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Executives

Geoff Chater – President and Chief Executive Officer

Peter Mah – Executive Vice-President and Chief Operating Officer

Analysts

Rahul Paul – Canaccord Genuity

Tara Hassan – Haywood Securities Inc.

Luna Gold Corp. (OTCQX:LGCUF) Q2 2014 Earnings Conference Call July 17, 2014 12:00 PM ET

Operator

Good morning, ladies and gentlemen. Welcome to the Luna Gold Second Quarter Production Results Question-And-Answer Conference Call. The Q&A session is reserved for institutional investors and analysts. Retail investors should direct their questions to Investor Relations calling 1-604-568-7993.

I would now like to turn the call over to Mr. Geoff Chater, President and CEO. Please go ahead, Mr. Chater.

Geoff Chater

Thank you, Geri. Good morning, everyone and thank you for participating in Luna Gold’s conference call to discuss the Company’s second quarter production results. Following our prepared remarks, we will conduct a question-and-answer session for analysts and institutional investors.

Before we begin, I must caution all participants that this conference call contains forward-looking statements that reflect management’s expectations regarding the Company’s future. Whenever possible, these statements will be identified by words such as anticipate, believe, expect or similar expressions, which are based on information currently available to the Company.

Investors should not place undue reliance upon these statements, which involve significant risks, uncertainties and assumptions. These statements are made as of the date of this call, and the Company assumes no obligation to update or revise them to reflect new events or circumstances.

During the second quarter, Luna processed by 406,144 tonnes of ore at an average grade of 1.14 grams per tonne. Our average recovery rate was 89%. We produced 14,262 ounces of gold and had gold sales of 13,882 ounces.

Above average rainfall during the second quarter severely impacted the Company’s ability to access ore in the pit which required processing of lower grade stockpiled ore. We have implemented a recovery plan which includes contracting additional mining equipment to increase material movement in an effort to deliver against 2014 guidance.

At this time, the Company’s production guidance of 85,000 to 95,000 ounces for 2014 is under review. The Company will revisit its production guidance based on operational results in July and half of August when it publishes its second quarter financial results on August 14, 2014.

Before we begin today’s question-and-answer session, I would like to remind everyone that questions will be reserved for institutional investors and analysts. I would also like to remind everyone that the Company is currently in a blackout period prior to the publication of its second quarter operating of financial results on August 14. As such, the Company will not comment on operating metrics or financial results that are typically contained within the second quarter financial statements or MD&A.

Operator, we can now proceed with the Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from Rahul Paul from Canaccord Genuity. Please go ahead.

Rahul Paul – Canaccord Genuity

Hi, Geoff. Hi everyone. Just wondering if this is something you could address. You did indicate in the press release that you had implemented a recovery plan. I’m just wondering is there any additional cost associated with this plan above your CapEx budget for the year?

Geoff Chater

I believe in the first quarter results in MD&A we had talked about a plan to mobilize additional equipment in an effort to advanced mining and also for the stockpile ahead of the processing plant. I don’t think we put a number on that in the MD&A. We will be putting a number on that in the coming MD&A for the second quarter. So there will be a cost, yes. Part of the material will also be used to raise a dam as well. So there certainly will be a cost associated with the additional equipment, yes.

Rahul Paul – Canaccord Genuity

Okay. Okay, I guess and just one session. I’m throwing this out, not sure if you can tell me, but can you tell me cash balance was the end of Q2.

Geoff Chater

No.

Rahul Paul – Canaccord Genuity

Okay. That’s it from me. Thanks. Thanks, Geoff.

Operator

Thank you. (Operator Instructions) The next question is from Tara Hassan from Haywood Securities. Please go ahead.

Tara Hassan – Haywood Securities Inc.

Afternoon, gentlemen. Because we can’t talk about the numbers, could you maybe walk us through what the biggest challenges were in the quarter in terms of getting the material moved? Is that, I mean, you’re not having the right equipment, not having the right guys to operate the equipment or is there still sort of the effects of transitioning in some of the new operating team like the senior operating team on-site?

