Aurizona Project

Overview

The Aurizona gold project is located in northeast Brazil between the cities of São Luis and Belém. The main orebody, Piaba, is a 2.9 km long orogenic gold deposit hosted in the Proterozoic Aurizona greenstone belt. The geologic setting of the project area, the São Luis Craton, is an eastern extension of the Guiana Shield which contains several major Proterozoic gold deposits (e.g. Las Cristinas, Omai, Rosebel) extending from Venezuela to Brazil (Figs 1 and 2).

The Aurizona project totals approximately 80,000 ha and is divided into two main areas:

Aurizona Main - This area contains the Piaba and Tatajuba deposits and over 10 satellite targets, which collectively form a gold camp. It covers an area of approximately 20,000 ha and is limited by the outer limits of the Company's fully permitted mining license and the Tatajuba exploration permit (Figs. 3, 4a & 4b).

Aurizona Regional. The Aurizona Regional project consists of all Company exploration permits located outside of the Aurizona Main area and covers an area of 60,000 ha. There are over 50 hard rock (primary) gold garimpos located within the Aurizona Regional permits (Fig. 3).

Current Reserves and Resources

Proven and Probable Reserves

	PROVEN			PROBABLE			PROVEN & PROBABLE
	Tonnes Kt	Grade g/t Au	Contained Oz	Tonnes Kt	Grade g/t Au	Contained Oz	Tonnes Kt	Grade g/t Au	Contained Oz
Aurizona: Piaba	1,509	1.44	70,000	15,609	1.31	659,000	17,119	1.32	729,000

Measured and Indicated Resources (inclusive of proven and probable reserves)

	MEASURED			INDICATED			MEASURED & INDICATED
	Tonnes Kt	Grade g/t Au	Contained Oz	Tonnes Kt	Grade g/t Au	Contained Oz	Tonnes Kt	Grade g/t Au	Contained Oz
Aurizona:
Piaba	1,616	1.41	73,000	17,999	1.33	771,000	19,615	1.34	844,000
Tatajuba	-	0.00	-	1,554	1.30	65,000	1,554	1.30	65,000
Total	1,616	1.41	73,000	19,553	1.33	836,000	21,169	1.33	909,000

Inferred Resources

	INFERRED
Aurizona:	Tonnes Kt	Grade g/t Au	Contained Oz
Piaba	9,099	1.19	347,000
Tatajuba	1,859	0.94	56,000
Total	10,958	1.14	403,000

Notes

All Mineral Reserves and Mineral Resources have been calculated in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101.
Mineral Resources which are not Mineral Reserves, do not have demonstrated economic viability.
Mineral Reserves are fully included in the Mineral Resources.
Reserves are reported as of June 23, 2009.
Resources are reported as of January 15, 2009.
The mineral reserve estimates set out in the table above have been prepared by Bret C. Swanson, MAusIMM, of SRK, who is a qualified person under NI 43-101. The mineral reserves are classified as proven and probable and are based on the CIM Standards.
Reserves on a gold price of $750 per ounce.
Resources based on a gold price of $650 per ounce.
Mineral reserves are not diluted (further to dilution already incorporated into the mineral resource model) and assume selectivity in mining. Full mining recovery is assumed.
The mineral resource estimates set out in the table above have been prepared by Leah Mach, C.P.G., M.Sc., Principal Resource Geologist of SRK, who is a qualified person under NI 43-101. The mineral resources are classified as measured, indicated and inferred and are based on the CIM Standards.
Mine reserves are diluted along mineralized boundary to block model SMU of 10mx10mx3m;
An internal CoG of 0.35g/tAu was used on Saprolite Rock within the pit design; An internal CoG of 0.37g/t-Au was used on Transition Rock within the pit design; An internal CoG of 0.41g/t-Au was used on Fresh Rock within the pit design.
Internal CoG determination includes metallurgical recoveries of 95% in Saprolite, 93% in Transition, and 91% in Fresh ore.
In situ Au ounces do not include metallurgical recovery losses.
Saprolite is rock between topography and an interpreted floor surface marking the change from highly to moderately weathered rock; Transition is rock between an (upper) interpreted Saprolite floor surface and an interpreted moderately weathered rock floor surface; and Fresh rock is rock below an (upper) interpreted Transition floor surface.
Based on 0.3 grams per tonne cut-off grade.

Cautionary Language Regarding Reserves and Resources
For further details regarding the Aurizona Project, readers should refer to the Technical Report for Mineração Aurizona S.A. filed by the Company on July 4, 2008 available at www.sedar.com. Mineral Resources which are not Mineral Reserves, do not have demonstrated economic viability.

