Mr. Christian Milau of Luna Gold reports

LUNA GOLD AND JDL GOLD ANNOUNCE MERGER TO CREATE A MULTI-ASSET MINING COMPANY AND CONCURRENT C$27 MILLION (US$20 MILLION) EQUITY FINANCING

Luna Gold Corp. and JDL Gold Corp. have entered into an arrangement agreement to combine their businesses, creating a multiasset mining company. The combined company intends to change its name to Trek Mining Inc. and expects to trade on the TSX Venture Exchange under the ticker symbol TREK. All amounts are in U.S. dollars unless otherwise indicated.

Trek Mining highlights:

• Strong leadership team: combined executive team and directors have the financial, technical, construction and operations experience to advance the combined assets and build a leading mid-tier gold producer;
• Significant cash position: well capitalized with approximately $66-million (Canadian) ($50-million) in cash and no cash debt;
• Simplified balance sheet: all cash debt repaid or settled in equity;
• Diversified asset portfolio: asset portfolio anchored by near-term production from the Aurizona gold project in Brazil, increasing gold production from milling operations at the Koricancha mill in Peru and a pipeline of exploration-stage projects, providing a platform for growth;
• Derisks Aurizona development: strong cash position increases construction financing flexibility for Aurizona and allows for purchase of long-lead capital items following completion of the feasibility study;
• Enhanced capital markets profile: broad shareholder base with supportive and recognized investors and improved liquidity.

Trek will be well financed, with approximately $66-million (Canadian) ($50-million) in cash and no cash debt, and will be strongly positioned to advance the Aurizona gold project to production. The transaction also accelerates exploration at Aurizona with a focus on the drill-ready targets directly along strike from the existing reserves and resources at the Piaba open pit. Trek's portfolio includes the gold-producing Koricancha mill in Peru and a robust pipeline of gold and copper exploration assets in South and North America.

Christian Milau, chief executive officer of Luna Gold, said: "This transaction achieves a number of our near-term growth objectives and is the next step toward our vision of building a leading mid-tier gold producer. We have spent our first six months at Luna Gold focused on development of Aurizona. Our cash position posttransaction, together with a simplified balance sheet, will provide a solid foundation to advance Aurizona to production and accelerate exploration efforts. We see significant potential in JDL's asset portfolio and believe the combined company puts us on an exciting growth path."

David Lowell, chairman of JDL and incoming director of Trek, said: "We are excited to team with Luna Gold in building a meaningful new mining company. JDL's shareholders will participate in the near-term gold production and exceptional exploration upside at Aurizona. The exploration potential, both on trend and regionally, represents a substantial opportunity for extension of the mine life and new discoveries. I look forward to joining the Trek Mining board of directors and continuing to work for the benefit of all our stakeholders."

Lukas Lundin said: "I am pleased to support the merger of JDL and Luna Gold to create Trek Mining. I am enthusiastic about Trek's current portfolio of assets and am confident that this combination of management, assets and opportunity provides Trek with a strong foundation for success and momentum going forward."

Pacific Road Resources Fund and Sandstorm Gold Ltd., the two largest shareholders of Luna Gold, and Lorito Holdings (Guernsey) Ltd. and Zebra Holdings and Investments (Guernsey) Ltd., the largest shareholders of JDL (both controlled by a trust settled by the late Adolf H. Lundin), have entered into support agreements to vote in favour of the transaction.

Upon completion of the transaction, Trek's asset base will consist of:

• Cash of approximately $66-million (Canadian) ($50-million), including marketable securities (1);
• 100-per-cent ownership of the feasibility-stage Aurizona project in Brazil, a past-producing open-pit gold mine that is anticipated to recommence production by year-end 2018, targeting average annual gold production of 150,000 ounces for the first five years with all-in sustaining costs of $708 per ounce (2);
• 75-per-cent ownership of the Koricancha mill, an operating gold-ore-processing facility in Peru (3);
• 100-per-cent ownership of the Warintza copper-molybdenum exploration-stage project in Ecuador, with an inferred resource of 195 million tonnes at a copper equivalent grade of 0.61 per cent (4);
• 100-per-cent ownership of the high-grade past-producing Elk gold project in British Columbia, Canada (5);
• 100-per-cent ownership of the Ricardo claim block in Chile, strategically located on the West Fissure fault that hosts numerous porphyry copper deposits, including Escondida and Chuquicamata (6).

Transaction summary

Under the terms of the agreement, JDL will acquire all outstanding shares of Luna Gold pursuant to a plan of arrangement in exchange for 1.105 JDL common shares for each Luna Gold common share. Each Luna Gold warrant, option and restricted share unit will become exercisable for JDL common shares, as adjusted in accordance with the exchange ratio. The exchange ratio represents consideration of approximately $2.20 (Canadian) per Luna Gold share based on the JDL share price as at the close of market on Jan. 31, 2017, a premium of approximately 16 per cent to Luna Gold's 20-day volume-weighted average price and 23 per cent to Luna Gold's share price as at the close of market on Jan. 31, 2017.

All Pacific Road debt will be repaid concurrent with or immediately following closing of the transaction. In addition, the Sandstorm debt facility of $20-million, plus accrued interest, will be settled in exchange for equity, or a combination of equity and cash, concurrent with the closing of the transaction.

Pursuant to the agreement, the requisite approval of the transaction for Luna Gold is the affirmative vote of: (i) 66-2/3rds per cent of the votes cast by Luna Gold securityholders, voting together as a single class, present in person or represented by proxy at the Luna Gold special meeting; (ii) 66-2/3rds per cent of the votes cast by Luna Gold shareholders present in person or represented by proxy at the Luna Gold special meeting; (iii) 66-2/3rds per cent of the votes cast by Luna Gold restricted share unitholders present in person or represented by proxy at the Luna Gold special meeting; and (iv) a majority of the votes cast by Luna Gold shareholders present in person or represented by proxy at the Luna Gold special meeting, excluding, for this purpose, votes attached to Luna Gold common shares held by persons described in items (a) through (d) of Section 8.1 (2) of MI 61-101. The requisite approval for each of the Luna Gold debt exchange and the Pacific Road debt settlement is the affirmative vote of a majority of the minority of the votes cast by Luna Gold shareholders present in person or represented by proxy at the Luna Gold special meeting. The vote on each of the Luna Gold debt exchange and the Pacific Road debt settlement will exclude, for this purpose, votes attached to the Luna Gold common shares held by persons described in items (a) through (d) of Section 8.1 (2) of MI 61-101.

The issuance of JDL securities pursuant to the arrangement and the concurrent financing (as defined below) and the creation of new control persons will require a majority vote of JDL shareholders.

The special meetings of both companies are expected to be held in the second half of March, 2017. A joint information circular detailing the terms and conditions of the transaction will be filed with regulatory authorities and mailed to the securityholders of Luna Gold and shareholders of JDL in accordance with applicable securities laws.

Completion of the transaction is expected to occur by the end of March, 2017. Completion of the transaction is subject to completion of the concurrent financing, which is fully backstopped by Pacific Road, and receipt of all regulatory, shareholder and court approvals in addition to other customary closing conditions. The transaction includes customary deal-protection provisions, including non-solicitation of alternative transactions and a $6.5-million (Canadian) ($4.9-million) reciprocal termination fee payable under certain circumstances.

Concurrent financing

Concurrent with the transaction, JDL intends to raise approximately $27-million (Canadian) ($20-million) in a non-brokered private placement financing of subscription receipts of JDL at a price of $2 (Canadian) per subscription receipt. Pacific Road has entered into an agreement with JDL to backstop the full amount of the concurrent financing. Completion of the concurrent financing is a condition to closing of the transaction.

Each subscription receipt will entitle the holder to receive automatically upon closing of the transaction, without any further action on the part of the holder and without payment of additional consideration, one unit, comprising one JDL common share and one JDL-listed common share purchase warrant. Each warrant will have the same terms as the existing JDL common share purchase warrants listed on the TSX Venture Exchange under the ticker symbol JDL.WT and will entitle the holder to acquire one common share of Trek at an exercise price of $3 (Canadian) with an expiry date of Oct. 6, 2021.

The shares and warrants issued upon conversion of the subscription receipts may be traded by the holders through the facilities of the TSX-V and will not be subject to a statutory hold period.

Proceeds of the concurrent financing will be used to repay all outstanding debt payable by Luna Gold to Pacific Road.

Trek leadership team

Luna Gold's executive team will remain in place with Mr. Milau as chief executive officer and executive director and Greg Smith joining as president and executive director. The new board of directors of Trek will have four directors appointed by Luna Gold, including the chairman, with four appointed by JDL:

Rob Pease:  chairman

Mr. Smith:  president and executive director

Marcel de Groot:  director

Jim O'Rourke:  director

Mr. Milau:  chief executive officer and executive director

Dan Wilton:  director

Felipe Alves:  director

Mr. Lowell:  director

Trek Mining assets

The Aurizona project in northeastern Brazil produced gold from 2010 until late 2015 when it was placed on care and maintenance. The Aurizona project produced a total of 329,042 ounces of gold at an average grade of 1.28 grams per tonne gold and average recoveries of 88 per cent. Remaining proven and probable reserves are estimated at 18.6 million tonnes of 1.62 g/t for 969,000 ounces of gold, with measured and indicated resources (inclusive of reserves) of 29.9 million tonnes of 1.67 g/t for 1,599,400 ounces of gold (7).

A prefeasibility study for the Aurizona project, completed in September, 2016, is based on a new mine plan and mineral reserve estimate and outlines the design of an open-pit gold mine with the following attributes (2):

• Production profile: 150,000 ounces of gold per year for the first five years, with an initial 6.5-year mine life;
• Robust returns: after-tax internal rate of return of 34 per cent at $1,250 per ounce ($1,350 per ounce: 40 per cent);
• Value: after-tax net present value (5-per-cent discount rate) of $201-million at $1,250 per ounce ($1,350 per ounce: $256-million);
• Low capex: leveraging significant existing infrastructure at site results in capital benefits, with initial capital costs estimated at $146-million, including a new mining fleet, and life-of-mine sustaining capital estimated at $47-million;
• Low all-in sustaining costs: estimated at $708 per ounce of gold produced.

Completion of a feasibility study for Aurizona is expected around the end of first quarter 2017 followed by an 18-month construction period, with first gold pour targeted for year-end 2018 (2).

The Aurizona project constitutes a large land package totalling approximately 241,400 hectares that includes the Aurizona mining licence, brownfield exploration properties proximal to the Aurizona mine site and earlier-stage greenfield exploration properties that are under option to AngloGold Ashanti Holdings PLC.

Near-mine, drill-ready exploration targets include Piaba West, which has the potential to extend the existing Piaba deposit 400 metres to the southwest, and Tatajuba. The Tatajuba target is situated on the same Piaba structure and represents a potential four-kilometre extension along strike from Piaba West. An application is under way to convert Tatajuba to a mining permit with the objective of expediting exploration of this target.

The greenfield land position covers approximately 191,426 hectares and is subject to a joint venture agreement with AngloGold, whereby AngloGold can earn a 70-per-cent interest in the greenfield land position by spending $14-million on exploration over a four-year period. AngloGold commenced exploration in August, 2016, and is currently undertaking extensive airborne surveys over the entire land package, including the brownfield properties and the Aurizona mine site.

The Koricancha mill, located in Arequipa, Peru, is an industrial gold-processing plant with processing capacity of 350 tonnes per day of ore. Koricancha purchases mineralized feed at a market discount from legally operating small-scale and artisanal miners throughout Peru and processes the material to produce gold and silver for its own account. Koricancha recommenced gold production during fourth quarter 2016 and is focused on increasing throughput toward its installed capacity (3).

The Warintza project is a copper-molybdenum porphyry deposit in southeast Ecuador. The project consists of mineral concessions covering a total of 22,676 hectares, located 40 kilometres north of the Mirador copper-gold development project and near contiguous with the San Carlos Panantza exploration-stage copper-molybdenum deposit. A 2013 resource estimate for Warintza outlined 195.0 million tonnes of inferred resources grading 0.42 per cent copper and 0.031 per cent molybdenum, for 1,808 million pounds of copper and 132.3 million pounds of molybdenum, and a copper equivalent grade of 0.61 per cent (4).

The Elk gold project in British Columbia, Canada, consists of 27 contiguous mineral claims and one mining lease covering 16,566 hectares. Approximately 51,500 ounces of gold were produced between 1992 and 1995 from a test pit on site. A 6,597-tonne bulk sample was mined and processed in 2014, producing 3,531 ounces of gold with an average grade of 16.65 g/t. An updated resource estimate in 2016 outlined 1,043,000 tonnes of measured and indicated resources at a grade of 6.32 g/t for 211,900 ounces of gold, and 1,097,000 tonnes of inferred resources at a grade of 5.94 g/t for 209,600 ounces of gold (5).

The Ricardo claim block consists of approximately 16,000 hectares strategically located along the West Fissure fault in Chile. The West Fissure fault hosts numerous large porphyry copper deposits, including Escondida and Chuquicamata, two of the world's largest known copper deposits. While proximity to existing porphyry deposits does not guarantee that similar mineralization will exist on the Ricardo claim block, this property presents an interesting area-play opportunity in Trek's portfolio of projects.

Lock-up agreements

Luna Gold's officers and directors and certain shareholders, holding, in the aggregate, 68 per cent of the issued and outstanding Luna Gold shares, have entered into lock-up agreements with JDL to vote in favour of the transaction.

JDL's officers and directors and certain shareholders, holding, in the aggregate, 30 per cent of the issued and outstanding JDL shares, have entered into lock-up agreements with Luna Gold to vote in favour of the transaction.

Special committee and board of directors' approval

Luna Gold's board of directors formed a special committee of independent directors to consider the transaction. The Luna Gold special committee has unanimously determined that the arrangement is in the best interests of Luna Gold, based on its investigations and considerations, including a review of the arrangement and the fairness opinion of National Bank Financial Inc., and after consultation with management and advisers.

The independent directors of JDL have unanimously determined that completion of the transaction is in the best interests of JDL, based on their investigations and considerations, including a review of the arrangement and the fairness opinion of Haywood Securities Inc., and after consultation with management and advisers.

Both companies' boards of directors (other than directors who have abstained from voting) have unanimously approved the transaction and will provide a written recommendation, in the joint information circulars to be mailed to their respective shareholders, that their respective shareholders vote in favour of the transaction.

Advisers and counsel

National Bank Financial is acting as financial adviser to Luna Gold, and Blake, Cassels & Graydon LLP is acting as legal counsel. Haywood Securities is acting as financial adviser to JDL, and Gowling WLG (Canada) LLP is acting as legal counsel.

Qualified persons

David Laing, BSc, MIMMM, Luna Gold's chief operating officer, and Scott Heffernan, MSc, PGeo, Luna Gold's executive vice-president of exploration, are the qualified persons under NI 43-101 for Luna Gold and have reviewed, approved and verified the technical content of this news release as it relates to Luna Gold's Aurizona project.

Mr. Lowell, JDL's chairman, is the qualified person under NI 43-101 for JDL and has reviewed, approved and verified the technical content of this news release as it relates to the Warintza, Elk gold and Ricardo projects.

Conference call and webcast

Interested analysts and investors are invited to participate in a joint conference call and webcast on Feb. 2, 2017, at 8:30 a.m. EST (5:30 a.m. PST) using the following dial-in numbers. The webcast will be archived and accessible on both companies' websites.

Toll-free in the United States and Canada:  1-844-707-0671

International callers:  1-703-639-1225

Conference ID:  65691435

Webcast:  at the Luna Gold website or the JDL Gold website

A copy of the investor presentation, outlining the details of the transaction and providing more information about Trek's asset portfolio, is available on the companies' websites.

About Luna Gold Corp.

Luna Gold is engaged in the exploration and development of its past-producing Aurizona gold mine in Brazil, which was placed on care and maintenance in 2015. A prefeasibility study for the project completed in September, 2016, outlined the design of an open-pit mine producing on average 150,000 ounces of gold annually for the first five years (see the "Prefeasibility study on Aurizona mine project, Maranhao, Brazil, NI 43-101 technical report," completed by Lycopodium Minerals Canada Ltd.). A feasibility study for the Aurizona project is under way, with the objective of pouring gold at the Aurizona gold mine in late 2018.

About JDL Gold Corp.

JDL Gold is a financially strong emerging gold-copper production and development company focused on building shareholder value through the acquisition and development of precious metal and copper assets. JDL controls a diverse portfolio of assets in Peru, Ecuador, Chile and Canada.

Footnotes:

(1) Following closing of the transaction, including marketable securities and an approximately $27-million (Canadian) ($20-million) concurrent financing.

(2) See the "Prefeasibility study on Aurizona mine project, Maranhao, Brazil, NI 43-101 technical report," completed by Lycopodium Minerals Canada, with an effective date of Sept. 12, 2016, which is available at the Luna Gold website and on SEDAR.

(3) The Koricancha mill does not have a dedicated mineral resource and sources all mineralized feed for processing from third parties. The Koricancha mill recommenced gold and silver sales in December, 2016, and expects to increase gold production toward installed capacity over the course of 2017. The rate of such production, however, remains uncertain.

(4) See the Warintza project resource estimate.

(5) See the Elk gold project resource estimate.

(6) Proximity to existing porphyry deposits does not guarantee that similar mineralization will exist on the Ricardo claim block.

(7) The mineral reserve estimate has an effective date of June 21, 2016, and is based on the mineral resource estimate, effective April 30, 2016. See the "Prefeasibility study on Aurizona mine project, Maranhao, Brazil, NI 43-101 technical report," completed by Lycopodium Minerals Canada, with an effective date of Sept. 12, 2016, which is available at the Luna Gold website and on SEDAR.

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