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VANCOUVER, BC—(Marketwired – August 14, 2015) – Luna Gold Corp. (TSX: LGC) (LMA: LGC) (OTCQX: LGCUF) (“Luna” or the “Company”) today announced its operational and financial results for the second quarter (“Second Quarter”) ended June 30, 2015. This news release should be read in conjunction with the condensed consolidated financial statements and the Management's Discussion and Analysis for the quarter ended June 30, 2015.

SECOND QUARTER 2015 HIGHLIGHTS

Â

Q2 2015

Â

YTD 2015

Â

Gold production (ounces)

Â

12,830

Â

Â

31,620

Â

Gold sales, including sales to Sandstorm (ounces)

Â

16,534

Â

Â

39,750

Â

Finished gold inventory at June 30, 2014 (ounces)

Â

3,093

Â

Â

3,093

Â

Net realized gold price received, including gold sales to Sandstorm (USD per ounce)

$

1,040

Â

$

1,075

Â

Total cash cost of production (1) (USD per ounce)

$

943

Â

$

783

Â

All–in sustaining cost of production (1) (USD per ounce)

$

1,004

Â

$

865

Â

All–in cost (1) (USD per ounce)

$

1,138

Â

$

984

Â

Gross profit (USD millions)

$

3.0

Â

$

8.8

Â

Net loss (USD millions)

$

(2.8

)

$

(6.1

)

Loss per share – basic and fully diluted (USD)

$

(0.02

)

$

(0.04

)

Cash flow per share from operating activities before changes in non–cash working capital (1) (USD)

$

(0.04

)

$

0.00

Â

Cash flow from operating activities before changes in working capital (1) (USD millions)

$

(5.4

)

$

0.1

Â

Cash flow from operating activities after changes in working capital (1) (USD millions)

$

(1.4

)

$

8.0

Â

Cash flow from financing activities (USD millions)

$

9.3

Â

$

5.1

Â

Cash flow from investing activities (USD millions)

$

0.7

Â

$

(4.0

)

Cash balance at June 30, 2015 (USD millions)

$

12.4

Â

$

12.4

Â

Company Developments:

On June 30, 2015, the Company completed a financing transaction with Pacific Road Resources Fund (“Pacific Road”) and a transaction with Sandstorm Gold Ltd. (“Sandstorm”) to restructure an agreement whereby the Company was obligated to sell 17% of its gold production from the Aurizona Mine to Sandstorm at $400 per ounce (the “Gold Stream”) and the Sandstorm Debt Facility (the “Sandstorm Stream Restructure”).

Pacific Road transaction
Pacific Road provided the Company with CA$20 million in cash in exchange for a CA$20 million senior secured note bearing interest at a rate of 10% per annum (the “Pacific Road Note”), payable quarterly in cash and 200 million common share purchase warrants, exercisable for a term of 5 years at CA$0.10 per common share (the “Class B Warrants”). At Pacific Road's election, the Company may pay the quarterly interest in shares with the number of shares determined based on the amount of interest due divided by the volume weighted average trading price of the Company's common shares for the 5 trading days immediately prior to the date of the payment. The Class B Warrants contain an embedded foreign currency derivative and were recognized as a derivative liability at their fair value of $6.6 million with the remainder of the proceeds of $9.5 million allocated to the Pacific Road Note.

Pacific Road also acquired 100 million units in the capital of Luna (“Units”) at a price of CA$0.10 per Unit in a non–brokered private placement (the “Private Placement”) for proceeds of CA$10 million. Each Unit consists of one common share and one common share purchase warrant (“Class A Warrants”). The Class A Warrants have an exercise price of CA$0.125 per common share and are exercisable for a term of 5 years. Sandstorm also participated in the Private Placement by subscribing for 24.7 million Units for proceeds of CA$2.47 million. The Class A Warrants contain an embedded foreign currency derivative and were recognized as a derivative liability at their fair value of $3.6 million with the remainder of the proceeds of $6.4 million allocated to the common shares.

