Wednesday, May 18, 2011 7:42:58 PM
Luna Gold Corp. Reports Operational and Financial Results for theThree Months Ended March 31, 2011
May 17, 2011 08:37:53 (ET)
VANCOUVER, BRITISH COLUMBIA, May 17, 2011 (MARKETWIRE via COMTEX) -- (expressed in United States dollars, unless otherwise noted) -
Luna Gold Corp. ("Luna" or the "Company") today announces its results for the three months ended March 31, 2011. The complete financial statements and management discussions and analysis are available for review at www.lunagold.com and should be read in conjunction with this news release.
OVERVIEW
Luna Gold Corp. (the "Company") is a publicly listed company on the TSX Venture Exchange trading under the symbol "LGC". The Company is actively engaged in the operation, exploration, acquisition and development of gold properties in Brazil. The Company currently has one gold mining operation, one development project and one large greenfield exploration project located in northeast Brazil.
The Aurizona gold mining operation ("Aurizona") consists of an open pit mine and gold process plant. Aurizona consists of the Piaba and Tatajuba deposits and over 10 near mine exploration targets which are being actively explored by the Company. It covers approximately 15,000 hectares of land and includes a mining license and three exploration permits.
The Cachoeira gold project ("Cachoeira") is a development gold project with a National Instrument 43-101 compliant resource estimate consisting of multiple mineralized zones, which include isolated quartz vein systems, hydrothermally altered host rocks and stockworks within a north-south trending shear zone.
The Maranhao Greenfields exploration property ("Maranhao Greenfields") is located next to Aurizona and consists of an extensive landholding of exploration licenses totalling 170,000 hectares. This unexplored land holding is highly prospective due to its location in the southern extension of the Guyana Shield and displays strong geologic and structural similarities to West African gold deposits. The area contains over 100 artisanal gold workings that require further exploration.
The Company's near term focus is to:
-- Significantly increase the size of the Aurizona resource and release an
updated NI 43-101 resource estimate for the Piaba and Tatajuba gold
deposits and certain near mine exploration targets;
-- Increase the Aurizona gold production above current feasibility study
levels through plant optimization and plant expansion;
-- Complete a scoping study on the Cachoeira resource and advance the
project to feasibility study; and
-- Advance the exploration activity at Maranhao Greenfields to define drill
targets for the 2012 exploration program.
The Company's longer term focus is to:
-- Increase Aurizona gold production to 100,000 ounces per annum;
-- Continue to invest in brownfield exploration activities to increase the
resource at Aurizona to replace production and provide a longer mine
life;
-- Develop Cachoeira as an organic growth pipeline project for the Company;
and
-- Identify new gold resources through the exploration of the 170,000
hectare Maranhao Greenfields property and through business development
programs.
HIGHLIGHTS
-- Net operating income for the quarter was $726.4 thousand, which was its
first positive quarterly operating income since inception of the
Company;
-- Operating cash inflow after working capital was $425.7 thousand, which
was its first positive quarterly operating cash inflow after working
capital movements since inception of the Company;
-- Aurizona gold production was approximately 9,200 ounces for the quarter;
-- Aurizona brownfield exploration drilling results in Q1 included 55.00
meters at 4.15 grams per tonne (g/t) of gold, including 17.00 meters at
7.80 g/t of gold;
-- The Company applied for a secondary listing on the Lima Stock Exchange;
and
-- The Company appointed Peter Mah as VP Operations and Carlos Paranhos as
Brazilian Exploration Director.
OUTLOOK
-- Aurizona gold production remains on target for between 55,000 and 60,000
ounces for the 2011 year at a targeted cash cost of between $610 and
$620 per ounce;
-- The Company remains targeted to complete the Aurizona 20,000 metre
exploration drill program and release an updated NI 43-101 compliant
resource in Q4 2011; and
-- Cachoeira scoping study to be completed and the results released in Q4
2011.
AURIZONA GOLD MINE - MARANHAO STATE, BRAZIL
The Aurizona gold mine is wholly owned by the Company and is situated in the municipality of Godofredo Viana in Maranhao State, Brazil, near the coast of the Atlantic Ocean. Aurizona contains the Piaba and Tatajuba deposits and over 10 near mine exploration targets. The area is covered by a mining licence and three exploration permits. The Tatajuba deposit is located within an exploration permit which is in the process of being converted to a mine license.
Operating Data
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Three months ended Mar 2011 Dec 2010 Sep 2010 Jun 2010 Mar 2010
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Mined waste - tonnes 348,036 579,012 299,396 278,670 110,269
Mined ore - tonnes 111,609 457,873 371,931 276,011 347,946
Ratio of waste to ore 3.1 1.3 0.8 1.0 0.3
Ore Grade mined - g/t 1.79 1.15 1.13 0.97 1.25
Processed ore - tonnes 293,393 328,735 279,654 138,960 -
Average grade processed - g/t 1.19 1.19 0.90 1.58 -
Average recovery rate % 83% 78% 59% 17% -
Gold produced (ounces) 9,209 9,768 4,774 1,217 -
Gold sold (ounces) 8,358 9,594 1,462 739 -
Total cash costs (per ounce) $1,100 $1,233 $1,136 $1,998 -
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Mining production
The Company mined approximately 460,000 tonnes of material of which approximately 111,600 tonnes was ore at an average head grade of 1.79 grams per tonne during Q1. This represented a reduction of 56% of total material mined and 75% of ore mined compared to the previous quarter. The lower mining activities were due to the onset of the rain season in Q1 and a decision to reduce mining activities while processing ore from the large build-up of the ore stockpile. The rain season in Brazil has been one of the heaviest on record, which has resulted in many disruptions to the mining activities. The Company also began blasting harder materials and focused on increasing the waste stripping in anticipation of mining higher grade ore in future periods and achieving a steady strip ratio over the life of the mine.
Of the total unit cash cost of production for Q1, approximately $250 per ounce was related to mining and ore costs. The cost per tonne of ore mined during the quarter was approximately $21 per tonne. Costs were higher than the feasibility study average rate due to the lower volumes mined and the related fixed costs of the mining function.
The Company is currently in the process of implementing its own mining team rather than utilizing a contract mining group. The Company obtained certain mining equipment during the quarter and is using a mining contractor for waste stripping activities. This is expected to benefit the operation resulting in lower mining production costs. A further study is currently in process to obtain the balance of the necessary mining equipment and team to implement the mining function at Aurizona.
Mill Processing
The mill processed approximately 11% less tonnes of ore in Q1 than the previous quarter. The lower production was the result of the onset of the rain season and an increase in downtime in preparation for the planned plant shutdown and upgrade which was completed in mid-April. The ore grade processed was similar to the previous quarter and the recovery percentage continued to improve while ramping up to feasibility level production rates.
The processing cash cost per unit of gold produced in Q1 was approximately $850 per ounce. This cost includes all milling, processing and administrative related costs of the operation. Costs were significantly higher than the full year average target of $620 per ounce due to the lower levels of production and the planned shutdown to upgrade the plant. The planned shutdown to achieve the targeted production levels resulted in higher salary related costs and increased consumable costs that were necessary to implement the plant upgrades. However, the average cash cost of production decreased from the previous quarter as the Company continues to reduce overhead costs related to the development and construction stage of the Aurizona.
The Company successfully installed the reduction gear box in the SAG mill, installed the pinion in ball mill #4 and upgraded the trash screens in April. The plant is currently being ramped up to full feasibility production levels in a steady rate while monitoring the increases to ensure there are no significant breakdowns. The Company also began to reduce the size of the workforce to targeted levels which will result in a reduction of cash operating costs.
AURIZONA EXPLORATION
The Company's exploration teams continued to advance exploration at Aurizona during the quarter as summarized below. Diamond drilling is on schedule for completion of the Phase 1, 20,000 metre program in July 2011. The Company's exploration strategy of surface exploration techniques combined with magnetic geophysical surveys is proving highly successful in defining the principal mineralized structures at the near mine targets.
