Capstone Announces New Life-of-Mine Plan & Mineral Reserve for the Cozamin Copper Mine, Mexico



    
    8.1 million tonne Mineral Reserve Supports 8-year Mine Life Producing
    Average of 33 million lbs of Payable Copper/year
    

    VANCOUVER, June 1 /CNW/ - Capstone Mining Corp. (CS: TSX) today announced
an updated life-of-mine plan ("LOM Plan") and mineral reserve estimate for the
Cozamin Mine in Zacatecas State, Mexico. This LOM Plan incorporates the
mineral resources in the San Roberto area announced on February 18, 2009 and
is described in more detail in a Technical Report prepared by SRK Consulting
(Canada) Inc. ("SRK") which will be available on Sedar shortly. All currency
values referred to in this release are in US$ unless otherwise specified.

    
                       Cozamin Mineral Reserve Estimate
                       --------------------------------
    -------------------------------------------------------------------------
    Class                         Tonnes   Copper     Zinc     Lead   Silver
                                  (000s)     (%)      (%)      (%)     (g/t)
    -------------------------------------------------------------------------
    Proven                         1,606     2.02     0.97     0.44     76.9
    -------------------------------------------------------------------------
    Probable                       6,491     1.57     1.13     0.26     55.4
    -------------------------------------------------------------------------
    Total                          8,097     1.66     1.10     0.29     59.6
    -------------------------------------------------------------------------
    

    "The updated mineral reserve estimate for the Cozamin Mine supports an
approximately eight year mine life, a significant increase over that
previously reported, even after a significant increase in mill throughput
resulting from the completion of the Phase III mill expansion," said Stephen
P. Quin, President & COO of Capstone. "The new life-of-mine plan for the
Cozamin Mine demonstrates robust economic and a net present value of US$172
million at an 8% discount rate, assuming approximately current metal prices
and silver prices capped at US$4 per ounce in accordance with Capstone's
silver stream agreement. A number of upside opportunities have been identified
that could result in a higher annualized rate of production, which we are
working to crystallize."

    Life of Mine Plan

    The LOM Plan was developed from the mineral reserve noted above,
excluding any inferred resources, based on a processing rate of 1,015,000
tonnes per year (a nominal throughput of 3,000 tonnes per day, adjusted down
for availability). The LOM Plan was prepared by the operating staff at the
Cozamin Mine and reviewed by SRK. The annual production profile is set out in
the table below.

    
               Annual Production Profile for the Cozamin Mine
               ----------------------------------------------
    -------------------------------------------------------------------------
                   2009  2010  2011  2012  2013  2014  2015  2016  2017 Total
    -------------------------------------------------------------------------
    Milling
    -------------------------------------------------------------------------
    Tonnes (000s) 1,015 1,015 1,015 1,015 1,015 1,015 1,015   734   258 8,097
    -------------------------------------------------------------------------
    - Copper (%)   1.70  1.87  1.86  1.88  1.51  1.51  1.52  1.47  1.28  1.66
    -------------------------------------------------------------------------
    - Zinc (%)     1.22  1.12  1.07  0.98  1.04  1.02  1.11  1.18  1.34  1.10
    -------------------------------------------------------------------------
    - Lead (%)     0.51  0.45  0.38  0.34  0.19  0.15  0.17  0.16  0.16  0.29
    -------------------------------------------------------------------------
    - Silver (g/t)   72    72    70    68    53    51    48    43    38    60
    -------------------------------------------------------------------------
    Payable Metals (in millions)
    -------------------------------------------------------------------------
    - Copper (lbs) 33.1  36.6  36.3  36.8  29.4  29.5  29.8  20.8   6.4 258.6
    -------------------------------------------------------------------------
    - Zinc (lbs)   14.8  13.6  12.9  11.9  12.6  12.4  13.5  10.3   4.1 106.1
    -------------------------------------------------------------------------
    - Lead (lbs)    6.5   5.7   4.9   4.3   2.4   2.0   2.1   1.4   0.5  29.9
    -------------------------------------------------------------------------
    - Silver (oz)   1.6   1.6   1.6   1.5   1.2   1.1   1.0   0.7   0.2  10.4
    -------------------------------------------------------------------------
    Cash costs (US$/lb of payable copper)
    -------------------------------------------------------------------------
    Production (on
     site) costs   1.09  0.99  0.99  0.98  1.23  1.22  1.21  1.25  1.44  1.11
    -------------------------------------------------------------------------
    By-product
     Credits for
     Zn, Pb & Ag   0.41  0.35  0.33  0.30  0.32  0.31  0.31  0.32  0.38  0.33
    -------------------------------------------------------------------------
    Off site cost
     of Cu
     concentrate   0.32  0.32  0.32  0.32  0.32  0.32  0.32  0.32  0.32  0.32
    -------------------------------------------------------------------------
    Total Cash
     Cost          1.00  0.96  0.99  1.00  1.22  1.24  1.22  1.26  1.38  1.10
    -------------------------------------------------------------------------
    

