Luna sees first in C$4 million deal; QuStream sells convertibles; Castle Resources to raise C$3 million

By Kenneth Lim

Boston, March 7 - Luna Gold Corp. said its C$4 million non-brokered private placement of stock was its first in which the investors initiated the capital raising.

Meanwhile, QuStream Corp. said it sold C$2 million of secured convertible secured debentures in a non-brokered placement and raised a further C$7 million in loans.

Castle Resources Inc. raised C$1.5 million through a private placement of share-and-warrant units to the MineralFields Group and plans to sell another C$1.5 million of units.

Luna places stock

Luna Gold, a Vancouver, B.C.-based gold exploration and development company with projects in Brazil and Nevada, said it will sell C$4 million worth of its common stock to two existing investors.

The shares will be sold at C$1.10 apiece, a discount of 28.2% to their Thursday closing price of C$1.53. Luna Gold common stock (TSX: LGC) closed at C$1.40 on Friday, down by C$0.13, or 8.5%.

Luna said the proceeds of the deal will be used for sourcing, exploration and drilling.

"This is the first financing we've done where the partners have initiated and called us to do a financing with a small discount to market with no warrants and fees," Luna president and chief executive Tim Searcy told Prospect News.

Searcy, who declined to name the investors, said they had been investors "for a long time" with the company.

"We felt very comfortable with these people," he said. "We knew the people and we were very comfortable with them, and that gave us the willingness to do it. One of the investors initiated this, and the other participant has participated in the last few rounds in a significant way and asked us to let him take his portion on a pro rata basis, and so we offered some to him and he decided to take even more."

The deal was purposely limited to just two investors, Searcy said.

"We kept it to two people, but there's a lot of interest among all insiders, all the people close to the deal," he said. "But because we were going out below market value, we felt that we ought to limit this to the two funds. It's a pretty nice deal."

The steep 28.2% initial discount was not the original intent of the fundraising, he added.

"When we negotiated the price, it was at a 10% discount to the 20-day moving average, and subsequent to that the price of the stock has moved up quite aggressively, maybe because of the price of gold, and then it became quite an aggressive discount," Searcy said. "But we didn't feel it was right to renegotiate."

Luna was not seeking any capital when the deal was arranged, but the new cash should last the company well into mid-year after a number of key project milestones, Searcy said.

"We're delivering a feasibility study at the end of April, drilling a second project with results by mid-May, and this should take us through that time," he said. "This lets us continue to acquire key pieces of mining equipment and plant facilities and continue aggressively developing this project without delaying the delivery of the feasibility study. Now we have a nice cushion."

Searcy welcomed the fact that the deal was initiated by the investors and came without the usual strings - warrants and fees - attached.

"I think what it marks is an indication of the recognition out there from some funds, that at least this is a quality team that's delivering on its word," he said.

QuStream sells convertibles

QuStream sold C$2 million of 10% convertible secured debentures due March 6, 2010 in a non-brokered private placement.

The notes are initially convertible into QuStream common stock at a C$2.00 per share. QuStream common stock (TSX: QVC) closed at C$1.10 on Friday, down by 15.38%, or C$0.20.

QuStream may force conversion of the debentures if its common shares close at C$2.00 or higher for 20 consecutive trading days. Investors also received two-year warrants for 1 million shares exercisable in the case of early redemption of the convertibles.

QuStream, a Toronto-based service provider for the creators and distributors of professional video content, said the proceeds will be used for working capital, financing potential acquisitions, capital expenditure and product development.

QuStream also entered into separate loan agreements with a Canadian bank for a C$5 million revolving operating credit facility and a C$2 million term loan.

"These financings will provide additional funds, with minimal equity dilution, and positions us to continue to grow QuStream," QuStream chairman, president and chief executive Frederick L. Godard said in a statement.

Castle Resources raises C$1.5 million

Castle Resources said it sold C$1.5 million of share-and-warrant units to the MineralFields Group and is planning a second deal for the same amount.

The first sale comprised 3.75 million units of one flow-through common share and one half-share warrant at C$0.40 per unit. Each whole warrant expires after 18 months and has a strike price of C$0.60.

The second deal will consist of 5 million units at C$0.30 per unit. Each whole warrant will be exercisable at C$0.45 for 18 months.

Castle Resources (TSX: CRI) gained $0.06, or 21.43%, on Friday before the deals were announced to close at C$0.34.

Castle Resources did not say if MineralFields will receive any units in the second placement.

Castle Resources, a Montreal-based junior mineral exploration company, said it will use the proceeds to finance projects and for exploration.

"We are very pleased to commence our relationship with MineralFields Group," Castle Resources president and chief executive Stephen Shefsky said in a press release. "This is an important milestone in the growth of Castle and we look forward to working with MineralFields Group as we develop our holdings both in Zacatecas, Mexico and the Legends of Cobalt Corporation acquisition in Cobalt, Ontario."

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