Diamond Drilling
The Company embarked on a 20,000 metre drill program at Aurizona in August 2010 and currently has seven drill rigs in operation at the Piaba deposit. Assays from 25 holes totaling 6,613 meters have been received and samples from 14 additional holes are at the assay lab. Drilling is currently focused on infilling over the 3 kilometre strike length of the Piaba deposit to increase measured and indicated resources. Holes are being drilled on 100 metre spaced sections to a maximum depth of minus 300 metres RL. On completion of the Piaba drill program, the rigs will be sited at the Tatajuba deposit and the Boa Esperanca near mine exploration target, which is drill ready following a successful trenching program. Recent significant drill intercepts (not true widths) from the ongoing program are listed below:
-- 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
-- 21.00 meters @ 2.50 grams/tonne Au including 8.00 meters @ 5.21
grams/tonne Au in BRAZD297
-- 29.00 meters @ 2.53 grams/tonne Au including 0.50 meters @ 57.00
grams/tonne Au in BRAZD301
Soil Surveys
Assays have been received for the majority of samples collected near the mine site and the data is being processed and new targets prioritized. Soil surveying commenced in the unexplored western portion of the Aurizona project (LDW Grid) in November 2010 targeting new gold mineralization within extensions to the west-southwest trending structures that host the gold mineralization in the main Aurizona area. This surveying is ongoing.
Trenching
A trenching program was completed at the Ferradura target in March where gold anomalies were associated with Banded Iron Formations, a mineralization style previously undocumented in the district. These trench samples are currently at the assay laboratory. Trenching was also recently completed at the Conceicao target and samples will be shipped to the assay laboratory in the coming weeks. Trenching will continue throughout 2011 to advance the near mine targets to drill stage.
Permitting
The process of converting the Tatajuba exploration licence, which hosts the Tatajuba deposit, to a mining license advanced during the quarter. The DNPM approved the Company's positive final exploration report in March and work has commenced on the Brazilian Level Feasibility Study (PAE).
Auger Drilling
Auger drilling was completed at the Micote near mine target and the samples are currently at the assay laboratory. Auger drilling commenced at the Piaba East target area with the objective of defining extensions to the main Piaba ore body beyond the current eastern boundary of the resource model. This program is ongoing. Auger drilling also commenced at the newly defined Agenor near mine exploration target and drilling is ongoing.
CACHOEIRA GOLD PROJECT
The Cachoeira Gold Project is located in northern Brazil in the Gurupi Greenstone Belt, approximately 220 kilometres southeast of the Para State capital of Belem and about 270 km northwest of the port city of Sao Luis, Maranhao State. Cachoeira comprises one contiguous block consisting of two mining and two exploration licenses covering approximately 3,826 hectares and an application for an exploration license covering approximately 916 hectares.
On October 9, 2007, Luna Gold announced that it had finalized an option agreement whereby it could earn a 100% interest in the property from a consortium of vendors. According to the terms of the agreement the Company can earn its interest by making a one-time cash payment and by incurring work expenditures over a 50 month period. As at March 31, 2011, the Company had incurred accumulated exploration expenditures of approximately BRL 9.1 million as part of the commitment to incur expenditures of approximately BRL 9.5 million. The Company's interest in the property would be subject to a 4.0% net profits royalty with a provision for a partial buy-out of this royalty.
The major asset associated with Cachoeira is a series of shear zone hosted gold deposits consisting of quartz veins, stockworks and wall rock alteration. Three deposits, Tucano, Arara and Coruja, have been defined to date within the north-south trending Cachoeira Shear Zone. In December, the Company released a maiden NI 43-101 compliant mineral resource estimate at Cachoeira and filed the technical report on February 7th, 2011 on SEDAR.
Cachoeira Regional
The Company is currently auger drill testing several new gold-in-soil anomalies in the northern part of the Cachoeira Shear Zone, which are located outside the main gold deposits defined to date. Results were received for auger drill holes completed at the Bavete target. Zones of narrow mineralization were defined which require follow-up via trenching programs. Drilling was completed at the Arara North target and samples will be shipped to the assay laboratory shortly.
MARANHAO GREENFIELDS EXPLORATION PROPERTY - MARANHAO STATE, BRAZIL
The Maranhao Greenfields exploration property is located to the southwest and southeast of Aurizona and contains multiple shear zones and over 100 historic artisanal gold workings (garimpos). It consists of over 170,000 hectares of contiguous exploration licenses and is located within the Sao Luis Craton, southeast of the Guiana shield, which hosts several major gold deposits including Rosebel and Las Cristinas. Geologic reconstruction of the South American and African continents places the Sao Luis Craton in close proximity to the Birimian Gold Belt of West Africa. Strong geologic and structural similarities exist between the Sao Luis Craton, the Guiana shield and the West African Craton. The area is characterized by low relief and an extensive sedimentary cover sequence with deep weathering profiles. Historic exploration in the district was limited to soil and rock sampling, auger drilling, geophysical surveys and some shallow reconnaissance drill holes.
The Company currently has exploration crews working four targets simultaneously in the Maranhao Greenfields project area. The Company continues its exploration programs throughout the wet season although at reduced rates.
Areal Grid
Areal is located in the north central part of the Maranhao Greenfields area and contains several inactive garimpo (artesan) pits including Areal, Leite, Novo Destino and Iricuri. Partial soil assay results have been received and the final data will be released when all assays have been delivered. A geological mapping program was completed at Areal during the quarter which identified intrusion related gold mineralization associated with several granitoid bodies. Ground magnetic surveying is underway.
JST Grid
Soil and channel samples from the JST Grid are at the assay laboratory.
PC and BML Grids
Soil sampling and regolith mapping continued at the PC grid in the quarter which hosts the Portuguesa and Cearazinho garimpo workings. Line cutting commenced at the new BML target area (eastern area) in January and work is progressing well. A new field base was established to support the eastern Maranhao Greenfields program. Both grids will be completed within 3 months at which time new grids will be initiated. The Company is aggressively exploring its extensive and prospective landholding at Maranhao Greenfields.
SUMMARY OF OPERATING RESULTS - THREE MONTHS ENDED
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(tabled amounts are
expressed in
thousands of US
dollars) Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010
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Revenue 10,357.4 13,656.7 1,620.3 829.5 -
Operating expense (8,728.9) (13,922.3) (5,576.2) (2,393.4) -
Depreciation and
amortization (902.1) (1,783.0) (303.8) (46.9) -
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726.4 (2,048.6) (4,259.7) (1,610.8) -
General &
administration(1) (1,062.0) (1,320.7) (1,367.6) (1,037.0) (1,019.1)
Exploration expense (1,398.7) (665.4) (1,334.5) (725.7) (63.2)
Financing (cost)
income, net (355.6) (491.2) (327.4) (78.6) 30.8
Unrealized gains
(losses) from
derivative
liability 1,628.3 (899.0) 472.7 (520.9) -
Foreign exchange and
other 650.4 519.1 30.4 349.5 4.6
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Net income (loss) 188.8 (4,905.8) (6.786.1) (3,623.5) (1,046.9)
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Basic loss income
per share 0.00 (0.01) (0.02) (0.01) (0.00)
Diluted loss income
per share 0.00 (0.01) (0.02) (0.01) (0.00)
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(1) General and administration consists of general and administrative
expenses, professional fees and stock based compensation charges.
The Company achieved its first quarter of positive operating income and operating cash flow in its history. This achievement was driven by the high gold price, declining cash costs since achieving gold production in the second quarter of 2010 and by a non-cash derivative liability gain.
The Company sold 8,358 ounces of gold bullion compared to 9,594 ounces in the previous quarter. Of the total gold bullion sold, 6,937 ounces was sold at an average realized gold price of $1,401 per ounce and 1,421 ounces were delivered to Sandstorm Gold Ltd. at $400 per ounce, which was 17% of the total gold sold as per the Sandstorm Gold Purchase Agreement.
Operating expense decreased from the previous quarter due to a decrease in the average unit cash cost of production and due to lower sales volumes.
General and administrative expense was lower than the previous quarter due to the costs associated with the recruitment and replacement of the President and Chief Executive Officer of the Company, which were included in the previous quarter's expenses. Excluding those costs, Q1 2011 remained reasonably consistent with prior quarters.
Exploration expense increased over the previous quarters as the Company continued its exploration programs at Aurizona, Cachoeira and Maranhao Greenfields. In the current quarter, the Company spent $2.9 million at Aurizona (capitalized in mineral properties for accounting purpose), $0.6 million at Cachoeira and $0.7 million at Maranhao Greenfields.
Net financing cost was lower due to interest earned on higher cash balances outstanding during the quarter as compared to the previous quarter. Due to the transition to IFRS, warrants outstanding were classified as a derivative liability and were re-classed from share capital to liability. This derivative liability is to be mark-to-market every period end and will fluctuate based on factors such as Company's stock price and volatility. The non-cash unrealized gains and losses resulted from the required revaluation from the current quarter end. Foreign exchange gain was the result of positive currency movements for the Company on its funds held in foreign currencies.
