VANCOUVER, BC--(Marketwired - May 15, 2014) - Luna Gold Corp. (TSX: LGC) (LMA: LGC) (OTCQX: LGCUF) ("Luna" or the "Company") today announced its operational and financial results for the three-month period ending March 31, 2014.
FIRST QUARTER 2014 RESULTS HIGHLIGHTS
- Revenue of $25.9 million, including sales to Sandstorm;
- Gold sales and production of 23,002 ounces and 19,414 ounces respectively;
- Total cash cost of production of $705, All-in sustaining cost of production of $787, All-in cost of $921 per ounce of gold produced;
- Cash flow from operating activities before changes in non-cash working capital of $7.6 million ($0.07 per share);
- Net income of $7.5 million ($0.07 per share); and
- Cash balance and finished gold inventory at April 30th, 2014 of approximately $31 million and 4,500 ounces respectively.
First Quarter 2014 Highlights
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| Q1 2014 |
| Gold production (ounces) |
| | 19,414 |
| Gold sales, including sales to Sandstorm (ounces) |
| | 23,002 |
| Finished gold inventory at March 31, 2014 (ounces) |
| | 5,449 |
| Net realized gold price received, including gold sales to Sandstorm (USD per ounce) |
| $ | 1,123 |
| Total cash cost of production (USD per ounce) |
| $ | 705 |
| All-in sustaining cost of production (USD per ounce) |
| $ | 787 |
| All-in cost (USD per ounce) |
| $ | 921 |
| Gross profit (USD millions) |
| $ | 8.9 |
| Net income (USD millions) |
| $ | 7.5 |
| Earnings per share - basic and fully diluted (USD) |
| $ | 0.07 |
| Cash flow per share from operating activities before changes in non-cash working capital (USD) |
| $ | 0.07 |
| Cash flow from operating activities before changes in working capital (USD millions) |
| $ | 7.6 |
| Cash flow from operating activities after changes in working capital (USD millions) |
| $ | 4.4 |
| Cash flow from financing activities (USD millions) |
| $ | 16.2 |
| Cash payments on Phase I Expansion (USD millions) |
| $ | 2.2 |
| Cash payments on sustaining capital (USD millions) |
| $ | 0.2 |
| Cash payments for mineral property development (USD millions) |
| $ | 1.0 |
| Cash balance at March 31, 2014 (USD millions) |
| $ | 23.5 |
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Company Developments
- Q1 2014 gold production was 19,414 ounces, representing a record first quarter for the Company. 2014 gold production remains on target at 85,000 to 95,000 ounces at an average annual cash cost of production of US$690 to US$740 per ounce of gold. The gold production target is based on a mine plan designed to feed the existing plant with saprolite ore and is not reliant on the Phase I Expansion upgrades to achieve production targets;
- The Aurizona Phase I Expansion is progressing and continued to trend on budget as at April 30, 2014. The overall engineering, including detailed site engineering, reached 98% completion, procurement awarded reached 98% completion (on planned material and equipment packages) and construction reached 43% completion. This is less than reported in Q4 2013 because one of the Carbon-In-Leach ("CIL") tank shells was defectively installed, requiring removal and reinstallation. Mechanical completion of Phase 1 Expansion remains on target for the second half of 2014;
- In April 2014, the Company announced a brownfield exploration program. The objective of this 3 to 5 year drilling program is to expand resources and reserves, specifically targeting new saprolite mineralization, to better understand high grade mineralization controls and to sterilize footprints for future plant expansion, tailings and waste storage areas. The brownfield exploration program will initially be funded by drawing down the final $10.0 million from its previously announced secured debt facility (the "Sandstorm Debt Facility") with Sandstorm Gold Ltd ("Sandstorm"). The Company plans to spend $6.0 million of this $10.0 million in 2014;
- On February 25, 2014, the Company successfully completed a public offering of 16,950,000 common shares at a price of C$1.18 per share for gross proceeds to the Company of approximately C$20.0 million, to be used for general corporate purposes. As a result of this financing, the $10.0 million loan from Sandstorm and cash inflows from operations during the first quarter of 2014, the Company has greater balance sheet support in a downside gold price environment and an opportunity to fund projects to increase mining and plant blend flexibility. The Company had approximately $31.0 million in cash and 4,500 ounces of finished gold bullion on hand at April 30, 2014;
- The Company announced the retirement of John Blake from the positions of President and CEO effective March 20, 2014 and the Board of Directors concurrently announced the appointment of Geoff Chater as President and CEO; and
- The Company announced the appointment of Federico Schwalb as a Director of the Company.
