It’s been a busy second half of the year for Luna Gold (LGC-T).
The company has brought on new management, graduated to the TSX big board, sold off an asset, arranged a gold-stream financing, optimized its Aurizona gold mine in northernmost Brazil and launched into an expansion plan.
And the activity looks to have paid off in its share price.
Since the summer doldrums — when its shares bottomed out at $1.80 — its stock has been on a steady climb and traded at $3.46 per share on Nov. 21.
The strong run comes with the company whipping Aurizona into shape through operational improvements, under the guidance of a new management team that took the reins mid-year.
And the industry is taking notice.
“Luna’s Aurizona mine is finally hitting its stride, with costs down dramatically and production set to top management’s initial guidance for the year, and grow in 2013 with decreasing cash costs,” Haywood Securities analyst Tara Hassan writes.
The company produced 33,332 oz. gold in the first six months of the year with average cash costs of US$767 per oz. This helped generate a net income of $7.3 million.
But the numbers are set to grow considerably. With the board’s approval for a first-phase expansion at the mine, Aurizona is expected to produce 125,000 oz. gold per year, with the build-out wrapped up by next year’s fourth quarter.
Capital expenditure for the expansion is estimated at $43.2 million and funded by internal cash generated by the mine, and through a deal with gold-streaming company Sandstorm Gold (SSL-V), by which Sandstorm will fund 17% of required capex.
The company is also studying the merits of a second expansion phase that could boost production to between 250,000 and 275,000 oz. gold per year.
Aurizona’s prospectiveness is what fuels the lofty ambitions, with its near-surface saprolite mineralization and a large swath of neighbouring ground.
Indeed, Luna has proven exploration savvy by growing its resources at Aurizona by 200% since May 2008.
Measured and indicated resources stand at 78 million tonnes grading 1.26 grams gold for 3.17 million oz. gold. From this, Luna has outlined 17.1 million tonnes of proven and probable reserves, with an average grade of 1.36 grams gold for 731,000 oz. gold.
And it believes there is potential for considerably more expansion when its Luna Greenfields ground is taken into account — a property that covers 2,200 sq. km, south of the Aurizona permits.
This area plays host to 100 historical artisanal gold workings, with drilling underway on three key targets at the property.
Aurizona and Luna Greenfields are located in the northeast corner of Brazil, 320 km northwest of Sao Luis.
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