LIQUIDITY AND CAPITAL RESOURCES - THREE MONTHS ENDED MARCH 31
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(tabled amounts are expressed in thousands
of US dollars) 2011 2010 2009
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Cash flows from operating activities
- Before working capital (801.7) (385.4) (928.8)
- After working capital 425.7 (1,650.0) (1,902.0)
Cash flows from financing activities (1,143.2) 13,910.1 24,774.8
Cash flows from investing activities (5,955.6) (15,858.7) (1,673.1)
Effect of exchange rates on cash 58.2 (41.9) (165.6)
Net cash flows (6,673.1) (3,598.6) 21,199.7
Cash balance 4,088.7 8,925.0 21,390.0
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The Company had approximately $4.1 million in cash and 3,227 ounces of finished gold on hand at March 31. The Company achieved its first positive operating cash inflow after working capital movements in its history. This achievement was the result of the positive net income in the quarter and an increase in accounts payable. The accounts payable increased from the previous quarter due to the receipt of the plant upgrades near the end of the quarter, which were implemented subsequent to quarter end.
Financing activities included a payment of $1.7 million on the Aurizona project debt facility and cash proceeds of approximately $0.6 million from the exercise of stock options. Cash flow from financing activities was significantly lower than the comparative quarter as the comparative quarter included the drawdown of the RMB debt facility.
Investing activities included payments of $2.9 million of capitalized exploration costs related to the brownfield exploration program to increase the resource at Aurizona. The balance of investment activity cash outflow was related to equipment purchases and plant upgrades at the Aurizona plant. Cash outflow from investing activities was significantly lower than the comparative quarter as the plant was substantially completed in late 2010.
In March, the Company accepted an indicative proposal for financing of a senior secured credit facility of up to $30 million to refinance the existing Aurizona project debt facility, fund future capital expenditures and provide additional working capital related to the Aurizona operation. The proposed facility would consist of a $20 million senior secured term loan ("Term Loan") and a $10 million senior secured revolving facility ("Revolving Facility"). The Term Loan would bear interest at 6-month Libor plus 3.625% per annum, be repaid in equal semi-annual instalments commencing twelve months from the closing date and would mature five years from the closing date. The Revolving Facility would bear interest at 6-month CDI plus 3.25% per annum, be repaid in full on the final maturity date and mature three years from the closing date. This proposed financing is currently subject to due diligence and final approval by the lender.
This proposed financing will assist the Company in its plans to upgrade the Aurizona production facility to achieve a production rate of 100,000 ounces per annum, subject to the results of the Company's proposed scoping study, and allow for additional working capital and liquidity in the current year.
As at March 31, 2011, the Company had the following contractual obligations outstanding:
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(tabled
amounts are
expressed in Less
thousands of than 1 - 2 2 - 3 3 - 4 4 - 5 There-
US dollars) Total 1 year years years years years after
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Long term
debt 20,148.7 9,238.5 7,545.7 2,545.8 545.8 272.9 -
Accounts
payables 6,507.2 6,507.2 - - - - -
Asset
retirement
obligation 8,072.3 - - - - - 8,072.3
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Aurizona Project Debt Facility
In December 2009, the Company entered into a senior secured, project debt facility (the "Facility") in the amount of up to $15.0 million with RMB Resources Inc. to assist in the completion of the Aurizona processing plant. The facility is comprised of two tranches in the amount of $7.5 million each, that each bear interest at LIBOR plus 7.5% and are to be fully repaid by December 31, 2012. The facility is secured by a first fixed floating charge over Aurizona, a first mortgage over the shares of Mineracao Aurizona S.A. ("MASA") and the rights, titles and licenses associated with Aurizona and a general security agreement between Luna Gold Corp. and RMB Resources Inc.
The Company shall maintain a Loan Life Net Present Value Cover Ratio ("LLNPVCR") greater than 1.5 over the life of the loan. The LLNPVCR is defined as the net present value of the project cash flow from the calculation date to the final repayment date, as determined from the cash flow model that is agreed upon by the Company and RMB.
Commitment from Acquisition of Aurizona Goldfields Corporation
In January 2007, the Company acquired the Aurizona property from Brascan Brasil ("Brascan") and Eldorado Gold Corporation ("Eldorado") in exchange for a series of staged payments (the "Purchase Agreement"), some of which were conditional upon the project reaching commercial production, as defined in the Purchase Agreement. The Company has repaid all outstanding amounts in relation to this agreement but remained liable for payments of $1.0 million payable to each party on the first, second and third anniversary of the commencement of commercial production of Aurizona. As defined under the terms of the Purchase Agreement, the Company achieved commercial production on December 2, 2010 resulting in the first payment becoming due and payable on December 2, 2011.
FINAME Equipment Purchase Financing ("FINAME")
In February 2011, the Company entered into debt financing in the amount of 4.0 million Brazilian Reais ("BRL") to purchase mining equipment through the FINAME financing program, which is administered through the Brazilian Development Bank ("BNDES"). Interest is calculated at 5.5% per annum and are repayable in equal monthly instalments beginning September 15, 2011 and ending February 15, 2016.
SHAREHOLDERS' EQUITY
Shareholders' equity increased over the prior year due to the Company's equity financing activities during the period, which was partially offset by an increase in the deficit.
As at the date of this report the Company had 443,522,764 shares outstanding, 21,751,666 share purchase options and 22,606,223 common share warrants outstanding.
The following is a summary of stock options outstanding as at the date of this report:
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Vested Price per share
Number of shares ('000s) ('000s) CA$ Expiry Date
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275 275 0.30 15-May-11
100 100 0.50 14-Mar-12
365 365 0.85 8-Aug-12
210 210 1.23 16-Jan-13
165 165 1.05 2-May-13
250 250 0.90 20-Jun-13
6,091 6,091 0.42 24-Jul-14
750 750 0.37 29-Jul-14
100 67 0.55 4-Jan-15
1,370 457 0.63 5-Jul-15
5,000 1,000 0.58 24-Sep-15
7,075 - 0.65 12-Apr-16
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21,751 9,730
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The following is a summary of warrants outstanding as at the date of this report:
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Numb
er of warrants ('000s) Price per share CA$ Expiry Date
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15,747 0.80 14-Jun-11
6,859 1.00 20-Jun-12
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22,606
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OUTLOOK AND STRATEGY
Aurizona Gold Mine
The Company continues to target its 2011 production to be between 55,000 ounces and 60,000 ounces of gold at an estimated cash cost between $610 and $620 per ounce of production. The capital upgrades needed to rectify the identified production constraints were successfully completed in April and the plant is currently ramping up to produce gold at feasibility study levels. Programs are underway to reduce current cash costs to achieve the targeted cash cost through a planned retrenchment program, improved maintenance programs and implementing the Company's own mining team to reduce reliance on mining contractors.
The Company remains targeted on spending approximately $10.5 million on capital projects and upgrades at the Aurizona mine in 2011. These items include $4.4 million to complete the mine construction and $6.1 in sustaining capital, including $2.5 million allocated for surface rights acquisition.
The Aurizona brownfield exploration and drill program remains on target to produce an updated NI 43-101 resource estimate for release in Q4.
Cachoeira Gold Property
The Company is targeting on completing the Cachoeira scoping study (the "Scoping Study") in Q3 2011 that will deliver the path forward to developing Cachoeira into a mining project feasibility study.
Maranhao Greenfields Property
The Company continues to aggressively explore the extensive Maranhao Greenfields property to discover new gold deposits and will maintain exploration crews working four targets simultaneously throughout 2011. Regional scale exploration is underway designed to generate large gold-in-soil anomalies consistent with the Aurizona mineralization style. Through these programs the Company intends to define between six and eight new target areas, several of which will be brought to drill stage in 2012.