For complete details on the first quarter 2014 results, please refer to the Financial Statements, and Management Discussion and Analysis on SEDAR, www.sedar.com or on the Financial Statements page of the Company's website. First quarter 2014 results have been incorporated into the Luna's latest Corporate Presentation. Recent Aurizona Phase I expansion construction photos are available to view at Phase I Photo Gallery.
OUTLOOK AND STRATEGY
The Company remains on target to deliver on its 2014 strategy and guidance which were outlined in the December 31, 2013 Management Discussion and Analysis report dated March 17, 2014. Improving operational excellence, completion of the Aurizona Phase I Expansion on time and on budget, as well as, maintaining financial flexibility, are top priorities for the Company.
In Q1 2014, despite challenges related to a week-long temporary suspension of mining operations resulting from community demonstrations against the local government, the Company produced 19,414 ounces of gold. This was a first quarter production record. 2014 gold production guidance remains unchanged at 85,000 to 95,000 ounces, at an average annual cash cost of production estimated at $690 to $740 per ounce of gold. The gold production target is based on a mine plan designed to feed the existing plant with saprolite ore and is not reliant on the Phase I Expansion upgrades to achieve production targets.
The Aurizona Phase I Expansion continued to trend on budget as at April 30, 2014. The overall engineering, including detailed site engineering, reached 98% completion, procurement awarded reached 98% completion (on planned material and equipment packages) and construction is approximately 43% complete. This is less than reported in
Q4 2013 because one of the CIL tank shells was defectively installed, requiring removal and reinstallation. Activities since December 2013 have included substantial completion of two of the CIL tanks, completion of thickener ring foundations and concrete pillars rebar, completion and hydro testing of the barren solution tank and substantial completion of the electrical room structural steel. Mechanical completion of the Phase I Expansion is targeted for the second half of 2014. Subsequent to mechanical completion, the Company requires operating permits to be updated and issued from the Brazilian mining and environmental authorities.
In April 2014, the Company announced a brownfield exploration program. The objective of this 3 to 5 year drilling program is to expand resources and reserves, specifically targeting new saprolite mineralization, to better understand high grade mineralization controls and to sterilize footprints for future plant expansion, tailings and waste storage areas. In April 2014, the Company drew down the final $10.0 million from the previously announced Sandstorm Debt Facility in order to purchase three multi-purpose drill rigs and commence exploration and condemnation drill programs in the second half of 2014. The Company plans to spend $6.0 million of this $10.0 million in 2014.
With the C$20.0 million gross proceeds equity financing, the additional $10.0 million loan from Sandstorm, and cash inflows from operations during the first quarter of 2014, the Company has greater balance sheet support in a downside gold price environment and an opportunity to fund projects to deliver on its 2014 operating guidance and progress on its strategy to develop and grow the business.
The Aurizona Phase II Expansion prefeasibility study, as well as the Aurizona Resource and Reserve update, are progressing well and are on target for completion and release in the second half of 2014. In addition, the Company has commenced trade-off studies to determine the lowest cost ore-waste material handling options, comparing contractor equipment, owner equipment and in-pit crushing-conveying.
The Company is considering a new initiative to advance waste stripping during the second half of the 2014 dry season to prepare for inventory stockpiling ahead of the first half of the 2015 wet season and higher throughput capacity upon completion of Phase I Expansion.
AURIZONA GOLD MINE - MARANHAO STATE, BRAZIL
Phase I Expansion Update
The Phase I Expansion is designed to expand, improve efficiencies and debottleneck the existing Aurizona process plant in order to increase gold production through low capital cost improvements, with minimal impact to the current plant foot print and operations. The 2014 gold production target is based on a mine plan designed to feed the existing plant with saprolite ore and is not reliant on the Phase I Expansion upgrades to achieve production targets.
The expansion consists of four projects designed to increase the Aurizona process plant nameplate throughput to 10,000 tonnes per day ("tpd") of saprolite ore. In addition, the expansion has been designed to allow flexibility for further upgrades to maintain the 10,000 tpd throughput as the Company develops the harder primary ore body. These four projects consist of (1) intensive cyanidation reactor ("ICR") with dedicated electro-winning cells ("EW"); (2) carbon regeneration kiln, and new elution and acid wash columns; (3) feed and tailings high rate thickeners and three additional CIL tanks; and (4) triple deck wet screen, additional cyclones, pumps and trash screen.