Infrastructure and Location

Aurizona is located in the municipality of Godofredo Viana (population 10,500) in Maranhão state near the Atlantic Ocean (Fig. 3). Travel time from both São Luis (370km) and Belém (415 km) by road (all year access) is approximately 6 hours and 1 hour via light aircraft. There is a small airstrip in the town of Godofredo Viana. Land access is good and the project is within 18 km of a state tarmac road. A 13.8 kV power line currently services the Aurizona village and Luna Gold's camp. A separate 69kV line is planned to serve the mining operation as well as 100% back-up diesel generation. The closest substation is 40 km from the project at Manaus.

Project History

Jesuit settlers are believed to have been the first to exploit gold at Aurizona during the 17th century. During the 1800's, experienced miners were brought to the area from Minas Gerais. During the 19th and the early part of the 20th century, several companies carried out work in the area.

In the 1950's a number of companies conducted exploration in the region.

From 1978 to 1988 CESBRA, a wholly-owned subsidiary of Brascan, carried out exploration to evaluate alluvial gold occurrences and started trial mining operations with a pilot gravity plant.

More recent exploration activity was initiated in the early 1990's by UNAMGEN (a subsidiary of Gencor, South Africa) via a joint venture with CESBRA. From 1991 to 1996 a comprehensive exploration program was conducted involving regional airborne surveys (magnetic & radiometrics), soil sampling, auger drilling, pit mapping and panel sampling in addition to ground geophysical surveying. During this time the oxide zone at the Piaba Deposit was systematically drill tested via diamond and to a lesser extent RC methods. The Tatajuba Deposit was also discovered at this time. The JV exploration strategy centered on the discovery and delineation of bulk-tonnage low-grade gold deposits amenable to open-pit mining methods.

In 1996, Gencor sold its gold assets in Brazil, including Unamgen, to Eldorado Gold Corp. (Eldorado). In 1997, Eldorado completed a work program designed to increase the open pittable reserves of the Piaba Deposit. Limited drilling was also carried out at the satellite targets in Aurizona Main and at some of the garimpos in the Aurizona Regional project area. Eldorado's evaluation lasted less than a year due to the deterioration of market conditions for junior mining stocks at that time. Apart from minor works necessary to maintain title, no further systematic exploration or development activity was carried out at Aurizona until Luna Gold acquired 100% of Mineração Aurizona S.A. from both venture partners in January 2007.

Ownership

The closing of the Aurizona acquisition occurred in January 2007. The conditions precedent to the closing were normal for a transaction of that nature and included:

Luna obtaining all regulatory consents, approvals and authorizations, including acceptance of the proposed transactions by the TSX Venture Exchange;
Luna completing a private placement of common shares or other securities for net proceeds of a minimum of US$ 1.5 million; and
Eldorado and Brascan releasing any claims against each other and against Aurizona.

The purchase price payable to each party was:

US$500,000 on closing, US$1 million on the first anniversary of the closing (Jan 2008) and US$1.5 million on the second anniversary of the closing (Jan 2009);
Each party had the option to take either 3 million shares of Luna on Closing or US$670,000 on the second anniversary of the Closing;
US$1 million is payable on the first, second and third anniversary of the Commencement of Commercial Production;
Luna paid about US$225,000 to Brascan on Closing for accrued operating expenses; and
Luna assumed a fine of approx US$1.2 million ($21,000/month for 5 years) payable to the DNPM (Departmento Nacional de Producao Mineral) for past due fees relating to exploration rights.

In January 2009 Luna renegotiated the Aurizona Goldfields Share Purchase Agreement. Eldorado Gold Corporation ("Eldorado") and Brascan Recursos Naturais SA ("Brascan"), a wholly owned subsidiary of Brascan Brasil, agreed to defer for up to one year the payments due on the second anniversary of the closing of its agreement (the "Agreement") to acquire 100% of the issued shares of Aurizona Goldfields Corporation ("Aurizona"), as announced in the Company news release of December 21, 2006. The Agreement terms were amended to permit the deferment of the Payments until January 31, 2010; however, any portion of the payments outstanding as of July 31, 2009, shall be increased by 10% of the amount outstanding.

On July 30, 2009, Luna reported it made the final pre-production payments, totalling US$2,170,000 to Brascan and Eldorado this week.

GOLD PURCHASE AGREEMENT WITH SANDSTORM RESOURCES LTD
On May 15, 2009, the Company entered into a definitive agreement with Sandstorm under which the Company's operating subsidiary Mineração Aurizona S.A. agreed to sell 17% of future gold production from the Aurizona Project to Sandstorm in exchange for an upfront cash payment of $17.8 million. Additionally, Sandstorm will make ongoing per-ounce payments equal to the lesser of $400 and the prevailing spot gold market price. The per ounce price of $400 is subject to an increase of 1% per annum beginning on the 3rd anniversary of the date that the Aurizona Project begins commercial production. The upfront payment will be used to fund construction and development of the Piaba open pit mine and for general and administrative costs associated therewith.