Geoff Chater

Yes, I don’t know that – this is Geoff Chater. Let me give you a good answer to the list. So, rainfall certainly was a major impact to the operation. It was well above normal. We’ve already had a full year drain already this year, which has really restricted mining to the upper levels of the open pit and to Piaba and Tatajuba. So that was a big issue.

We also opened up west Piaba, which is a low point in the topography. Also a big collection area for water and when you – we had more water than we expected. Obviously that impacted mines. We also didn’t have much time to prepare for the wet season due to cash constraints at the end of last year.

So, and furthermore, last year if you remember, we actually had a drought and we cut production because we didn’t have enough water. So we used the pit to actually catch water and pump it into the tailing stands. So we have plenty of water for processing cases. It was a dry season, which turned out to be two times a wet season. So, sure we had equipment, but we didn’t have enough operators, but that’s not the main reason. The main reason was that it was way wet. It was wet.

Tara Hassan – Haywood Securities Inc.

And I mean is there any – looking at sourcing additional equipment into the second half of this year, I mean is there anything on your own fleet given that there is – you’re seeing the extremities of the weather down there just in the last 12 months. Is there anything that you feel you guys could add capital-wise or can be done from like a mine planning perspective that would help prevent such fluctuations when you’re seeing the impacts of the weather?

Peter Mah

Sara, it’s Peter here. That is part of a trade-off studies that we’re doing and we’ll be coming out with that in the NI 43-101 update. But the decision and the recovery plan we took here now was to increase our fleet in the dry season. So make hay while the sun shines. And we increased our trucking fleet by 18. So now we have a total of 44 trucks on-site. They’ve all arrived to site and we’re just working through ramping up that equipment and there’s additional excavators and ancillary support equipment that we brought in as well.

Tara Hassan – Haywood Securities Inc.

And, so I’ve got additional equipment, Peter. How much of that is Luna owned or leased versus contract?

Peter Mah

Of the 44 truck, the same 12 $740s we’ve talked about in the past, those are the known. So 32 of those 44 trucks are contractor trucks.

Tara Hassan – Haywood Securities Inc.

Okay. And I’m not sure if you can talk about the breakout, but if you can justify how much came from the actual pit versus stockpiles in the quarter?

Geoff Chater

The answer is critical…

Tara Hassan – Haywood Securities Inc.

Okay, yes. That’s okay, actually great.

Geoff Chater

I think one thing I also didn’t mention, Tara, we actually took a six-day maintenance shutdown at the end of second quarter in an effort to do that in the second quarter and not in the third and fourth. So we’re going to actually be leaving a lot of dirt. So we missed six days with the processing as well.

Tara Hassan – Haywood Securities Inc.

Okay. And so is there any – that will eliminate any maintenance shutdown for the remainder of the year?

Geoff Chater

As far as I’m aware…

Peter Mah

Yes, we have high ends for Phase 1 that stands out, but, yes.

Tara Hassan – Haywood Securities Inc.

Okay. I know you guys will be able to give any updates on the expansion or we’ll have to wait till the quarterly numbers?

Geoff Chater

So we publish our…

Tara Hassan – Haywood Securities Inc.

Okay. That’s great. Thanks, guys.

Operator

Thank you. (Operator Instructions) There are no further questions registered at this time. I’ll turn the meeting back over to Mr. Chater.

Geoff Chater

Okay. Thank you everybody for calling in for the brief conference call. If you have any other questions, we’d be happy to have you call us individually or we feel that just call Patrick. And I appreciate your participation. Thanks very much.

Operator

Thank you. The conference call has now ended. Please disconnect your lines at this time and we thank you for your participation.

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Source: Luna Gold's (LGCUF) CEO Geoff Chater on Q2 2014 Results - Earnings Call Transcript

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