The expansion continues to progress towards mechanical completion in the second half of 2014 and continued to trend on budget at April 30, 2014. Subsequent to mechanical completion, the Company requires operating permits to be updated and issued from the Brazilian mining and environmental authorities. The pace of construction activities in Q1 2014 was slowed due to the temporary halt of mining operations as community members demonstrated against the local government, heavy rains, changes to strengthen the project management team, delays related to construction deficiencies of the third CIL tank shell and receipt of approval from the insurers to proceed with the plan to reconstruct the defective CIL tank shell. The approval to reconstruct the CIL tank shell was received in late April and materials for the new tank shell have been ordered. The overall engineering, including detailed site engineering, reached 98% completion, procurement awarded reached 98% completion (on planned material and equipment packages) and construction reached 43% completion. This is less than reported in Q4 2013 because one of the CIL tank shells was defectively installed, requiring removal and reinstallation. The status of each project is as follows:
(1) This project is designed to improve gravity gold recovery efficiency through the elimination of the inefficient shaking tables. The ICR is an intense cyanidation process delivering gold in pregnant solution directly to one new dedicated stainless steel electro-winning cell. Three additional electro-winning cells, bringing the total to four, will increase the efficiency of the gold room through higher capacity and improved controls. The ICR building is structurally complete and block walls will be installed around the first three levels of the secure area of the building. The ICR and EW cells have been rough set. Bulk piping and electrical materials have been received on site and are awaiting installation. The pipe assembly shop was set up, crews hired and training commenced. This project is approximately 67% complete.
(2) This project is designed to increase the efficiency of the CIL circuit, reduce carbon replacement costs and increase capacity of the elution circuit. The elution and acid wash columns are designed to improve the overall capacity and efficiency of the elution process. The carbon regeneration kiln building is structurally complete. The new kiln, dewatering screen, feed hopper and quench tank have been rough set. Bulk piping and electrical materials have been received on site and are awaiting installation. The construction of the barren solution tank, hydrostatic testing and final inspection were completed. Pre-assembly of the acid wash structural steel commenced. This project is approximately 65% complete.
(3) The high rate thickeners provide increased throughput and optimal water/solids slurry control for consistent delivery of both ore in solution to the CIL tanks and recovering of cyanide in solution prior to cyanide destruction and tailings disposal. The three CIL tanks will provide increased ore retention time and throughput to the CIL process. The two above ground, steel, high rate thickeners have been received on site. Foundations for the center columns are complete and main ring foundations for the thickener support steel are 60% complete with backfilling started. Four CIL tank foundations have been completed along with one foundation for a future fourth tank, and two tank shells have been completed with bottom welding and baffle installation started inside the tanks. The third tank shell was under construction but will have to be dismantled due to a construction deficiency. The cost of dismantling and reconstructing this tank, including any new materials, are the responsibility of the contractor and covered by the Company's insurance. With the exception of the third tank, all major materials and equipment associated with the thickeners and CIL circuit have been received on site. The materials required to reconstruct the third tank are currently being procured. The feed and tailings high rate thickeners are approximately 40% complete and the CIL tanks are approximately 30% complete. This is less than reported in Q4 2013 because one of the CIL tank shells was defectively installed, requiring removal and reinstallation.
(4) This project is designed to improve crushing and grinding circuit efficiencies through optimized feed particle sizing and distribution. The triple deck screen engineering is being completed onsite and procurement and delivery of the screen and main conveyors are 100% complete. The remaining engineering design has been reviewed and released to finalize detailed engineering and procurement of materials for secondary equipment. Conveyor and wet screen foundation excavations, concrete piles and formwork started. Hydrocyclone materials and equipment have been delivered to site with the exception of the medium voltage variable frequency drive for the new cyclone feed pump, which is expected in June 2014. This project is approximately 25% complete.
From an approved budget of $49.8 million, the Company has committed approximately $41.0 million, of which approximately $39.0 million has been incurred to the end of April 2014. The Company expects to fund the remaining portion of the Phase I Expansion, which is estimated at approximately $11.0 million (approximately $9.0 million, net of approximately $2.0 million contribution from Sandstorm), utilizing the existing cash balance, operating cash flow and funds from Sandstorm for their remaining 17% contribution to expansion capital.