Aurizona Main

Piaba Deposit

Type of Operation	Open Pit (60,000 oz/yr)
Processing	Grind/Gravity/CIL Process
Life of Mine	11 years

Geology
Piaba is a 2.9 km long orogenic gold deposit hosted in greenstone belt rocks of the Aurizona Group located within the ENE-trending Aurizona Shear Zone (ASZ) (Fig. 5). The ASZ has been traced for several km within Company tenements and also hosts the Tatajuba gold deposit, the principal satellite deposit at Aurizona, located 2.4 km WSW of Piaba (Figs. 4a & 4b). The footwall (FW) to the Piaba deposit is a distinctive volcano sedimentary unit which suffered tilting and dips steeply to the north. The principal deposit lithologies are felsic intrusives, predominantly tonalites and volcanic rocks (dacites) intruded by minor dykes (Fig. 6). Gold mineralization preferentially occurs within the tonalites due to the fact that they are more brittle and fractured more easily than the volcanics thus providing greater permeability for mineralizing gold fluids. Piaba is a large, low-grade, deeply weathered (average depth of oxidation is 60m) tabular-shaped gold deposit dipping NNW (Fig. 6). Zones (shoots) of high-grade gold mineralization occur within the lower-grade deposit. These high-grade zones are controlled by structures which cross-cut the orebody. Drilling to date has been focused on defining the strike and depth extent of the main orebody. However, future drilling will also target the high-grade lodes.

The widest portion of the Piaba deposit is located at a bend in the ASZ. Analysis of structural fabrics and textures in drill core shows limited shear fabrics (confined to graphitic slip planes) which indicate that the maximum depth of current drilling has mainly tested the brittle and brittle-ductile transition zones of the Piaba deposit. The deposit is currently open at depth on all drill sections within the 2.9 km strike.

Mineralization/Alteration
Piaba is a large low-grade gold deposit within a major shear zone containing second and possibly third order structures which control high-grade ore shoots attaining values of 30 g/t Au and higher. Mineralization does occur within the volcanic sequence though preferentially occurs within tonalite intrusions, due to their competency contrast with the volcanics. The widest portion of the deposit is located at a bend in the ASZ which is an area where increased extension likely occurred. Mineralization is strongly associated with quartz veining. Three types of quartz veins have been identified:

Sub-vertical quartz veins are narrow, associated with shear zones and are commonly associated with pyrite. They are frequently sheared, brecciated and have a smoky coloration. Native gold is occasionally observed at wall rock-vein contacts.
Sub-horizontal quartz veins are wider (up to 0.50m) and generally composed of milky quartz showing less deformation than the sub-vertical veins. They constitute ladder vein sets which are commonly linked into the vertical vein set and are gold-bearing though generally lower-grade than the sub vertical veins. Native gold is occasionally observed at wall rock-vein contacts.
Branching veins are anastamosing vein sets where several veins branch off a main vein (mother vein). They are interpreted to represent an intermediate vein type between the sub-vertical and sub-horizontal (ladder) veins.

The alteration assemblage is composed of quartz, chlorite, carbonate (ankerite and calcite), graphite, alkali feldspar, sericite, pyrite and minor amounts of tourmaline. Mineralization and alteration are strong to intense particularly within the centre of the ore deposit. Metamorphic grade is greenschist facies. Quartz occurs in vein form as summarized above though also in silicification fronts. Chlorite occurs as matrix replacive and in veinlets and its intensity is likely linked to the mafic wall rocks. Ankerite and carbonate occur as matrix replacement and in veinlets and commonly as accessory minerals in quartz veins. Tourmaline occurs solely in quartz veins. Both tourmaline and calcite appear to increase with depth. Pyrite occurs in quartz veins though it predominantly forms a matrix replacement, particularly at deeper levels. Minor pyrrhotite occurs at deeper levels. Graphite alteration is locally moderate to strong and is closely associated with gold mineralization. The graphite was most likely sourced from the footwall at deeper levels in the structure early in the deposit formation and subsequently acted as a reductant trap for gold mineralizing fluids. No significant base metals occur at Piaba.

