Luna Gold logoTwo weeks ago an investor friend phoned me up and asked "Should I dump my shares of Luna Gold? I'm worried about gold and all my other stocks are down.....". I pulled up the LGC chart and was quickly impressed by the relative strength and large recent consolidation between $3.00 and $3.50. Instead of advising him to sell, I stunned him by telling him that he should BUY MORE!

LGC.TO_Daily

LGC daily breakout

Since that conversation we have witnessed a sharp upside reversal in the gold price which has helped to propel LGC to fresh two year highs - let's go to the charts to better gauge the potential extent of this upside breakout:

Click to enlarge weekly and monthly LGC charts:

LGC_Weekly

LGC_Monthly

The technical picture is extremely bright for LGC and pullbacks are likely to be quickly snapped up with previous resistance at $3.50 now acting as support. However, the fundamental picture is the real driver of the company's shares.

Luna is on track to produce roughly 100,000 ounces of gold from its flagship Aurozina gold mine in Brazil at an average cash cost of roughly $710 per ounce. Moreover, Luna continues to drill out other prospective mineral resources as it moves ahead with its goal of becoming a mid-tier Brazilian gold producer:

"We anticipate not only several significant milestones at our Aurizona property, but also the formal continuation of drilling at Luna Greenfields, which we believe has the potential to produce several gold deposits. Achieving all of these objectives during 2013 is an ambitious endeavour. However, I am confident that the dedication and talent of our operational and exploration teams will allow us to reach these goals, and establish Luna as a mid-tier gold producer." John Blake, Luna Gold Corp. President & CEO

At a time when the senior gold producers are desperately struggling to replace reserves with economic resources in safe jurisdictions, Luna Gold is rapidly on path to becoming an acquisition target that the majors simply can't afford to ignore.