Operating results
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| Three months ended March 31 |
| |
| 2014 |
| 2013 |
| Mined waste - tonnes |
| | 960,010 |
| | 2,089,416 |
| Mined ore - tonnes |
| | 336,242 |
| | 511,473 |
| Ratio of waste to ore |
| | 2.9 |
| | 4.1 |
| Ore grade mined - g/t |
| | 1.85 |
| | 1.43 |
| Cost per tonne mined (USD) |
| $ | 3.93 |
| $ | 1.80 |
| Processed ore - tonnes |
| | 486,839 |
| | 447,990 |
| Average grade processed - g/t |
| | 1.40 |
| | 1.40 |
| Average recovery rate % |
| | 89% |
| | 90% |
| Gold produced (ounces) |
| | 19,414 |
| | 17,203 |
| Gold sales (ounces) |
| | 23,002 |
| | 13,017 |
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| USD per |
| USD per |
| USD per |
| USD per |
| Cash costs of production: |
| ounce |
| tonne |
| ounce |
| tonne |
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| processed |
| |
| processed |
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| Mining |
| $ | 276 |
| $ | 12 |
| $ | 244 |
| $ | 10 |
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| Processing |
| | 326 |
| | 12 |
| | 374 |
| | 14 |
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| Administration |
| | 70 |
| | 3 |
| | 117 |
| | 5 |
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| Refining and transportation |
| | 20 |
| | 1 |
| | 22 |
| | 1 |
| |
| Royalties |
| | 13 |
| | 1 |
| | 16 |
| | 1 |
| Total cash costs of production |
| $ | 705 |
| $ | 29 |
| $ | 773 |
| $ | 31 |
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| Sustaining capital |
| | 31 |
| | |
| | 221 |
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| Brownfields exploration expenditure |
| | 51 |
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| | 21 |
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| All-in sustaining costs |
| $ | 787 |
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| $ | 1,015 |
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Mining production
During the three months ended March 31, 2014, total material mined (ore and waste) decreased from the comparative quarter of 2013 by 50% due to wet conditions, temporary suspension of mining operations (including delays to re-access the pit), training of new operators and lower than planned equipment utilization and availability. In Q1 2013, the mine experienced a drought which allowed for an opportunity to increase mine production during a period which normally has heavy rainfall. In Q1 2014, the seasonal rains returned and were above average, resulting in lower mine production. The wet conditions resulted in lower utilization and productivity compared to the same period last year. Equipment availability and productivity were negatively impacted due to delays in receiving equipment maintenance parts from suppliers and allocating more equipment for stockpile re-handling. In addition, there was a week-long temporary suspension of mining operations as community members demonstrated against the local government. During this time, access could not be safely maintained to manage the pit dewatering system, resulting in flooding of the Piaba pit and haul road erosion. Additional pumping and road rehabilitation were required to regain access to the mine. As a result, ore, waste and total tonnes mined were lower in Q1 2014 compared to Q1 2013.
The average ore grade mined in the three months ended March 31, 2014 was higher than comparative quarter of 2013, as the Company targeted higher grade ore areas of the Piaba pit in an effort to offset lower mine production.
After adjusting for a foreign exchange gain of $0.72 per tonne, mining costs were significantly higher per tonne mined in the three months ended March 31, 2014 compared to the same quarter of 2013, primarily due to lower volume of material mined.
Mill processing
Gold production during the three months ended March 31, 2014 was 13% higher than the comparable quarter of 2013. The increase was due to higher ore volumes processed through the mill.
Ore throughput in Q1 2014 was higher than the comparable quarter of 2013 due to an increase in plant availability. The drought conditions that positively impacted mine operations in Q1 2013 had the opposite impact on processing ore due to a lack of water available for plant production. There were no water shortage issues in Q1 2014 resulting in the increase in process plant availability. In addition, the ore stockpile was processed to increase ore throughput in the plant.
The average ore grade processed in Q1 2014 was comparable to the same quarter in 2013. Recoveries were slightly lower due to a higher percentage of laterite and transitional ore blend in Q1 2014. This resulted in additional lime requirements in the production process, which lowered the recovery.
Cash costs of production
The Company's results are subject to seasonal variation, in particular the wet season in Northeastern Brazil. The wet season generally starts in January and continues through June, with the heaviest rainfall normally experienced in the months of March to May. As a result of the wet season, pit access and the ability to mine ore will be lower in this period than other periods of the year and the unit cost of production will also be higher. To address this issue, the Company mines ore and waste at higher levels than processing rates in the dry season, resulting in a build-up of ore stockpiles to be used during the wet season, and also pre-strip waste ahead of future ore mining.
The total cash cost of production was 9% lower for the three months ended March 31, 2014 compared to the same quarter in 2013. The strengthening of the US dollar in relation to the Brazilian Real had a positive impact on the total cash costs for the first quarter of 2014 of approximately $129 per ounce compared to 2013.
After adjusting for positive foreign exchange movements, the mining costs per ounce produced in the first quarter of 2014 were approximately 33% higher than the comparative quarter of 2013. This was due to the higher cost per tonne mined.