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of U.S. dollars, except where indicated)
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Three months ended
--------------------
March 31, March 31,
Note 2011 2010
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Revenue
Gold sales 8 $ 10,357.4 $ -
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10,357.4 -
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Operating expenses
Cost of goods sold (8,728.9) -
Depletion and amortization (902.1) -
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726.4 -
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Other (expenses) income, net
Exploration (1,398.7) (63.2)
General and administrative 9 (717.6) (410.2)
Unrealized gains on derivative liability 10 1,628.3 -
Foreign exchange gain (loss) 619.1 (22.9)
Stock-based compensation 6 (344.4) (608.9)
Finance income 117.2 76.7
Finance cost (472.8) (45.9)
Other (expense) income 31.3 27.5
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Net income (loss) and
comprehensive (loss)
income for the period $ 188.8 $(1,046.9)
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Earning (Loss) per common share
Basic 0.00 (0.00)
Diluted 0.00 (0.00)
Weighted average shares outstanding (000's)
Basic 435,638 358,839
Diluted 441,957 358,839
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Total shares issued and outstanding (000's) 436,213 358,837
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The accompanying notes are an integral part of these consolidated
financial statements.
Interim Consolidated Statements of Financial Position
(expressed in thousands of U.S. dollars, except where indicated)
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March 31, December 31, January 1,
Note 2011 2010 2010
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Assets
Current assets
Cash and cash equivalents $ 4,088.7 $ 10,703.6 $ 12,565.5
Accounts receivable and prepaid
expenses 2,693.9 3,647.9 743.7
Inventory 8,707.1 6,325.5 393.6
Investments - - 2,942.9
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15,489.7 20,677.0 16,645.7
Property, plant and equipment 4 95,978.4 88,166.0 54,867.6
Other assets 1,590.0 1,089.5 408.1
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Total assets $ 113,058.1 $ 109,932.5 $ 71,921.4
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 6,507.2 $ 3,524.2 $ 5,364.6
Current portion of derivative
liability 317.5 1,605.8 -
Current portion of debt
instruments 5 8,986.5 8,118.3 301.6
Current portion of unearned
revenue 1,675.5 1,748.2 1,787.2
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17,486.7 14,996.5 7,453.4
Debt instruments 5 9,431.7 9,383.2 4,989.2
Derivative liability 633.6 1,019.2 -
Unearned revenue 19,737.3 19,917.9 20,308.8
Asset retirement obligation 2,317.2 2,370.9 2,108.5
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Total liabilities 49,606.5 47,687.7 34,859.9
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Shareholders' equity
Share capital 108,251.3 107,233.3 65,687.7
Deficit (44,799.7) (44,988.5) (28,626.2)
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Total shareholders' equity 63,451.6 62,244.8 37,061.5
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Total liabilities and
shareholders' equity $ 113,058.1 $ 109,932.5 $ 71,921.4
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The accompanying notes are an integral part of these consolidated
financial statements.
Interim Consolidated Statements of Changes in Shareholders'
Equity and Deficit
(expressed in thousands of U.S. dollars, except where indicated)
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Attributable to equity holders of the Company
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Contri-
Share buted
Notes Shares capital surplus Deficit Total
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Balance at
January 1, 2010 358,837 60,063.2 5,624.5 (28,626.2) 37,061.5
Net loss for the
period - - - (1,046.9) (1,046.9)
Stock options
exercised 100 66.5 (25.2) - 41.3
Stock-based
compensation
charges - 702.6 - 702.6
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Balance at
March 31, 2010 358,937 $ 60,129.7 $ 6,301.9 $(29,673.1) $ 36,758.5
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance at
January 1, 2010 358,837 60,063.2 5,624.5 (28,626.2) 37,061.5
Net loss for the
year - - - (16,362.3) (16,362.3)
Escrow shares
returned to
treasury and
cancelled (214) (35.7) 35.7 - -
Stock options
exercised 3,267 1,183.2 (405.6) - 777.6
Stock-based
compensation
charges - - 1,952.9 - 1,952.9
Issue of share
capital, net 72,649 38,701.6 113.6 - 38,815.2
---------------------------------------------------------------------------
Balance at
December 31,
2010 434,539 $ 99,912.3 $ 7,321.1 $(44,988.5) $ 62,244.9
---------------------------------------------------------------------------
Net income for the
period - - - 188.8 188.8
Stock options
exercised 6 1,674 1,083.8 (410.3) - 673.5
Stock-based
compensation
charges 6 - - 344.4 - 344.4
---------------------------------------------------------------------------
Balance at
March 31, 2011 436,213 $100,996.1 $ 7,255.2 $(44,799.7) $ 63,451.6
---------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
Interim Consolidated Statements of Cash Flows
(expressed in thousands of U.S. dollars, except where indicated)
---------------------------------------------------------------------------
Three months ended
---------------------------------------------------------------------------
March 31, March 31,
Notes 2011 2010
---------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) for the period $ 188.8 $ (1,046.9)
Items not affecting cash
Depletion and amortization 919.3 8.5
Recognition of unearned revenue (253.3) -
Unrealized foreign exchange (gains) losses (584.8) 16.7
Unrealized gains from warrant liability (1,628.3) -
Stock-based compensation charges 6 344.4 608.9
Accretion of asset retirement obligation 65.8 45.9
Accretion of interest 146.4 -
Other - (18.5)
---------------------------------------------------------------------------
(801.7) (385.4)
Change in non-cash operating working
capital
Decrease in accounts receivable and prepaid
expense 932.2 71.1
Increase in inventory (1,895.0) (1,259.7)
Increase in accounts payable and accruals 2,287.8 -
Payments to the Departamento Nacional de
Producao Mineral ("DNPM") (97.6) (76.0)
---------------------------------------------------------------------------
425.7 (1,650.0)
---------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from debt financing, net - 13,868.8
Payment of debt financing fees (150.0) -
Repayment to principal of debt financing (1,666.7) -
Proceeds on issuance of common shares 673.5 41.3
---------------------------------------------------------------------------
(1,143.2) 13,910.1
---------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from disposal of investments - 2,964.2
Payments for property, plant and equipment (5,955.6) (18,822.9)
---------------------------------------------------------------------------
(5,955.6) (15,858.7)
---------------------------------------------------------------------------
Effect of exchange rate changes on cash 58.2 (41.9)
Decrease in cash and cash equivalents (6,673.1) (3,598.6)
Cash and cash equivalents -
beginning of period 10,703.6 12,565.5
---------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 4,088.7 $ 8,925.0
---------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
On behalf of the Board of Directors
LUNA GOLD CORP.
John Blake, President and CEO
Forward Looking Statements
This MD&A includes certain statements that constitute "forward-looking statements", and "forward-looking information" within the meaning of applicable securities laws ("forward-looking statements" and "forward-looking information" are collectively referred to as "forward-looking statements", unless otherwise stated). These statements appear in a number of places in this MD&A and include statements regarding our intent, or the beliefs or current expectations of our officers and directors. Such forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this MD&A, words such as "believe", "anticipate", "estimate", "project", "intend", "expect", "may", "will", "plan", "should", "would", "contemplate", "possible", "attempts", "seeks" and similar expressions are intended to identify these forward-looking statements.
Forward-looking statements may relate to the Company's future outlook and anticipated events or results and may include statements regarding the Company's future financial position, business strategy, budgets, litigation, projected costs, financial results, taxes, plans and objectives. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements were derived utilizing numerous assumptions regarding expected growth, results of operations, performance and business prospects and opportunities that could cause our actual results to differ materially from those in the forward-looking statements. While the Company considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Accordingly, you are cautioned not to put undue reliance on these forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results. To the extent any forward-looking statements constitute future-oriented financial information or financial outlooks, as those terms are defined under applicable Canadian securities laws, such statements are being provided to describe the current anticipated potential of the Company and readers are cautioned that these statements may not be appropriate for any other purpose, including investment decisions. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date those statements are made. Except as required by applicable law, we assume no obligation to update or to publicly announce the results of any change to any forward-looking statement contained or incorporated by reference herein to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. If we update any one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. You should not place undue importance on forward-looking statements and should not rely upon these statements as of any other date. All forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.
Other Technical Information
Titus Haggan Ph.D., EurGeol Certified Professional Geologist #746, Luna's VP of Exploration, is the Qualified Person as defined under National Instrument 43-101 responsible for the scientific and technical work on the exploration programs and has reviewed the corresponding technical disclosure throughout this MD&A. John Blake Ph.D., Certified Mining Engineer, Luna's President and CEO is the Qualified Person as defined under National Instrument 43-101 responsible for the scientific and technical work on the development programs and has reviewed the corresponding technical disclosure throughout this MD&A.
Neither 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.
Contacts:
Luna Gold Corp.