Deposit Type
Piaba is a bulk tonnage, low-grade gold deposit amenable to open pit mining methods situated in a tropical environment similar to other gold deposits in this part of South America including the Las Cristinas and El Callao gold deposits in Venezuela, the Omai Gold Mine in Guyana, and the Gross Rosebel gold deposit in Suriname. Gold mineralization at Aurizona is typical of orogenic gold deposits formed in regional-scale brittle-ductile structures in supracrustal terranes. The general model for these types of deposits involves the migration of large amounts of hydrothermal fluids (generated during collisional orogenesis) within shear zones (particularly within fractured intrusives where the permeability is greater than within the country rock). The hydrothermal fluids carry gold in solution until changes in temperature, pressure, reduction potential or pH (traps) facilitate its precipitation. The gold source is likely the country rocks through which metamorphic fluids travel before concentrating in the shear zones.

Mineralization is often continuous to considerable depths in these systems and the 2009 drill program is testing the orebody to depth of -300m RL. Geological modeling indicates that mineralization defined to date at Piaba is located within the brittle-ductile deformation zone consistent with the model of Groves et al. (1998) (Fig. 7).

The paleo-reconstruction of the Pangea continent strongly suggests that the São Luis Craton (SLC) is a fragment of the West African Craton that was left behind on the South American Platform following the break-up of the Pangea supercontinent. Geological, geochronological and isotopic evidence also indicate that the Brazilian terrains were contiguous with the West African Craton in Palaeoproterozoic times (Fig. 8).

Tatajuba
The Tatajuba Deposit is located 2.4 Km WSW from Piaba within the ASZ (Figs. 4a & 4b). The deposit extends over an 800m strike length and, like Piaba, contains gold mineralization associated with a sub-vertical to moderately north-dipping structure nearly parallel to the ASZ. Mineralization is hosted in a mafic to ultramafic volcano-sedimentary sequence (Figs. 9 and 10). Mineralization at Tatajuba is similar to Piaba although the alteration and mineralization zone at Tatajuba is more restricted. There is a strong weathering overprint to the alteration zones at Tatajuba, in addition to a zone of strong fracturing infilled by graphite, which has been overprinted by a later chlorite-iron carbonate fracture controlled alteration. There is an abrupt change above the base of weathering into what appears to be essentially "unaltered" andesite. The background alteration is suspected as being chlorite and albite with calcite/dolomite.

Satellite Deposits
Mineralization in the Aurizona Main area occurs in east-northeast trending, near vertical structures within a dilatant zone or bend within the Aurizona Shear Zone. The Piaba and Tatajuba deposits have been well defined by drilling although only to relatively shallow levels. Approximately 10 satellite targets occur in the immediate vicinity of the Piaba deposit. Exploration at these targets has been limited to historic soil and auger sampling programs and small drill programs which returned encouraging results which require follow-up. Table 1 shows significant drill intercepts from satellite target drilled by historic operators (Table 1). Luna is currently conducting exploration programs at the satellite targets.

The satellite targets which occur to the north and south of the main Piaba deposit may occur along separate sub-parallel shear zones/splays or they may occur along flower structures which developed in the principal deformation zone of the ASZ. Additional exploration of these targets will define the structural setting of the deposits.

Aurizona Regional

The Aurizona Regional project consists of all Company exploration permits located outside of the Aurizona Main area and covers an area of 60,000 ha (Fig. 3). There are over 20 hard rock (primary) gold garimpos located within the Aurizona Regional permits (Fig. 3). Luna has inherited a large database covering Aurizona Regional from the project vendors which includes airborne geophysical surveys, soil, auger and drill data. These data are being reviewed and targets prioritized. Luna initiated a reconnaissance program of mapping and rock chip sampling in 2008 which returned gold values of up to 9.71 g/t Au in rock grab samples (these samples were neither part of, nor alone do they constitute, a statistically representative sampling program). The Company has also commissioned a high resolution satellite image (Geoeye-01) covering the entire project area.

2009 Exploration Program

The Aurizona project is at a relatively early stage of exploration when compared with other gold camps of the Guiana Shield. The ASZ is currently the main exploration target at Aurizona and exploration programs are focused on defining its strike extent within company tenements and defining gold anomalies along its length. Particular attention will be paid to bends in the structure associated with gold anomalism. The scale of the Piaba deposit represents a significant mineralizing system within the ASZ and the Company is focused on defining additional satellite deposits along the structure.

In addition to the main ASZ, several satellite targets occur in the vicinity of Piaba (Figs. 4a & 4b) which define sub-parallel mineralized trends. The spatial distribution of these targets suggests that they either represent separate mineralized structures or splays from the main ASZ. Exploration work is currently focused on defining surface gold anomalies associated with structures to bring these targets to the drill stage. All satellite targets will be evaluated to determine the potential for additional near surface oxide gold deposits at Aurizona Main.

Aurizona's Exploration Department is currently conducting the following exploration programs: