The Aurizona Gold Project is located in Maranhão State in northern Brazil and is 100% owned and operated by Luna Gold Corp. (TSX:LGC). Aurizona is an open-pit mine with a gravity and carbon-in-leach milling operation. The mine is in commercial production and produced 79,229 ounces of gold in 2013. Luna is targeting between 75,000 and 80,000 ounces of annual gold production in 2014.
Aurizona is an orogenic gold deposit hosted in a greenstone belt of the São Luis Craton. There are a number of mineralized bodies on the property, but work to date has focused on the Piaba and Tatajuba deposits on which the current resource is based.
Aurizona Gold Stream
Sandstorm has a gold stream agreement to purchase 17% of the life of mine gold produced from the open-pit operations at Aurizona, for a per ounce cash payment equal to the lesser of US$404 and the then prevailing market price of gold. Sandstorm made an upfront payment of US$17.8 million in cash and 1.1 million common shares of Sandstorm (5.5 million pre-consolidation) to acquire the stream in May 2009. If Luna develops an underground mine on Aurizona, Sandstorm has the right (but not the obligation) to purchase 17% of the payable gold from the underground mine, at a per-ounce price of US$500. For consideration, Sandstorm would pay 17% of the capital expenditures incurred to determine the economic viability and to construct the underground mine.
In September 2012, Sandstorm committed to contribute capital towards the phase one production expansion project at Aurizona (“Phase 1 Expansion”). Sandstorm’s contribution will be equal to 17% of the capital costs incurred by Luna towards the Phase 1 Expansion to a maximum contribution of $10 million (as of June 30, 2014, Sandstorm had paid $6.2 million). Luna has delayed completion of the Phase 1 Expansion indefinitely due to forecast cost overruns.
Sandstorm has also remitted a $20.0 million loan to Luna (whereby $10.0 million was advanced in 2013 and the remaining $10.0 million commitment was remitted in April 2014). The non-revolving loan is subject to interest at a rate of 12% per annum, subject to certain conditions, and will mature on June 30, 2017.