
to participate in the Concurrent Equity Financing of Units on the same terms of the Private Placement for up to
an additional C$15 million, subject to compliance with securities laws.
Any securities issued in 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.
ConditionsThe Proposed Financing is subject to a number of conditions, including (i) the concurrent completion of the
Restructuring, (ii) regulatory approvals such as the approval of the Toronto Stock Exchange, (iii) the approval of
Luna’s shareholders in accordance with the policies of the Toronto Stock Exchange and applicable securities laws
at a meeting which we anticipate will be held on or around June 18, 2015, and (iv) other customary closing
conditions. Until the conditions are satisfied there can be no assurance that the Proposed Financing will be
completed. The Proposed Financing, if completed, will raise C$10 million of the C$20 million in equity financing
that is a condition of the Restructuring. The Company anticipates completion of the Proposed Financing on or
around June 30, 2015, assuming the foregoing conditions can be met. If the Proposed Financing and
Restructuring are not completed, the Senior Lenders will be in a position to accelerate our senior debt due to
our previously announced covenant breaches and commence enforcement proceedings against the Company
and its assets. The Company cannot give any assurance that the Senior Lenders will continue to forbear from
taking such actions if the Proposed Financing and Restructuring fail to complete, whether due to an absence of
shareholder approval of the transactions or otherwise.
In connection with the Proposed Financing, Pacific Road is requiring that Luna grant it certain rights, including a
pro rata participation right in future equity financings, registration rights in certain circumstances and the right
to appoint a number of directors to Luna’s board that is equal to Pacific Road’s partially diluted pro rata equity
ownership in the Company, assuming exercise of its Class B warrants. Assuming the C$15 million Private
Placement is fully subscribed, Pacific Road’s fully-diluted pro-rata equity ownership will be 48% and Pacific Road
will have the right to nominate three of Luna’s seven directors.
On closing of the Proposed Financing, Pacific Road will require that Luna pay it a fee equal to 4% of the principal
amount of the Debenture and 2% of the gross proceeds from Pacific Road’s subscription to the Private
Placement. Pursuant to the Definitive Agreement Luna has agreed in certain circumstances to pay Pacific Road a
break fee of C$1.2 million if the Proposed Financing does not close.
Sandstorm Gold Stream RestructuringUnder the terms of the Restructuring, Sandstorm’s existing 17% gold stream (the “Gold Stream”) on Luna’s
Aurizona project will be terminated and 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 190,073 hectares of exploration ground held by Luna and is a 2% NSR. Luna
would have the right to purchase one-half of the Greenfields NSR for US$10 million at any time prior to
achieving commercial production.
Under the Restructuring, Sandstorm will also receive 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 will have 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 will be amended so that the maturity date is extended from June
30, 2017 to June 30, 2021, the interest rate is revised to 5% per annum, payable in cash on the maturity date,
and Luna would be subject to a default rate of interest equal to 10% per annum.
ManagementAs announced on February 2, 2015, Mr. Marc Leduc, P.Eng., was appointed President, CEO and Director of the
Company. Since his appointment, Mr. Leduc has been assembling a team that includes a wide experience range.
This team includes:
Duane Lo, Executive VP and CFO (since August 2009)—Former controller with First Quantum Minerals;
Martin Kostuik, Director of Development and Operations—Mining Engineer, MBA. 20+ years of mining
experience in all aspects of mine operations and development;
Carol Fries, Director of Environmental & Community Affairs—Over 30 years of experience in the
environmental, community relations and sustainability sectors;
Carlos Paranhos, Exploration Director (Since April 2011)– Geologist with over 30 years of exploration and
mining experience in Brazil and similar international Precambrian terrain; and
Richard Pearce, PE, Director of Corporate Development—Economist and civil engineer with +20 years of
experience planning and managing complex mining projects.
Strategic Development PlanThe Aurizona project fundamentals remain strong with the deposit containing a Measured Resource of 0.5
million ounces of gold (10.9Mt @ 1.4 g/t) and an Indicated Resource of 2.4 million ounces of gold (52.8Mt @ 1.4
g/t) (estimate filed in an update NI 43-101 Technical Report on March 27, 2015) for a total Measured and
Indicated resource of 2.9 million ounces of gold (63.7Mt @ 1.4 g/t Au).
The new management team has spent the last 3 months developing a strategic plan and also implementing the
first phases of this plan. The first part of the plan called for the renegotiation of the Sandstorm stream and the
elimination of the senior bank debt. With the closing of the Proposed Financing and Restructuring, the Company
will have accomplished both of these objectives. The Company then plans on using the balance of the financing
proceeds to commence a significant infill drilling program, updating the geological model, calculating a new
resource, formulate a new and optimized mine plan, produce an updated prefeasibility study and continuing the
permitting process to ultimately secure a permit to restart Aurizona. Commencing in mid-2016, Luna expects to
use the results of the exploration program and the pre-feasibility study to move on to detailed engineering and
ultimately the restart of the mine as a hard rock operation.
It is anticipated that additional financing will be needed for the construction and restart of the Aurizona mine
because it is likely that a new crushing and grinding circuit will be required to process the different types of ore
in the existing ore body. The balance of the processing circuit will benefit from the significant capital spent on
the Phase I plant upgrade, which was stopped by the Company in the Third Quarter of 2014, after having spent
over $40 million on this Phase I 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.
Luna’s community relation’s initiatives will continue to focus on building capacity within the communities in our
area of influence and on multi- stakeholder partnership models, that involve strengthening local labor skills
through the establishment of partnerships with the Industry State Federation (FIEMA), and in partnership with
state and local governments and community associations on campaigns to raise social awareness about
important issues, such as children’s education, community safety and security, and the prevention of domestic
violence and substance abuse, and our Open Door program to provide information to the public on an ongoing
basis regarding mining activities in a framework of openness and transparency.
Conference Call and WebcastLuna will hold a conference call at 11AM Toronto time on •, May 8, 2015 to allow management to discuss the
Proposed Financing and Restructuring details. The call can be accessed by dialing 416-340-2216 or, for toll-free
in North America dial 866-223-7781. For a list of International dial-in numbers use the following link:
https://www.confsolutions.ca/ILT?oss=1P29R8662237781. The conference call will be available for replay until
May 22, 2015 by dialing 905-694-9451 or, for toll-free in North America dial 800-408-3053. The Passcode for the
replay is 3714533. The webcast can be accessed through this link (
http://www.lunagold.com/conference-calls/).
The presentation will be available on Luna’s website at
www.LunaGold.com .
About Pacific Road Resources Funds and Pacific Road Capital
The Pacific Road Resources Funds are private equity funds investing in the global mining industry. They provide
expansion and buyout capital for mining projects, mining related infrastructure and mining services businesses
located throughout resource-rich regions of the world. The Pacific Road Resources Funds are managed or
advised by Pacific Road Capital Management Pty Ltd. (“PRCM”). The PRCM team, located in Sydney, Australia,
San Francisco, USA, and Vancouver, Canada, is comprised of experienced mining investment professionals that
have extensive knowledge and experience in the mining and infrastructure sectors, including considerable
operating, project development, transactional and investment banking experience. For further information on
the Pacific Road Resources Funds and PRCM, please go to their website at
www.PacRoad.com.auAbout 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.comFor further information contact Investor Relations at +1 (604) 568-7993.
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