Mr. Marc Leduc of Luna Gold reports

LUNA GOLD ANNOUNCES RESTRUCTURING OF SANDSTORM STREAM AND $30 MILLION FINANCING BY PACIFIC ROAD

Luna Gold Corp. has executed a definitive agreement with Pacific Road Resources Funds for a proposed $20-million debt and $10-million private placement equity financing, which, upon closing, will result in the company receiving gross proceeds of $30-million. As well, the company has executed definitive agreements for the previously announced restructuring of Sandstorm Gold Ltd.'s existing gold stream and debt facility. The closing of the proposed financing and the restructuring remains subject to a number of conditions, including, among others, the raising of an additional $10-million of equity. As part of the proposed financing, Luna expects to complete a concurrent private placement of up to $15-million, which the company intends to offer to new and existing shareholders.

Highlights

With a restructured gold stream and recapitalized balance sheet, Luna will be in a position to undertake a work program that will have the ultimate goal of restarting operations at the Aurizona gold mine. The proposed 18-month work program will involve significant infill drilling; updating the geological model; calculating a new resource estimate; formulating a new, optimized mine plan; producing an updated prefeasibility study incorporating an upgraded crush and grind circuit; and continuing the licensing and permitting process to ultimately secure all the needed permits to restart Aurizona. The work program has a particular focus on continuing to build capacity in the local community, with the continuation of skills training programs and the launch of new initiatives to encourage agricultural entrepreneurship in the communities surrounding Aurizona.

Marc Leduc, Luna's chief executive officer, said: "The fundamentals of the Aurizona asset remain strong, and the economics of the project will be enhanced with the replacement of the old 17-per-cent gold stream with the much lower NSR royalties and optimization of the mining plan. We have a new team of senior managers in place; that includes a committed core of existing Brazilian management that together are ready to move the project development forward. With the closing of both the Pacific Road financing and the Sandstorm restructuring, the company expects to have the financial resources and working capital necessary to fund the work programs currently outlined. Additionally, the company has two long-term committed shareholders/partners in Pacific Road and Sandstorm to further strengthen our financial and technical mining expertise. Finally, we will extinguish our existing bank debt and rebuild the capital structure of the company."

The company expects to use the proceeds from the proposed financing to:

1. Repay its existing debt facility with Societe Generale (Canada branch) and Mizuho Corporate Bank;
2. Commence an infill drilling program, prepare engineering studies and submit updated permits at Aurizona;
3. For general working capital and corporate purposes.

The proposed financing, concurrent equity financing and restructuring are subject to a number of conditions, including the approval from Luna's shareholders. If the proposed financing and restructuring are not completed, the senior lenders' agreement to forbear from commencing enforcement actions against the company and its assets will terminate, and the senior lenders will have the immediate right to commence such actions, including, without limitation, the initiation of legal proceedings that could result in an insolvency proceeding against the company and its subsidiaries. The company cannot give any assurance that the senior lenders will continue to forbear from taking such actions if the proposed financing, concurrent equity financing and restructuring fail to complete, whether due to an absence of shareholder approval of the transactions or otherwise.

Pacific Road financing terms

Senior secured note

Under the terms of the proposed financing, Pacific Road will provide Luna with a $20-million senior secured note bearing interest at a rate of 10 per cent per annum, payable quarterly in arrears in cash or shares at Pacific Road's election. The note is required to be secured by first-ranking liens and encumbrances and is expected to mature on June 30, 2020, and if Luna were to enter into default on the note, the interest rate would increase to 15 per cent per annum. All outstanding amounts, including principal and any remaining accrued interest, will be payable at maturity. Luna has also agreed to provide Pacific Road with 200 million Class B common share purchase warrants, exercisable for a term of five years at 10 cents.

Subject to the receipt of all required approvals, Pacific Road will have the right to reduce the note outstanding as satisfaction of the exercise proceeds of the Class B warrants.