Investor Relations
(604) 689-7317 or toll free: 1-866-689-7317
(604) 688-0094 (FAX)
www.lunagold.com
May 17, 2011 08:37:53 (ET)
VANCOUVER, BRITISH COLUMBIA, May 17, 2011 (MARKETWIRE via COMTEX) -- (expressed in United States dollars, unless otherwise noted) -
Luna Gold Corp. ("Luna" or the "Company") today announces its results for the three months ended March 31, 2011. The complete financial statements and management discussions and analysis are available for review at www.lunagold.com and should be read in conjunction with this news release.
OVERVIEW
Luna Gold Corp. (the "Company") is a publicly listed company on the TSX Venture Exchange trading under the symbol "LGC". The Company is actively engaged in the operation, exploration, acquisition and development of gold properties in Brazil. The Company currently has one gold mining operation, one development project and one large greenfield exploration project located in northeast Brazil.
The Aurizona gold mining operation ("Aurizona") consists of an open pit mine and gold process plant. Aurizona consists of the Piaba and Tatajuba deposits and over 10 near mine exploration targets which are being actively explored by the Company. It covers approximately 15,000 hectares of land and includes a mining license and three exploration permits.
The Cachoeira gold project ("Cachoeira") is a development gold project with a National Instrument 43-101 compliant resource estimate consisting of multiple mineralized zones, which include isolated quartz vein systems, hydrothermally altered host rocks and stockworks within a north-south trending shear zone.
The Maranhao Greenfields exploration property ("Maranhao Greenfields") is located next to Aurizona and consists of an extensive landholding of exploration licenses totalling 170,000 hectares. This unexplored land holding is highly prospective due to its location in the southern extension of the Guyana Shield and displays strong geologic and structural similarities to West African gold deposits. The area contains over 100 artisanal gold workings that require further exploration.
The Company's near term focus is to:
-- Significantly increase the size of the Aurizona resource and release an
updated NI 43-101 resource estimate for the Piaba and Tatajuba gold
deposits and certain near mine exploration targets;
-- Increase the Aurizona gold production above current feasibility study
levels through plant optimization and plant expansion;
-- Complete a scoping study on the Cachoeira resource and advance the
project to feasibility study; and
-- Advance the exploration activity at Maranhao Greenfields to define drill
targets for the 2012 exploration program.
The Company's longer term focus is to:
-- Increase Aurizona gold production to 100,000 ounces per annum;
-- Continue to invest in brownfield exploration activities to increase the
resource at Aurizona to replace production and provide a longer mine
life;
-- Develop Cachoeira as an organic growth pipeline project for the Company;
and
-- Identify new gold resources through the exploration of the 170,000
hectare Maranhao Greenfields property and through business development
programs.
HIGHLIGHTS
-- Net operating income for the quarter was $726.4 thousand, which was its
first positive quarterly operating income since inception of the
Company;
-- Operating cash inflow after working capital was $425.7 thousand, which
was its first positive quarterly operating cash inflow after working
capital movements since inception of the Company;
-- Aurizona gold production was approximately 9,200 ounces for the quarter;
-- Aurizona brownfield exploration drilling results in Q1 included 55.00
meters at 4.15 grams per tonne (g/t) of gold, including 17.00 meters at
7.80 g/t of gold;
-- The Company applied for a secondary listing on the Lima Stock Exchange;
and
-- The Company appointed Peter Mah as VP Operations and Carlos Paranhos as
Brazilian Exploration Director.
OUTLOOK
-- Aurizona gold production remains on target for between 55,000 and 60,000
ounces for the 2011 year at a targeted cash cost of between $610 and
$620 per ounce;
-- The Company remains targeted to complete the Aurizona 20,000 metre
exploration drill program and release an updated NI 43-101 compliant
resource in Q4 2011; and
-- Cachoeira scoping study to be completed and the results released in Q4
2011.
AURIZONA GOLD MINE - MARANHAO STATE, BRAZIL
The Aurizona gold mine is wholly owned by the Company and is situated in the municipality of Godofredo Viana in Maranhao State, Brazil, near the coast of the Atlantic Ocean. Aurizona contains the Piaba and Tatajuba deposits and over 10 near mine exploration targets. The area is covered by a mining licence and three exploration permits. The Tatajuba deposit is located within an exploration permit which is in the process of being converted to a mine license.
Operating Data
-----------------------------------------------------------------------
----
------------------------------------------------------------------
---------
Three months ended Mar 2011 Dec 2010 Sep 2010 Jun 2010 Mar 2010
---------------------------------------------------------------------------
Mined waste - tonnes 348,036 579,012 299,396 278,670 110,269
Mined ore - tonnes 111,609 457,873 371,931 276,011 347,946
Ratio of waste to ore 3.1 1.3 0.8 1.0 0.3
Ore Grade mined - g/t 1.79 1.15 1.13 0.97 1.25
Processed ore - tonnes 293,393 328,735 279,654 138,960 -
Average grade processed - g/t 1.19 1.19 0.90 1.58 -
Average recovery rate % 83% 78% 59% 17% -
Gold produced (ounces) 9,209 9,768 4,774 1,217 -
Gold sold (ounces) 8,358 9,594 1,462 739 -
Total cash costs (per ounce) $1,100 $1,233 $1,136 $1,998 -
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Mining production
The Company mined approximately 460,000 tonnes of material of which approximately 111,600 tonnes was ore at an average head grade of 1.79 grams per tonne during Q1. This represented a reduction of 56% of total material mined and 75% of ore mined compared to the previous quarter. The lower mining activities were due to the onset of the rain season in Q1 and a decision to reduce mining activities while processing ore from the large build-up of the ore stockpile. The rain season in Brazil has been one of the heaviest on record, which has resulted in many disruptions to the mining activities. The Company also began blasting harder materials and focused on increasing the waste stripping in anticipation of mining higher grade ore in future periods and achieving a steady strip ratio over the life of the mine.
Of the total unit cash cost of production for Q1, approximately $250 per ounce was related to mining and ore costs. The cost per tonne of ore mined during the quarter was approximately $21 per tonne. Costs were higher than the feasibility study average rate due to the lower volumes mined and the related fixed costs of the mining function.
The Company is currently in the process of implementing its own mining team rather than utilizing a contract mining group. The Company obtained certain mining equipment during the quarter and is using a mining contractor for waste stripping activities. This is expected to benefit the operation resulting in lower mining production costs. A further study is currently in process to obtain the balance of the necessary mining equipment and team to implement the mining function at Aurizona.
Mill Processing
The mill processed approximately 11% less tonnes of ore in Q1 than the previous quarter. The lower production was the result of the onset of the rain season and an increase in downtime in preparation for the planned plant shutdown and upgrade which was completed in mid-April. The ore grade processed was similar to the previous quarter and the recovery percentage continued to improve while ramping up to feasibility level production rates.
The processing cash cost per unit of gold produced in Q1 was approximately $850 per ounce. This cost includes all milling, processing and administrative related costs of the operation. Costs were significantly higher than the full year average target of $620 per ounce due to the lower levels of production and the planned shutdown to upgrade the plant. The planned shutdown to achieve the targeted production levels resulted in higher salary related costs and increased consumable costs that were necessary to implement the plant upgrades. However, the average cash cost of production decreased from the previous quarter as the Company continues to reduce overhead costs related to the development and construction stage of the Aurizona.
The Company successfully installed the reduction gear box in the SAG mill, installed the pinion in ball mill #4 and upgraded the trash screens in April. The plant is currently being ramped up to full feasibility production levels in a steady rate while monitoring the increases to ensure there are no significant breakdowns. The Company also began to reduce the size of the workforce to targeted levels which will result in a reduction of cash operating costs.
AURIZONA EXPLORATION
The Company's exploration teams continued to advance exploration at Aurizona during the quarter as summarized below. Diamond drilling is on schedule for completion of the Phase 1, 20,000 metre program in July 2011. The Company's exploration strategy of surface exploration techniques combined with magnetic geophysical surveys is proving highly successful in defining the principal mineralized structures at the near mine targets.