After adjusting for positive foreign exchange movements, processing costs were approximately 3% higher than the comparative quarter of 2013. The increase in the average process cost per ounce produced was due to higher leaching costs related to the increase in laterite and transitional ore processed.
The administration cost per ounce produced was lower than the comparative quarter of 2013 due to higher gold production, a reduction in administration projects that were completed in 2013 and cost saving initiatives that were enacted in the Company's sustainable cost reduction programs.
Refining and transportation costs were lower due to a change in gold refineries in 2014.
Royalty costs are a function of gross sales and were lower due to a lower gold price in Q1 2014 versus Q1 2013.
The total all-in sustaining cost ("AISC") of production was lower by 23% for the three months ended March 31, 2014, as compared with the same quarter of 2013. The lower AISC for Q1 2014 was the result of a $144 per ounce gain in foreign exchange and deferring all non-essential sustaining capital projects to the future on an as needed basis. This was partially offset by higher capitalized mine activities related to the clearing and preparation of a new mining area on the west side of the Piaba pit.
After adjusting for a foreign exchange gain of $5 per tonne, total cost per tonne processed was 13% higher in the three months ended March 31, 2014 compared to the same quarter of 2013. This was generally due to the higher mining costs associated with low mine production and higher processing costs associated with lower gold recovery and higher leaching costs, which was partially offset by lower administration costs and a higher volume of ore tonnes processed through the mill.
Exploration
Exploration expenditure during the first quarter of 2014 was related to Aurizona resource geology planning programs to be executed in 2014.
In April 2014, the Company announced a brownfield exploration program at the Aurizona Gold Mine. Under this initiative, the Company plans to continue exploration and condemnation drilling in the second half of 2014. The objective of this 3 to 5 year drilling program is to expand resources and reserves, specifically targeting new saprolite mineralization, to better understand high grade mineralization controls and to sterilize footprints for future plant expansion, tailings and waste storage areas. Results of the drilling program will assist in the determination of the next steps for the Phase I and Phase II expansion scenarios. The Company targets to spend $6.0 million on this brownfields exploration program in 2014, which includes the procurement of three new multi-purpose drill rigs.
The Brownfield Exploration drilling program will target new mineralization in several near mine areas as well as an expansion of resources and reserves through step-out drilling at the Piaba, Boa Esperança, Conceição and Ferradura gold deposits. The drilling program will focus on saprolite mineralization along strike from these deposits and new saprolite mineralization east-southeast of Piaba within the Micote-São Lourenço trend and basin area.
Permitting
The mine licence application for the Tatajuba claim was submitted in March 2012 and remains under review by the Brazilian Mining Department. The Company is currently progressing the Environmental Impact Assessment ("EIA- RIMA") and is targeting to receive the mine licence in the second half of 2014.
CONFERENCE CALL DETAILS
The Company will also host a conference call at 11:00 a.m. Eastern Time on Friday 16th May 2014, where Management will both review the financial results and discuss the 2014 outlook.
Conference Call Dial-In Details
Toll Free (North America): +1 866 226 1799
Toronto Local and International: +1 416 340 2220
Webcast: www.gowebcasting.com/5454
A replay of the call will be available on Luna's website, www.lunagold.com.
About Luna Gold Corp.
Luna is a gold production company engaged in the operation, expansion, and exploration of gold projects in Brazil.
On behalf of the Board of Directors
LUNA GOLD CORP.
Geoff Chater - President and CEO
Website: www.lunagold.com
Forward-Looking Statements
This release contains certain "forward looking statements" and certain "forward looking information" as defined under applicable Canadian and U.S. securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "continue", "plans" or similar terminology. Forward-looking statements include, but are not limited to, statements with respect to future gold production and/or the results of analysis on gold production. Forward-looking statements are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in Luna Gold Corp.'s periodic filings with Canadian Securities Regulators. These factors include the inherent risks involved in the mechanical completion and commissioning of the Aurizona Phase I expansion, preparation and delivery of the Aurizona Phase II expansion prefeasibility study, exploration and development of mineral properties, the uncertainties involved in interpreting drill results and other exploration data, the potential for delays in exploration or development activities, the geology, grade and continuity of mineral deposits, the possibility that future exploration, development or mining results will not be consistent with the Company's expectations, accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties with or interruptions in production and operations, fluctuating metal prices, unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, regulatory restrictions, including environmental regulatory restrictions and liability, competition, loss of key employees, and other related risks and uncertainties. The Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.