Private placement

Pacific Road has also agreed to acquire $10-million of units in the capital of Luna in a non-brokered private placement. Each unit will consist of one common share and one whole Class A common share purchase warrant. Subject to receipt of all required approvals, the issue price of each unit will be 10 cents per unit. The Class A warrants will have an exercise price of 12.5 cents per Luna common share and will be exercisable for a term of five years.

It is anticipated that an offer will be made to existing shareholders, including Sandstorm, and to new investors, to participate in the concurrent equity financing of units on the same terms of the private placement for up to an additional $15-million, subject to compliance with securities laws.

Any securities issued in the transactions described in this news release will be subject to a four-month hold period, which will expire four months plus one day from the closing date.

Conditions

The proposed financing is subject to a number of conditions, including (i) the concurrent completion of the restructuring; (ii) regulatory approvals, such as the approval of the Toronto Stock Exchange; (iii) the approval of Luna's shareholders in accordance with the policies of the Toronto Stock Exchange and applicable securities laws at a meeting that the company anticipates will be held on or around June 18, 2015; and (iv) other customary closing conditions. Until the conditions are satisfied there can be no assurance that the proposed financing will be completed. The proposed financing, if completed, will raise $10-million of the $20-million in equity financing that is a condition of the restructuring. The company anticipates completion of the proposed financing on or around June 30, 2015, assuming the foregoing conditions can be met. If the proposed financing and restructuring are not completed, the senior lenders will be in a position to accelerate the company's senior debt due to its previously announced covenant breaches and commence enforcement proceedings against the company and its assets. The company cannot give any assurance that the senior lenders will continue to forbear from taking such actions if the proposed financing and restructuring fail to complete, whether due to an absence of shareholder approval of the transactions or otherwise.

In connection with the proposed financing, Pacific Road is requiring that Luna grant it certain rights, including a pro rata participation right in future equity financings, registration rights in certain circumstances and the right to appoint a number of directors to Luna's board that is equal to Pacific Road's partially diluted pro rata equity ownership in the company, assuming exercise of its Class B warrants. Assuming the $15-million private placement is fully subscribed, Pacific Road's fully diluted pro rata equity ownership will be 48 per cent, and Pacific Road will have the right to nominate three of Luna's seven directors.

On closing of the proposed financing, Pacific Road will require that Luna pay it a fee equal to 4 per cent of the principal amount of the debenture and 2 per cent of the gross proceeds from Pacific Road's subscription to the private placement. Pursuant to the definitive agreement, Luna has agreed in certain circumstances to pay Pacific Road a break fee of $1.2-million if the proposed financing does not close.

Sandstorm gold stream restructuring

Under the terms of the restructuring, Sandstorm's existing 17-per-cent gold stream on Luna's Aurizona project will be terminated and replaced by two net-smelter-return royalties and a convertible debenture. The Aurizona project NSR covers the entire Aurizona project, including the current 43-101-compliant resources, and all adjacent exploration upside that is processed through the Aurizona mill, net of third party refining costs. The Aurizona project NSR pays Sandstorm a sliding-scale royalty based on the price of gold as follows:

• 3 per cent if the price of gold is less than or equal to $1,500 (U.S.) per ounce;
• 4 per cent if the price of gold is between $1,500 (U.S.) per ounce and $2,000 (U.S.) per ounce;
• 5 per cent if the price of gold is greater than $2,000 (U.S.) per ounce.

The Greenfields NSR covers the 190,073 hectares of exploration ground held by Luna and is a 2-per-cent NSR. Luna would have the right to purchase one-half of the Greenfields NSR for $10-million (U.S.) at any time prior to achieving commercial production.

Under the restructuring, Sandstorm will also receive a $30-million (U.S.) debenture with interest at a rate of 5 per cent per annum. The debenture will be payable in three equal annual tranches of $10-million (U.S.) plus accrued interest beginning June 30, 2018. Luna will have the right to convert principal and interest owing under the debenture into common shares of Luna as long as Sandstorm owns less than 20 per cent or more of the outstanding common shares of Luna. Luna can choose to postpone the payment of any instalment until a point when the issuance of shares would not result in Sandstorm owning more than 20 per cent of the common shares of Luna.

