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Monday, July 07, 2008
Luna Gold Announces Results Of The Feasibility Study For Its Aurizona Gold Project, Brazil
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Vancouver, July 7th, 2008 - Luna Gold Corp. (TSXV-LGC) ("Luna" or the "Company") is pleased to release the results of its Feasibility Study ("FS") for its wholly owned, fully permitted Aurizona gold project, in Maranh�o State, Brazil. The study was completed by Luna's Brazilian subsidiary and its Brazilian consultants. SRK Consulting ("SRK") of Lakewood, Colorado has reviewed and contributed to the work of Luna and its consultants and drafted the NI 43-101 Technical Report. The report has been filed and is available on SEDAR. All gold reserves come from the Piaba deposit.
Highlights of the Report
- 0.5 million ounces of Proven and Probable gold reserves
- Life Of Mine ("LOM") is 7.5 years
- LOM production is 469,000 ounces gold (average production of approximately 60,000 oz/year)
- 1.7 million tonnes of Inferred material at a grade of 1.12 g/t Au occurs within the pit and is reported as waste.
- Initial Capex of USD 47.5 million (including a USD 4 million contingency and USD 7 million owners costs)
- LOM cash operating costs of USD 422/ounce (USD 371/ounce over the first three years)
- NPV5% USD 75 million, IRR 46% (pre-tax basis, Base Case scenario with LOM average gold price of USD 780/oz and BRL of 1.8)
- NPV5% USD 155 million, IRR 69 % (pre-tax basis, at LOM average gold price of USD 1,000/oz and BRL of 1.8 -- this scenario is not part of the SRK report and SRK is not forecasting a USD 1000/oz gold price)
Luna's CEO, Tim Searcy, comments, "The Company is very pleased with these results. The FS provides an excellent view on the economic viability of mining saprolite and fresh rock at Aurizona, but it does not reveal Aurizona's full potential. Luna began work on this FS well before initiating its infill and exploration drill program. As a result, the economic evaluation has focused largely on the weathered resources defined by historic drilling. The success Luna's exploration program is having in expanding the resource, especially in the fresh rock, has not significantly impacted this economic analysis because most of the added ounces are still Inferred, and Inferred material is treated as waste under NI 43-101. Luna continues its fresh rock drilling at Piaba and Tatajuba and intends to drill test other satellite deposits at Aurizona later in the year. The Company is confident that these efforts will continue to expand the resource at Aurizona and extend the LOM (please see http://www.lunagold.com/i/pdf/piaba-long-section-07-07-08..pdf)."
Capex and Opex
LOM operating estimates are: a strip ratio of 2.64, mining costs of USD 7.72/ore tonne, processing costs of USD 6.84/ore tonne, G&A of USD 1.89/ore tonne, and an average recovery of 94% for a cash operating cost of USD 422/oz.
The recovery process is a standard grind, gravity, and CIL. The processing rate was modeled at 1.5 mtpa; however, the nameplate capacity on the mills is 1.8 mtpa. This provides the opportunity for a 20% increase in production. Luna has already secured its grinding mills, (please see the press release dated 21 February 2008), and expects to have them on site by Q4, this year.
Initial Capex, including contingency and owners cost, is estimated at USD 47.5 million with USD 2.4 million for mining, USD 28.4 million for plant and construction costs, USD 3.4 million for infrastructure, and USD 6.3 million for the first three years of tailings containment. (A mining contractor will be engaged to perform mining operations.) In addition, owners cost during the construction and start-up period are estimated at USD 7.0 million. More than 99% of the surface rights over the Piaba pit, process plant, waste dump, and tailings storage facility have been acquired; the process for securing the outstanding interests has been initiated.
Luna's COO, Jim Bahan, states "The FS is a useful snapshot of the potential at Piaba based on current operating cost estimates, plant throughputs, and gold reserves. We will continue drilling to better define and increase the overall reserves and resources at Piaba, and its satellite deposits. Our strategic objective is to treat the higher grade ores in the CIL plant and the lower grade ores by heap leaching, in order to substantially boost overall gold output. In the meanwhile, Luna will focus on the surface oxide resources that should provide a solid cash base for the company's growth plans."
Of the USD 3.4 million infrastructure component of capex, USD 2.2 million is for the 41 km installation of a 69 kV powerline, which will be dedicated to the Aurizona project. The overall capex also includes cost estimates for diesel generator back-ups.