Diamond Drilling
The Company embarked on a 20,000 metre drill program at Aurizona in August 2010 and currently has seven drill rigs in operation at the Piaba deposit. Assays from 25 holes totaling 6,613 meters have been received and samples from 14 additional holes are at the assay lab. Drilling is currently focused on infilling over the 3 kilometre strike length of the Piaba deposit to increase measured and indicated resources. Holes are being drilled on 100 metre spaced sections to a maximum depth of minus 300 metres RL. On completion of the Piaba drill program, the rigs will be sited at the Tatajuba deposit and the Boa Esperanca near mine exploration target, which is drill ready following a successful trenching program. Recent significant drill intercepts (not true widths) from the ongoing program are listed below:
-- 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
-- 21.00 meters @ 2.50 grams/tonne Au including 8.00 meters @ 5.21
grams/tonne Au in BRAZD297
-- 29.00 meters @ 2.53 grams/tonne Au including 0.50 meters @ 57.00
grams/tonne Au in BRAZD301
Soil Surveys
Assays have been received for the majority of samples collected near the mine site and the data is being processed and new targets prioritized. Soil surveying commenced in the unexplored western portion of the Aurizona project (LDW Grid) in November 2010 targeting new gold mineralization within extensions to the west-southwest trending structures that host the gold mineralization in the main Aurizona area. This surveying is ongoing.
Trenching
A trenching program was completed at the Ferradura target in March where gold anomalies were associated with Banded Iron Formations, a mineralization style previously undocumented in the district. These trench samples are currently at the assay laboratory. Trenching was also recently completed at the Conceicao target and samples will be shipped to the assay laboratory in the coming weeks. Trenching will continue throughout 2011 to advance the near mine targets to drill stage.
Permitting
The process of converting the Tatajuba exploration licence, which hosts the Tatajuba deposit, to a mining license advanced during the quarter. The DNPM approved the Company's positive final exploration report in March and work has commenced on the Brazilian Level Feasibility Study (PAE).
Auger Drilling
Auger drilling was completed at the Micote near mine target and the samples are currently at the assay laboratory. Auger drilling commenced at the Piaba East target area with the objective of defining extensions to the main Piaba ore body beyond the current eastern boundary of the resource model. This program is ongoing. Auger drilling also commenced at the newly defined Agenor near mine exploration target and drilling is ongoing.
CACHOEIRA GOLD PROJECT
The Cachoeira Gold Project is located in northern Brazil in the Gurupi Greenstone Belt, approximately 220 kilometres southeast of the Para State capital of Belem and about 270 km northwest of the port city of Sao Luis, Maranhao State. Cachoeira comprises one contiguous block consisting of two mining and two exploration licenses covering approximately 3,826 hectares and an application for an exploration license covering approximately 916 hectares.
On October 9, 2007, Luna Gold announced that it had finalized an option agreement whereby it could earn a 100% interest in the property from a consortium of vendors. According to the terms of the agreement the Company can earn its interest by making a one-time cash payment and by incurring work expenditures over a 50 month period. As at March 31, 2011, the Company had incurred accumulated exploration expenditures of approximately BRL 9.1 million as part of the commitment to incur expenditures of approximately BRL 9.5 million. The Company's interest in the property would be subject to a 4.0% net profits royalty with a provision for a partial buy-out of this royalty.
The major asset associated with Cachoeira is a series of shear zone hosted gold deposits consisting of quartz veins, stockworks and wall rock alteration. Three deposits, Tucano, Arara and Coruja, have been defined to date within the north-south trending Cachoeira Shear Zone. In December, the Company released a maiden NI 43-101 compliant mineral resource estimate at Cachoeira and filed the technical report on February 7th, 2011 on SEDAR.
Cachoeira Regional
The Company is currently auger drill testing several new gold-in-soil anomalies in the northern part of the Cachoeira Shear Zone, which are located outside the main gold deposits defined to date. Results were received for auger drill holes completed at the Bavete target. Zones of narrow mineralization were defined which require follow-up via trenching programs. Drilling was completed at the Arara North target and samples will be shipped to the assay laboratory shortly.
MARANHAO GREENFIELDS EXPLORATION PROPERTY - MARANHAO STATE, BRAZIL
The Maranhao Greenfields exploration property is located to the southwest and southeast of Aurizona and contains multiple shear zones and over 100 historic artisanal gold workings (garimpos). It consists of over 170,000 hectares of contiguous exploration licenses and is located within the Sao Luis Craton, southeast of the Guiana shield, which hosts several major gold deposits including Rosebel and Las Cristinas. Geologic reconstruction of the South American and African continents places the Sao Luis Craton in close proximity to the Birimian Gold Belt of West Africa. Strong geologic and structural similarities exist between the Sao Luis Craton, the Guiana shield and the West African Craton. The area is characterized by low relief and an extensive sedimentary cover sequence with deep weathering profiles. Historic exploration in the district was limited to soil and rock sampling, auger drilling, geophysical surveys and some shallow reconnaissance drill holes.
The Company currently has exploration crews working four targets simultaneously in the Maranhao Greenfields project area. The Company continues its exploration programs throughout the wet season although at reduced rates.
Areal Grid
Areal is located in the north central part of the Maranhao Greenfields area and contains several inactive garimpo (artesan) pits including Areal, Leite, Novo Destino and Iricuri. Partial soil assay results have been received and the final data will be released when all assays have been delivered. A geological mapping program was completed at Areal during the quarter which identified intrusion related gold mineralization associated with several granitoid bodies. Ground magnetic surveying is underway.
JST Grid
Soil and channel samples from the JST Grid are at the assay laboratory.
PC and BML Grids
Soil sampling and regolith mapping continued at the PC grid in the quarter which hosts the Portuguesa and Cearazinho garimpo workings. Line cutting commenced at the new BML target area (eastern area) in January and work is progressing well. A new field base was established to support the eastern Maranhao Greenfields program. Both grids will be completed within 3 months at which time new grids will be initiated. The Company is aggressively exploring its extensive and prospective landholding at Maranhao Greenfields.
SUMMARY OF OPERATING RESULTS - THREE MONTHS ENDED
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----
------------------------------------------------------------------
---------
(tabled amounts are
expressed in
thousands of US
dollars) Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010
---------------------------------------------------------------------------
Revenue 10,357.4 13,656.7 1,620.3 829.5 -
Operating expense (8,728.9) (13,922.3) (5,576.2) (2,393.4) -
Depreciation and
amortization (902.1) (1,783.0) (303.8) (46.9) -
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726.4 (2,048.6) (4,259.7) (1,610.8) -
General &
administration(1) (1,062.0) (1,320.7) (1,367.6) (1,037.0) (1,019.1)
Exploration expense (1,398.7) (665.4) (1,334.5) (725.7) (63.2)
Financing (cost)
income, net (355.6) (491.2) (327.4) (78.6) 30.8
Unrealized gains
(losses) from
derivative
liability 1,628.3 (899.0) 472.7 (520.9) -
Foreign exchange and
other 650.4 519.1 30.4 349.5 4.6
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Net income (loss) 188.8 (4,905.8) (6.786.1) (3,623.5) (1,046.9)
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Basic loss income
per share 0.00 (0.01) (0.02) (0.01) (0.00)
Diluted loss income
per share 0.00 (0.01) (0.02) (0.01) (0.00)
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(1) General and administration consists of general and administrative
expenses, professional fees and stock based compensation charges.
The Company achieved its first quarter of positive operating income and operating cash flow in its history. This achievement was driven by the high gold price, declining cash costs since achieving gold production in the second quarter of 2010 and by a non-cash derivative liability gain.
The Company sold 8,358 ounces of gold bullion compared to 9,594 ounces in the previous quarter. Of the total gold bullion sold, 6,937 ounces was sold at an average realized gold price of $1,401 per ounce and 1,421 ounces were delivered to Sandstorm Gold Ltd. at $400 per ounce, which was 17% of the total gold sold as per the Sandstorm Gold Purchase Agreement.
Operating expense decreased from the previous quarter due to a decrease in the average unit cash cost of production and due to lower sales volumes.
General and administrative expense was lower than the previous quarter due to the costs associated with the recruitment and replacement of the President and Chief Executive Officer of the Company, which were included in the previous quarter's expenses. Excluding those costs, Q1 2011 remained reasonably consistent with prior quarters.
Exploration expense increased over the previous quarters as the Company continued its exploration programs at Aurizona, Cachoeira and Maranhao Greenfields. In the current quarter, the Company spent $2.9 million at Aurizona (capitalized in mineral properties for accounting purpose), $0.6 million at Cachoeira and $0.7 million at Maranhao Greenfields.
Net financing cost was lower due to interest earned on higher cash balances outstanding during the quarter as compared to the previous quarter. Due to the transition to IFRS, warrants outstanding were classified as a derivative liability and were re-classed from share capital to liability. This derivative liability is to be mark-to-market every period end and will fluctuate based on factors such as Company's stock price and volatility. The non-cash unrealized gains and losses resulted from the required revaluation from the current quarter end. Foreign exchange gain was the result of positive currency movements for the Company on its funds held in foreign currencies.
