VANCOUVER, March 12 /PRNewswire-FirstCall/ -- Luna Gold Corp. (TSXV-LGC) ("Luna" or the "Company") is pleased to announce that it has entered into a letter agreement with Sandstorm Resources Ltd. ("Sandstorm") under which the Company has agreed to sell 17% of the payable gold to be produced by the Company's Aurizona Project (the "Project") to Sandstorm in exchange for an upfront cash payment, an agreed payment schedule for Sandstorm's portion of future gold sales, and a commercial loan facility.
Sandstorm will, subject to certain conditions precedent, pay an upfront cash payment of US$17.8 million to the Company (the "Upfront Payment") to acquire the right to purchase 17% of the payable gold produced during the life of the mine to be constructed on the Project. The Upfront Payment will be used to fund construction and development of the mine and for general and administrative costs associated therewith.
In addition to the Upfront Payment, Sandstorm shall make ongoing per-ounce payments equal to the lesser of US$400 and the prevailing spot gold market price, subject to an increase equal to 1% per annum beginning on the 3rd anniversary of the date that the Project begins commercial production.
Sandstorm has also agreed to loan to Luna, concurrently with the Upfront Payment, the sum of US$7.2 million (the "Loan") to be used to advance the Project. The Loan will bear interest at the rate of LIBOR plus 6% and will have a term of four years, subject to being repaid earlier out of 50% of free cash flow from the Project, less certain adjustments.
Luna's CEO, Jim Bahan, comments, "On the closing of this transaction, Luna will receive all the remaining funds estimated as necessary to put its Aurizona project into production. This will allow the Company to take advantage of the upcoming dry season to commence construction, at a time when the Brazilian Real is relatively weak and the gold market strong. Luna expects the project to be ready for production approximately twelve months from receipt of the funds."
Luna will provide a completion guarantee under which Sandstorm may require the return of a portion of the Upfront Payment if, within 30 months from the date that Sandstorm makes the Upfront Payment to Luna, the Project has not produced a minimum of 12,500 ounces of payable gold in any three consecutive month period.
If Luna decides to develop an underground mine (the "Underground Mine") on the Project, Sandstorm will also have the right to purchase 17% of the payable gold from the Underground Mine, at a per-ounce price equal to the lesser of US$500 and the prevailing market price, subject to an increase of 1% per annum beginning on the 3rd anniversary on the date that the Underground Mine begins commercial production, in exchange for paying 17% of the capital expenditures incurred to determine the economic viability and to construct the Underground Mine.
The making of the Upfront Payment and the Loan are subject to the usual conditions for similar transactions, including: (i) the completion of satisfactory due diligence by Sandstorm by April 15, 2009; (ii) the finalization of the structure of the transaction, including tax considerations; (iii) the execution of definitive agreements before May 15, 2009; (iv) the receipt of any required regulatory approvals and third party consents; and (v) the closing by Sandstorm of a financing to raise proceeds of at least C$60 million as announced on March 12, 2009.
The Board also wishes to announce that Nolan Watson, a Director of the Company, will be stepping down at the close of business today. The Board would like to thank Mr. Watson for his valuable service and support to the Company and its development.
About Luna Gold Corp.
Luna is a mining exploration company focused on the acquisition, exploration, and development of gold resources and advanced stage gold exploration projects in northeastern Brazil.
On behalf of the Board of Directors LUNA GOLD CORP. Jim Bahan - CEO Website: http://www.lunagold.com/ Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. Forward-Looking Statements
Statements in this release that are 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 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, 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, the possibility of project cost overruns or 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.