Economic Model
The economic analysis, at an average LOM gold price of USD 780/oz, BRL of 1.8, and a discount rate of 5%, returns an NPV of USD 75.3 million and an IRR of 46%. This economic analysis includes only proven and probable reserves; it treats inferred mineralization as waste. The FS pit includes 1.7 million tonnes of Inferred resources with a grade of 1.12 g/t, for approximately 60,000 oz. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. However, this Inferred material represents an opportunity to improve the economics of the mine, if it can be converted into reserves it could extend the mine life by one year and reduce cash costs.
Fiscal Incentives
The Aurizona project area is located in a Federal development area known as the SUDENE (Superintend�ncia de Desenvolvimento do Nordeste). Gold mining activities are listed as a priority industry for regional development by SUDENE, as such the Project can reasonably expect to benefit from a number of Federal and State fiscal incentives, including a reduction of 75% of the Corporate Income Tax rate for a period of 10 years. This would bring down the Corporate Income Tax rate to 6.25% from 25%. The Project remains subject to the Social Contribution Tax of 9%.
Exploration
Luna's Exploration Manager, Titus Haggan states "Geologic reinterpretation of the deposit and limited drilling have provided very positive results to date. Drilling at Aurizona is ongoing, focusing on depth expansion at Piaba and strike and depth expansion at Tatajuba. In addition, Luna has yet to test a number of the other satellite deposits that occur in the immediate vicinity of Piaba and Tatajuba within the area defined as Aurizona Main. In the coming months, a second drill rig will be added to the project to begin the testing of these targets." (please see http://www.lunagold.com/i/maps/Aurizona_Targets.jpg)
Permitting
The Aurizona project received its operating license on 11 July 2007 (please see the Luna press release dated 16 July 2007). The license permits Luna's wholly owned subsidiary, Minera��o Aurizona SA (Aurizona) to initiate the mining and processing of gold. The permit is valid until 11 December 2009, and is renewable every two years.
Social Issues
The village of Aurizona has approximately 1,500 inhabitants and 400 homes. The common means of survival has been gold mining, initially in pits, but now, more commonly, in the shallow subsurface using metal detectors. There has always been subsistence farming, combined with hunting of small game and fishing.
The community will benefit from improved infrastructure: better roads, new water wells, and use of the 69 kV powerline after the mine closure or after the project upgrades to a higher voltage line. Beyond infrastructure, the community will benefit primarily from the creation of local jobs and a much greater purchasing power within the community, which should have a positive impact on local businesses.
Luna has already provided the community with access to the project's medical clinic which is staffed with a doctor and nurse. The mine will commence an apprentice program whereby interested parties can obtain work experience and skills training. Evening classes will be held to improve basic education, particularly in the areas of domestic economics, health, and hygiene.
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.
Tim Searcy, P. Geo. -- President and CEO
Website: www.lunagold.com
For further information contact Investor Relations at (604) 689-7317 or toll free at 1-866-689-7317.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this press release.
Regulatory Footnotes
Exploration on the Aurizona Project was initiated in 1978 by Brascan Recursos Naturais S.A. (Brascan) and continued through the 1990's with work by Brascan, Unamgen Minera��o e Metalurgia S.A (Unamgen) an exploration subsidiary of Gencor Ltd and Eldorado Gold Corp (Eldorado). Luna acquired the property in 2007 and commenced exploration soon after. Historic drill core (HQ [63.5mm] diameter) analyses by previous operators Unamgen and Eldorado were conducted at Nomos Laboratory in Rio de Janeiro and Bondar Clegg Laboratory in Luzi�nia, Goias respectively. Unamgen and Eldorado conducted laboratory QA/QC programs and retained all original assay certificates. Luna used Acme Laboratories Ltda in Maraba, Brazil and Vancouver, Canada. Luna's QA/QC program consists of blanks, Certified Reference Materials (CRM), pulp check assays at ALS Chemex in Belo Horizonte, Minas Gerais and coarse reject check assays at Acme and at ALS Chemex. The Piaba reserve estimate contains drill data produced up to 01/12/2007.
The Feasibility Study was compiled by SRK Consulting of Lakewood , CO, an internationally recognized independent consulting engineering company. Peter Clarke, Registered Professional Engineer (British Columbia, #13,473), is SRK's Qualified Person for the National Instrument 43-101 technical report (Reserve Statement and scientific and technical work on which this release is based), and has reviewed the technical information disclosed in this press release. Mr. Clarke and SRK are independent of the company as defined under NI 43-101.
This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the United States Securities Act of 1933 and applicable state securities laws or an exemption from such registration is available.
Forward-Looking Statements
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. 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. Luna Gold does not assume the obligation to update any forward-looking statement unless otherwise required by law. | |
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