LIQUIDITY AND CAPITAL RESOURCES - THREE MONTHS ENDED MARCH 31
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----
------------------------------------------------------------------
---------
(tabled amounts are expressed in thousands
of US dollars) 2011 2010 2009
---------------------------------------------------------------------------
Cash flows from operating activities
- Before working capital (801.7) (385.4) (928.8)
- After working capital 425.7 (1,650.0) (1,902.0)
Cash flows from financing activities (1,143.2) 13,910.1 24,774.8
Cash flows from investing activities (5,955.6) (15,858.7) (1,673.1)
Effect of exchange rates on cash 58.2 (41.9) (165.6)
Net cash flows (6,673.1) (3,598.6) 21,199.7
Cash balance 4,088.7 8,925.0 21,390.0
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The Company had approximately $4.1 million in cash and 3,227 ounces of finished gold on hand at March 31. The Company achieved its first positive operating cash inflow after working capital movements in its history. This achievement was the result of the positive net income in the quarter and an increase in accounts payable. The accounts payable increased from the previous quarter due to the receipt of the plant upgrades near the end of the quarter, which were implemented subsequent to quarter end.
Financing activities included a payment of $1.7 million on the Aurizona project debt facility and cash proceeds of approximately $0.6 million from the exercise of stock options. Cash flow from financing activities was significantly lower than the comparative quarter as the comparative quarter included the drawdown of the RMB debt facility.
Investing activities included payments of $2.9 million of capitalized exploration costs related to the brownfield exploration program to increase the resource at Aurizona. The balance of investment activity cash outflow was related to equipment purchases and plant upgrades at the Aurizona plant. Cash outflow from investing activities was significantly lower than the comparative quarter as the plant was substantially completed in late 2010.
In March, the Company accepted an indicative proposal for financing of a senior secured credit facility of up to $30 million to refinance the existing Aurizona project debt facility, fund future capital expenditures and provide additional working capital related to the Aurizona operation. The proposed facility would consist of a $20 million senior secured term loan ("Term Loan") and a $10 million senior secured revolving facility ("Revolving Facility"). The Term Loan would bear interest at 6-month Libor plus 3.625% per annum, be repaid in equal semi-annual instalments commencing twelve months from the closing date and would mature five years from the closing date. The Revolving Facility would bear interest at 6-month CDI plus 3.25% per annum, be repaid in full on the final maturity date and mature three years from the closing date. This proposed financing is currently subject to due diligence and final approval by the lender.
This proposed financing will assist the Company in its plans to upgrade the Aurizona production facility to achieve a production rate of 100,000 ounces per annum, subject to the results of the Company's proposed scoping study, and allow for additional working capital and liquidity in the current year.
As at March 31, 2011, the Company had the following contractual obligations outstanding:
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-----------------------------------------------------------------
-----------
(tabled
amounts are
expressed in Less
thousands of than 1 - 2 2 - 3 3 - 4 4 - 5 There-
US dollars) Total 1 year years years years years after
----------------------------------------------------------------------------
Long term
debt 20,148.7 9,238.5 7,545.7 2,545.8 545.8 272.9 -
Accounts
payables 6,507.2 6,507.2 - - - - -
Asset
retirement
obligation 8,072.3 - - - - - 8,072.3
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Aurizona Project Debt Facility
In December 2009, the Company entered into a senior secured, project debt facility (the "Facility") in the amount of up to $15.0 million with RMB Resources Inc. to assist in the completion of the Aurizona processing plant. The facility is comprised of two tranches in the amount of $7.5 million each, that each bear interest at LIBOR plus 7.5% and are to be fully repaid by December 31, 2012. The facility is secured by a first fixed floating charge over Aurizona, a first mortgage over the shares of Mineracao Aurizona S.A. ("MASA") and the rights, titles and licenses associated with Aurizona and a general security agreement between Luna Gold Corp. and RMB Resources Inc.
The Company shall maintain a Loan Life Net Present Value Cover Ratio ("LLNPVCR") greater than 1.5 over the life of the loan. The LLNPVCR is defined as the net present value of the project cash flow from the calculation date to the final repayment date, as determined from the cash flow model that is agreed upon by the Company and RMB.
Commitment from Acquisition of Aurizona Goldfields Corporation
In January 2007, the Company acquired the Aurizona property from Brascan Brasil ("Brascan") and Eldorado Gold Corporation ("Eldorado") in exchange for a series of staged payments (the "Purchase Agreement"), some of which were conditional upon the project reaching commercial production, as defined in the Purchase Agreement. The Company has repaid all outstanding amounts in relation to this agreement but remained liable for payments of $1.0 million payable to each party on the first, second and third anniversary of the commencement of commercial production of Aurizona. As defined under the terms of the Purchase Agreement, the Company achieved commercial production on December 2, 2010 resulting in the first payment becoming due and payable on December 2, 2011.
FINAME Equipment Purchase Financing ("FINAME")
In February 2011, the Company entered into debt financing in the amount of 4.0 million Brazilian Reais ("BRL") to purchase mining equipment through the FINAME financing program, which is administered through the Brazilian Development Bank ("BNDES"). Interest is calculated at 5.5% per annum and are repayable in equal monthly instalments beginning September 15, 2011 and ending February 15, 2016.
SHAREHOLDERS' EQUITY
Shareholders' equity increased over the prior year due to the Company's equity financing activities during the period, which was partially offset by an increase in the deficit.
As at the date of this report the Company had 443,522,764 shares outstanding, 21,751,666 share purchase options and 22,606,223 common share warrants outstanding.
The following is a summary of stock options outstanding as at the date of this report:
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--
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Vested Price per share
Number of shares ('000s) ('000s) CA$ Expiry Date
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275 275 0.30 15-May-11
100 100 0.50 14-Mar-12
365 365 0.85 8-Aug-12
210 210 1.23 16-Jan-13
165 165 1.05 2-May-13
250 250 0.90 20-Jun-13
6,091 6,091 0.42 24-Jul-14
750 750 0.37 29-Jul-14
100 67 0.55 4-Jan-15
1,370 457 0.63 5-Jul-15
5,000 1,000 0.58 24-Sep-15
7,075 - 0.65 12-Apr-16
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21,751 9,730
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The following is a summary of warrants outstanding as at the date of this report:
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--
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Numb
er of warrants ('000s) Price per share CA$ Expiry Date
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15,747 0.80 14-Jun-11
6,859 1.00 20-Jun-12
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22,606
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OUTLOOK AND STRATEGY
Aurizona Gold Mine
The Company continues to target its 2011 production to be between 55,000 ounces and 60,000 ounces of gold at an estimated cash cost between $610 and $620 per ounce of production. The capital upgrades needed to rectify the identified production constraints were successfully completed in April and the plant is currently ramping up to produce gold at feasibility study levels. Programs are underway to reduce current cash costs to achieve the targeted cash cost through a planned retrenchment program, improved maintenance programs and implementing the Company's own mining team to reduce reliance on mining contractors.
The Company remains targeted on spending approximately $10.5 million on capital projects and upgrades at the Aurizona mine in 2011. These items include $4.4 million to complete the mine construction and $6.1 in sustaining capital, including $2.5 million allocated for surface rights acquisition.
The Aurizona brownfield exploration and drill program remains on target to produce an updated NI 43-101 resource estimate for release in Q4.
Cachoeira Gold Property
The Company is targeting on completing the Cachoeira scoping study (the "Scoping Study") in Q3 2011 that will deliver the path forward to developing Cachoeira into a mining project feasibility study.
Maranhao Greenfields Property
The Company continues to aggressively explore the extensive Maranhao Greenfields property to discover new gold deposits and will maintain exploration crews working four targets simultaneously throughout 2011. Regional scale exploration is underway designed to generate large gold-in-soil anomalies consistent with the Aurizona mineralization style. Through these programs the Company intends to define between six and eight new target areas, several of which will be brought to drill stage in 2012.
