I will be going through the key names from the Denver Gold Forum one by one and will be posting my notes and impressions. This is a large conference, but  during the next week I would like to cover at least 15 of the names that I use. I will be making two of these posts, including the first one, available to non-subscribers, with the balance protected for paid subscribers. Archived webcasts are available here. First up: Luna Gold.

Luna’s share structure indicates there’s skin in the game. Insiders hold 10% and Sandstorm, the royalty company, holds 19.8%.

Sandstorm’s has a good-size royalty of 17% of Luna’s production at $404. This is for the Aurizona land package (15,000 hectares) that got Luna into initial production and does not extend to Luna’s highly prospective 220,000-hectare district, which I believe is a significant and currently an under-appreciated part of the story. Brazilian shareholders hold 34% of the float, and Sentry Select has a 12% stake.

There are 142 million shares outstanding, with net debt after working capital at only $10 million. The market’s enterprise value for Luna is a very modest $114 million.

Even before recent high-grade hits in the rest of the district, Luna had a proven-and-probable reserve of 2.36 million ounces at 1.32 grams and 3.63 million measured and indicated at 1.38 grams. There is a resource of another million.

Luna has a 7,500-tons-per-day processing plant that is churning out about 80,000 ounces a year. The stock has been slammed to cow pasture levels by some cost overruns and the lower PoG. Cash cost for 2014 are put at $825-900 versus $723 in 2013.

The company’s Phase I expansion, designed to lower production costs and add ounces, will be limited to half that planned. To put this into perspective, the total capex for this is a modest $63 million, which suggests that management has decided to play it close to the vest so as to stay cash-flow positive and avoid dilution. The second tranche of a previously announced private placement was cancelled. With the ounces nearby, production could be ramped up considerably and with a reasonable capex.

In a normal market, Luna’s high-grade discoveries at five satellite targets out in the district would have garnered attention. This would include 5.3 meters of 12.18 grams at Micote.

Of particular interest are some juicy near-surface drill holes at Tatajuba, including  a yahoo hole of 35 meters of 13.74 grams and a nice thick interval of 55.8 meters of 2.71 grams.

Also out in the greenfield is a find at Touro, which shows a nice footprint of near surface 1 gram material with numerous signs of high grade interspersed.

Given that Mr. Market isn’t even valuing the operating mine correctly, let alone the optionality of this district, Luna would be a great opportunistic scarf for a producer looking for a mine that’s already producing and requires modest, fresh capex combined with open-ended exploration targets. This is a prime entree into the Guyana Shield gold belt.

Tatajuba