Further, the existing Sandstorm debt facility will be amended so that the maturity date is extended from June 30, 2017, to June 30, 2021; the interest rate is revised to 5 per cent per annum, payable in cash on the maturity date; and Luna would be subject to a default rate of interest equal to 10 per cent per annum.

Management

As announced on Feb. 2, 2015, Marc Leduc, PEng, was appointed president, chief executive officer and director of the company. Since his appointment, Mr. Leduc has been assembling a team that includes a wide experience range. This team includes:

• Duane Lo, executive vice-president and chief financial officer (since August, 2009); former controller with First Quantum Minerals;
• Martin Kostuik, director of development and operations; mining engineer, MBA; 20-plus years of mining experience in all aspects of mine operations and development;
• Carol Fries, director of environmental and community affairs; over 30 years of experience in the environmental, community relations and sustainability sectors;
• Carlos Paranhos, exploration director (since April, 2011); geologist with over 30 years of exploration and mining experience in Brazil and similar international Precambrian terrain;
• Richard Pearce, PE, director of corporate development; economist and civil engineer with over 20 years of experience planning and managing complex mining projects.

Strategic development plan

The Aurizona project fundamentals remain strong with the deposit containing a measured resource of 500,000 ounces of gold (10.9 million tonnes at 1.4 grams per tonne) and an indicated resource of 2.4 million ounces of gold (52.8 million tonnes at 1.4 grams per tonne) (estimate filed in an updated National Instrument 43-101 technical report on March 27, 2015) for a total measured and indicated resource of 2.9 million ounces of gold (63.7 million tonnes at 1.4 grams per tonne gold).

The new management team has spent the last three months developing a strategic plan and also implementing the first phases of this plan. The first part of the plan called for the renegotiation of the Sandstorm stream and the elimination of the senior bank debt. With the closing of the proposed financing and restructuring, the company will have accomplished both of these objectives. The company then plans on using the balance of the financing proceeds to commence a significant infill drilling program, update the geological model, calculate a new resource, formulate a new and optimized mine plan, produce an updated prefeasibility study. and continue the permitting process to ultimately secure a permit to restart Aurizona. Commencing in mid-2016, Luna expects to use the results of the exploration program and the prefeasibility 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 orebody. The balance of the processing circuit will benefit from the significant capital spent on the phase 1 plant upgrade, which was stopped by the company in the third quarter of 2014, after having spent over $40-million on this phase 1 work.

The updated and revised mine plan will require amendments to some of the 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 relation initiatives will continue to focus on building capacity within the communities in its area of influence and on multistakeholder partnership models that involve strengthening local labour skills through the establishment of partnerships with the Industry State Federation, and in partnership 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, the prevention of domestic violence and substance abuse, and the company's open door program to provide information to the public on a continuing basis regarding mining activities in a framework of openness and transparency.

Conference call and webcast

Luna will hold a conference call at 11 a.m. Toronto time on May 8, 2015, to allow management to discuss the proposed financing and restructuring details. The call can be accessed by dialling 416-340-2216 or for toll-free in North America dial 866-223-7781. The conference call will be available for replay until May 22, 2015, by dialling 905-694-9451 or for toll-free in North America dial 800-408-3053. The passcode for the replay is 3714533. The webcast can be accessed through the company's website. The presentation will be available on Luna's website.

About Pacific Road Resources Funds and Pacific Road Capital

The Pacific Road Resources Funds are private equity funds investing in the global mining industry. They provide expansion and buyout capital for mining projects, mining-related infrastructure and mining services businesses located throughout resource-rich regions of the world. The Pacific Road Resources Funds are managed or advised by Pacific Road Capital Management Pty. Ltd. The PRCM team, located in Sydney, Australia; San Francisco, United States; and Vancouver, Canada, is composed of experienced mining investment professionals that have extensive knowledge and experience in the mining and infrastructure sectors, including considerable operating, project development, transactional and investment banking experience.

We seek Safe Harbor.