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of U.S. dollars, except where indicated)
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Three months ended
--------------------
March 31, March 31,
Note 2011 2010
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Revenue
Gold sales 8 $ 10,357.4 $ -
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10,357.4 -
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Operating expenses
Cost of goods sold (8,728.9) -
Depletion and amortization (902.1) -
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726.4 -
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Other (expenses) income, net
Exploration (1,398.7) (63.2)
General and administrative 9 (717.6) (410.2)
Unrealized gains on derivative liability 10 1,628.3 -
Foreign exchange gain (loss) 619.1 (22.9)
Stock-based compensation 6 (344.4) (608.9)
Finance income 117.2 76.7
Finance cost (472.8) (45.9)
Other (expense) income 31.3 27.5
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Net income (loss) and
comprehensive (loss)
income for the period $ 188.8 $(1,046.9)
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Earning (Loss) per common share
Basic 0.00 (0.00)
Diluted 0.00 (0.00)
Weighted average shares outstanding (000's)
Basic 435,638 358,839
Diluted 441,957 358,839
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Total shares issued and outstanding (000's) 436,213 358,837
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The accompanying notes are an integral part of these consolidated
financial statements.
Interim Consolidated Statements of Financial Position
(expressed in thousands of U.S. dollars, except where indicated)
---------------------------------------------------------------------------
March 31, December 31, January 1,
Note 2011 2010 2010
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Assets
Current assets
Cash and cash equivalents $ 4,088.7 $ 10,703.6 $ 12,565.5
Accounts receivable and prepaid
expenses 2,693.9 3,647.9 743.7
Inventory 8,707.1 6,325.5 393.6
Investments - - 2,942.9
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15,489.7 20,677.0 16,645.7
Property, plant and equipment 4 95,978.4 88,166.0 54,867.6
Other assets 1,590.0 1,089.5 408.1
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Total assets $ 113,058.1 $ 109,932.5 $ 71,921.4
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 6,507.2 $ 3,524.2 $ 5,364.6
Current portion of derivative
liability 317.5 1,605.8 -
Current portion of debt
instruments 5 8,986.5 8,118.3 301.6
Current portion of unearned
revenue 1,675.5 1,748.2 1,787.2
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17,486.7 14,996.5 7,453.4
Debt instruments 5 9,431.7 9,383.2 4,989.2
Derivative liability 633.6 1,019.2 -
Unearned revenue 19,737.3 19,917.9 20,308.8
Asset retirement obligation 2,317.2 2,370.9 2,108.5
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Total liabilities 49,606.5 47,687.7 34,859.9
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Shareholders' equity
Share capital 108,251.3 107,233.3 65,687.7
Deficit (44,799.7) (44,988.5) (28,626.2)
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Total shareholders' equity 63,451.6 62,244.8 37,061.5
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Total liabilities and
shareholders' equity $ 113,058.1 $ 109,932.5 $ 71,921.4
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The accompanying notes are an integral part of these consolidated
financial statements.
Interim Consolidated Statements of Changes in Shareholders'
Equity and Deficit
(expressed in thousands of U.S. dollars, except where indicated)
---------------------------------------------------------------------------
Attributable to equity holders of the Company
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Contri-
Share buted
Notes Shares capital surplus Deficit Total
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Balance at
January 1, 2010 358,837 60,063.2 5,624.5 (28,626.2) 37,061.5
Net loss for the
period - - - (1,046.9) (1,046.9)
Stock options
exercised 100 66.5 (25.2) - 41.3
Stock-based
compensation
charges - 702.6 - 702.6
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Balance at
March 31, 2010 358,937 $ 60,129.7 $ 6,301.9 $(29,673.1) $ 36,758.5
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Balance at
January 1, 2010 358,837 60,063.2 5,624.5 (28,626.2) 37,061.5
Net loss for the
year - - - (16,362.3) (16,362.3)
Escrow shares
returned to
treasury and
cancelled (214) (35.7) 35.7 - -
Stock options
exercised 3,267 1,183.2 (405.6) - 777.6
Stock-based
compensation
charges - - 1,952.9 - 1,952.9
Issue of share
capital, net 72,649 38,701.6 113.6 - 38,815.2
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Balance at
December 31,
2010 434,539 $ 99,912.3 $ 7,321.1 $(44,988.5) $ 62,244.9
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Net income for the
period - - - 188.8 188.8
Stock options
exercised 6 1,674 1,083.8 (410.3) - 673.5
Stock-based
compensation
charges 6 - - 344.4 - 344.4
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Balance at
March 31, 2011 436,213 $100,996.1 $ 7,255.2 $(44,799.7) $ 63,451.6
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The accompanying notes are an integral part of these consolidated
financial statements.
Interim Consolidated Statements of Cash Flows
(expressed in thousands of U.S. dollars, except where indicated)
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Three months ended
---------------------------------------------------------------------------
March 31, March 31,
Notes 2011 2010
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Cash flows from operating activities
Net income (loss) for the period $ 188.8 $ (1,046.9)
Items not affecting cash
Depletion and amortization 919.3 8.5
Recognition of unearned revenue (253.3) -
Unrealized foreign exchange (gains) losses (584.8) 16.7
Unrealized gains from warrant liability (1,628.3) -
Stock-based compensation charges 6 344.4 608.9
Accretion of asset retirement obligation 65.8 45.9
Accretion of interest 146.4 -
Other - (18.5)
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(801.7) (385.4)
Change in non-cash operating working
capital
Decrease in accounts receivable and prepaid
expense 932.2 71.1
Increase in inventory (1,895.0) (1,259.7)
Increase in accounts payable and accruals 2,287.8 -
Payments to the Departamento Nacional de
Producao Mineral ("DNPM") (97.6) (76.0)
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425.7 (1,650.0)
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Cash flows from financing activities
Proceeds from debt financing, net - 13,868.8
Payment of debt financing fees (150.0) -
Repayment to principal of debt financing (1,666.7) -
Proceeds on issuance of common shares 673.5 41.3
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(1,143.2) 13,910.1
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Cash flows from investing activities
Proceeds from disposal of investments - 2,964.2
Payments for property, plant and equipment (5,955.6) (18,822.9)
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(5,955.6) (15,858.7)
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Effect of exchange rate changes on cash 58.2 (41.9)
Decrease in cash and cash equivalents (6,673.1) (3,598.6)
Cash and cash equivalents -
beginning of period 10,703.6 12,565.5
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Cash and cash equivalents - end of period $ 4,088.7 $ 8,925.0
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The accompanying notes are an integral part of these consolidated
financial statements.
On behalf of the Board of Directors
LUNA GOLD CORP.
John Blake, President and CEO
Forward Looking Statements
This MD&A includes certain statements that constitute "forward-looking statements", and "forward-looking information" within the meaning of applicable securities laws ("forward-looking statements" and "forward-looking information" are collectively referred to as "forward-looking statements", unless otherwise stated). These statements appear in a number of places in this MD&A and include statements regarding our intent, or the beliefs or current expectations of our officers and directors. Such forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this MD&A, words such as "believe", "anticipate", "estimate", "project", "intend", "expect", "may", "will", "plan", "should", "would", "contemplate", "possible", "attempts", "seeks" and similar expressions are intended to identify these forward-looking statements.
Forward-looking statements may relate to the Company's future outlook and anticipated events or results and may include statements regarding the Company's future financial position, business strategy, budgets, litigation, projected costs, financial results, taxes, plans and objectives. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements were derived utilizing numerous assumptions regarding expected growth, results of operations, performance and business prospects and opportunities that could cause our actual results to differ materially from those in the forward-looking statements. While the Company considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Accordingly, you are cautioned not to put undue reliance on these forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results. To the extent any forward-looking statements constitute future-oriented financial information or financial outlooks, as those terms are defined under applicable Canadian securities laws, such statements are being provided to describe the current anticipated potential of the Company and readers are cautioned that these statements may not be appropriate for any other purpose, including investment decisions. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date those statements are made. Except as required by applicable law, we assume no obligation to update or to publicly announce the results of any change to any forward-looking statement contained or incorporated by reference herein to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. If we update any one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. You should not place undue importance on forward-looking statements and should not rely upon these statements as of any other date. All forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.
Other Technical Information
Titus Haggan Ph.D., EurGeol Certified Professional Geologist #746, Luna's VP of Exploration, is the Qualified Person as defined under National Instrument 43-101 responsible for the scientific and technical work on the exploration programs and has reviewed the corresponding technical disclosure throughout this MD&A. John Blake Ph.D., Certified Mining Engineer, Luna's President and CEO is the Qualified Person as defined under National Instrument 43-101 responsible for the scientific and technical work on the development programs and has reviewed the corresponding technical disclosure throughout this MD&A.
Neither 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.
Contacts:
Luna Gold Corp.
Investor Relations
(604) 689-7317 or toll free: 1-866-689-7317
(604) 688-0094 (FAX)
www.lunagold.com
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