The proceeds received by the Company from the issuance of the above instruments was required to be used to repay in full an existing loan facility with a financial institution, to complete infill drilling on the Piaba target of the Aurizona Project and for working capital purposes including (i) updating the mine plan for the Aurizona project; (ii) completing updated engineering studies on the Aurizona Project, and (iii) completing all necessary and appropriate permit applications for the Aurizona Project.

The Company also incurred transaction costs totalling $1.2 million, of which $0.5 million was included in the carrying value of the Pacific Road Note, $0.2 million was included in the carrying value of the common shares and $0.5 million related to the Class A Warrants and Class B Warrants were expensed. Transaction costs were allocated to each instrument pro–rata based on their assigned values.

Sandstorm Stream Restructure
Sandstorm and the Company agreed to restructure the Gold Stream. The Gold Stream was terminated in exchange for the issuance of a $30 million debenture (the “Sandstorm Debenture”) and two net smelter return royalties (the “Aurizona Project NSR” and the “Greenfields NSR”). The Aurizona Project NSR covers all future production from the Aurizona Project processed through the Aurizona mill. The Aurizona Project NSR requires the Company to pay Sandstorm a sliding scale royalty based on the price of gold as follows:

3% if the price of gold is less than or equal to $1,500 per ounce;

4% if the price of gold is between $1,500 per ounce and $2,000 per ounce; and

5% if the price of gold is greater than $2,000 per ounce.

The Greenfields NSR covers approximately 200,000 hectares of exploration properties held by the Company and requires the Company to pay Sandstorm a royalty of 2% on production from these properties. The Company has the right to purchase one–half of the Greenfields NSR for $10 million at any time prior to achieving commercial production. If the Company exercises this right, the royalty rate is reduced to 1%.

If the Company abandons the properties subject to the Aurizona Project NSR or Greenfields NSR, Sandstorm has the right to accept an assignment of the properties.

The remaining gold ounces included in inventory and the ore stockpile as at June 30, 2015, will continue to be subject to the terms of the Sandstorm Gold Stream until the earlier of completion of processing of these ounces or September 30, 2015, whereby 17% of these ounces will be sold to Sandstorm for $408 per ounce.

The Sandstorm Debenture bears interest at a rate of 5% per annum and is repayable in three equal annual tranches of $10 million plus accrued interest beginning June 30, 2018. The Company has the right to repay the principal and interest owing on each repayment date with common shares of the Company. The number of common shares to be issued is determined based on the principal and interest to be paid divided by the higher of CA$0.10 per share and the 20 day volume weighted average CA$ trading price of the Company's common shares (the “Conversion Price”) provided that Sandstorm owns less than 20% of the outstanding common shares of the Company (the “Sandstorm Ownership Limitation”). The Company can choose to postpone the payment of any instalment until a point when the issuance of shares would not exceed the Sandstorm Ownership Limitation. The Company also has the right to convert up to $5 million of the Sandstorm Debenture quarterly at the Conversion Price subject to the Sandstorm Ownership Limitation.

The Sandstorm Stream Restructure also included amendments of a $20 million existing Sandstorm Debt Facility to extend the maturity date from June 30, 2017 to June 30, 2021 and to reduce the interest rate from 12% to 5% per annum, payable in cash on the maturity date. In addition, a completion guarantee provided to Sandstorm was terminated and Sandstorm is no longer required to pay an amount receivable related to its obligation to fund certain capital expenditures.

The Sandstorm Debenture was recognized at its fair value of $20.7 million based on the future cash flows discounted at a market rate of interest of 15%. The amended Sandstorm Debt Facility was accounted for as a substantial modification resulting in the de–recognition of the old instrument with a carrying value of $23.7 million and the recognition of a new instrument at its fair value of $13.2 million based on the future cash flows discounted at a market rate of interest of 15%. No value was assigned to the conversion option because the Company is not able to currently exercise the option due to the Sandstorm Ownership Limitation. Royalties will be recognized when they are paid in the future.

The net impact of the Sandstorm Restructure resulted in an increase in mineral property, plant and equipment of $0.8 million as follows:

(expressed in millions of US Dollars)

June 30, 2015

Â

Fair value of Sandstorm debenture

$

20.7

Â

Fair value of new Sandstorm Debt Facility

Â

13.2

Â

Write off of Sandstorm Phase I expansion receivable

Â

1.7

Â

De–recognition of old Sandstorm Debt Facility

Â

(23.7

)

De–recognition of other liabilities related to Gold Stream

Â

(7.0

)

De–recognition of Sandstorm Phase I completion guarantee

Â

(4.1

)

Â

$

0.8

Â

Transaction costs of $0.5 million were expensed.

Management and Director Changes

There were a number of director changes that occurred since Q1 2015. Mr. Greg Smith was elected to the Company's Board of Directors on June 18, 2015 and as part of the restructuring plan, there have been changes to the composition of the Company's Board of Directors. Mr. Rob Pease, P.Geo. and Mr. Dan Wilton have been added to the Board while Mr. Wayne Kirk and Dr. Bill Lindqvist have stepped down.

Mr. Smith is CEO and Director of Anthem United Inc. Prior to his role with the Company, he held the roles of President and CEO of Esperanza Resources prior to its sale to Alamos Gold and CFO of Minefinders Corporation prior to its sale to Pan American Silver. Mr. Smith has also held management positions at both Goldcorp and the mining division of KPMG LLP. He is a director and the Audit Committee Chair of both Chesapeake Gold and Lowell Copper. He also acted as a director of Premier Royalty prior to its sale to Sandstorm Gold. Mr. Smith is a Canadian Chartered Accountant.

Mr. Pease has more than 30 years of experience in global exploration and mine development. He was most recently President and CEO of Sabina Gold and Silver Corp. from November 2011 until his retirement in February 2015. In 2006, Mr. Pease founded Terrane Metals Corp. to develop the Mount Milligan project in BC, Canada. Terrane Metals was acquired by Thompson Creek Metals Company Inc. for CA$700 million in 2010. Mr. Pease is a former director and strategic advisor to Richfield Ventures Corp. that was exploring the Blackwater gold project in BC, Canada. In 2011, Richfield Ventures was acquired by New Gold Inc. for CA$500 million. The majority of Mr. Pease's prior career was spent at Placer Dome Inc. His last position there was GM, Canada Exploration & Global Major Projects. In 2010, the Association of Mineral Exploration BC named Mr. Pease their “BC Mining Person of the Year”.

In addition to Mr. Pease, Mr. Wilton is also joining the Board of Directors as a representative for Pacific Road. Mr. Wilton joined Pacific Road in 2013 and has more than 20 years' experience in mergers and acquisition and corporate finance in the mining industry. His transaction experience includes advising on over CA$10 billion in mergers and acquisition transactions and over CA$1 billion in corporate financings. Formerly Mr. Wilton was Managing Director and Head of Global Mining and Metals at National Bank Financial Inc., Managing Director in Business Development at General Electric and held other senior financial positions at leading financial institutions.

Also, Mr. Duane Lo, has stepped down as Executive Vice President and Chief Financial Officer and Mr. Brad Blacketor has been appointed to the role of Chief Financial Officer.

OUTLOOK AND STRATEGY

Aurizona Operation

The Company continues to process the remaining ore stockpile through the plant and this is expected to end in August 2015.

Upon exhausting the ore stockpile, the Company will cease operations at the Aurizona mine and place the existing facilities into a care and maintenance condition. This will require all the equipment to be cleaned and placed in a secure manner. The Company has filed for a care and maintenance permit in Brazil.

The timing of and the milestones outlined below are management's proposed planned targets only. Certain milestones are dependent on earlier targeted milestones being achieved. These targets are forward looking in nature and subject to the Company completing the required studies and technical report and obtaining all applicable approvals and meeting various other conditions and securing the required financing. There is no assurance that these targeted milestones will be achieved on time or at all. See “Forward Looking Statements”.

After completion of the Pacific Road Financing and Sandstorm Restructuring on June 30, 2015, the Company is in a position to commence a work program which will have the ultimate goal of restarting operations at the Aurizona gold mine. The proposed 18–month work program will involve significant infill drilling programs, updating the geological model, calculating a new resource, formulating a new and optimized mine plan, producing an updated prefeasibility study and continuing the on–going licensing and permitting process to ultimately secure a permit to restart Aurizona. Commencing in mid–2016, the Company expects to use the augmented drill hole data and the pre–feasibility study to move on to detailed engineering and ultimately the restart of the mine as a hard rock operation.

It is anticipated that additional financing will be needed for the construction and restart of the Aurizona mine because it is likely that a new crushing and grinding circuit will be required to process the different types of ore in the existing ore body. The balance of the processing circuit will benefit from the significant capital spent on the Phase I plant upgrade, which was stopped by the Company in the Third Quarter of 2014, after having spent over $40.0 million on this Phase I work.

The updated and revised mine plan will require amendments to some of our existing permits at Aurizona as well as other permitting activities for some off–site infrastructure. Luna will be working diligently with the relevant government authorities in Brazil to advance the permitting process. Many of the required permits will be amendments to existing permits.

Luna's community relations initiatives will continue to focus on working with the communities in our area of influence and on multi–stakeholder partnership models, that involve strengthening local labor skills through the establishment of partnerships with the Industry State Federation (FIEMA), and partnerships with state and local governments and community associations on campaigns to raise social awareness about important issues, such as children's education, community safety and security, and the prevention of domestic violence and substance abuse, and our Open Door program to provide information to the public on an ongoing basis regarding mining activities in a framework of openness and transparency.

AURIZONA GOLD MINE – MARANHAO STATE, BRAZIL

Â

Three months ended June 30

Â

Six months ended June 30

(tabled monetary amounts are expressed in thousands of US dollars)

2015

Â

2014

Â

2015

Â

2014

Mined waste – tonnes

Â

–

Â

Â

1,008,543

Â

Â

396,784

Â

Â

1,968,553

Mined ore – tonnes

Â

–

Â

Â

357,051

Â

Â

430,799

Â

Â

693,293

Ratio of waste to ore

Â

–

Â

Â

2.8

Â

Â

0.9

Â

Â

2.8

Ore grade mined (g/t)

Â

–

Â

Â

1.28

Â

Â

1.36

Â

Â

1.55

Cost per tonne mined (USD)

Â

–

Â

$

5.67

Â

$

4.44

Â

$

4.82

Processed ore – tonnes

Â

345,396

Â

Â

406,144

Â

Â

778,683

Â

Â

892,983

Average grade processed (g/t)

Â

1.30

Â

Â

1.14

Â

Â

1.39

Â

Â

1.28

Average recovery rate %

Â

89%

Â

Â

88%

Â

Â

89%

Â

Â

89%

Gold produced (ounces)

Â

12,830

Â

Â

14,262

Â

Â

31,620

Â

Â

33,676

Gold sales (ounces)

Â

16,534

Â

Â

13,882

Â

Â

39,750

Â

Â

36,884

Cash costs of production (1)

Â

USD per ounce

Â

Â

USD per
tonne
processed

Â

Â

USD per ounce

Â

Â

USD per tonne
processed

Â

Â

USD per ounce

Â

Â

USD per tonne
processed

Â

Â

USD per ounce

Â

Â

USD per tonne
processed

Â

Mining

$

282

Â

$

10

Â

$

472

Â

$

17

Â

$

270

Â

$

11

Â

$

367

Â

$

14

Â

Processing

Â

569

Â

Â

21

Â

Â

528

Â

Â

20

Â

Â

410

Â

Â

17

Â

Â

422

Â

Â

16

Â

Administration

Â

63

Â

Â

2

Â

Â

112

Â

Â

4

Â

Â

70

Â

Â

3

Â

Â

90

Â

Â

3

Â

Refining and transport

Â

18

Â

Â

1

Â

Â

16

Â

Â

1

Â

Â

21

Â

Â

1

Â

Â

20

Â

Â

1

Â

Royalties

Â

11

Â

Â

1

Â

Â

12

Â

Â

–

Â

Â

12

Â

Â

1

Â

Â

14

Â

Â

1

Total cash costs of production (1)

$

943

Â

$

35

Â

$

1,140

Â

$

42

Â

$

783

Â

$

33

Â

$

913

Â

$

35

Â

Sustaining capital

Â

36

Â

Â

Â

Â

Â

94

Â

Â

Â

Â

Â

61

Â

Â

Â

Â

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