    Life of Mine Plan Parameters

    The LOM Plan for the Cozamin Mine was developed based on the assumptions
and parameters set out in the table below. The operating parameters were
generated from recent operating performance achieved at the Cozamin Mine
during and after the completion of the Phase III expansion. Capstone believes
there are additional opportunities to further optimize these parameters, as
discussed below.

    
                 Life of Mine Parameters for the Cozamin Mine
                 --------------------------------------------
    -------------------------------------------------------------------------
                                                        Unit        Value
    -------------------------------------------------------------------------
    Metal Prices
    -------------------------------------------------------------------------
    Copper                                              $/lb            2.00
    -------------------------------------------------------------------------
    Zinc                                                $/lb            0.70
    -------------------------------------------------------------------------
    Lead                                                $/lb            0.60
    -------------------------------------------------------------------------
    Silver(*)                                           $/oz            4.00
    -------------------------------------------------------------------------
    Recovery to concentrates
    -------------------------------------------------------------------------
    Copper in Cu concentrate                              %               91
    -------------------------------------------------------------------------
    Zinc in Zn concentrate                                %               65
    -------------------------------------------------------------------------
    Lead in Pb concentrate                                %               60
    -------------------------------------------------------------------------
    Silver in all concentrates                            %               74
    -------------------------------------------------------------------------
    Operating Costs
    -------------------------------------------------------------------------
    Unit mining cost                                 $/t milled        18.03
    -------------------------------------------------------------------------
    Unit processing cost                             $/t milled        12.99
    -------------------------------------------------------------------------
    Unit G&A cost                                    $/t milled         4.49
    -------------------------------------------------------------------------
    Unit cost total                                  $ millions        35.51
    -------------------------------------------------------------------------
    Capital Costs
    -------------------------------------------------------------------------
    Sustaining Capital                               $ millions         17.5
    -------------------------------------------------------------------------
    (*) Silver prices are capped at $4.00 per oz in accordance with the
        silver stream agreement entered into by Capstone in April 2007.


    Economic Analysis Summary

    Based on the LOM Plan and economic parameters summarized above, the
economic parameters of the project are summarized in the table below.

                Summary of Economic Analysis for Cozamin Mine
                ---------------------------------------------
    -------------------------------------------------------------------------
                                                        Units       Amount
    -------------------------------------------------------------------------
    Metal Production
    -------------------------------------------------------------------------
    Copper in Cu concentrate                         Tonnes Cu       122,000
    -------------------------------------------------------------------------
    Zinc in Zn concentrate                           Tonnes Zn        58,000
    -------------------------------------------------------------------------
    Lead in Pb concentrate                           Tonnes Pb        14,000
    -------------------------------------------------------------------------
    Silver in all concentrates                         oz Ag      11,468,000
    -------------------------------------------------------------------------
    Life-of-mine
    -------------------------------------------------------------------------
    Revenue after 3% NSR                             $ millions          521
    -------------------------------------------------------------------------
    Operating costs                                  $ millions          288
    -------------------------------------------------------------------------
    Capital costs                                    $ millions           18
    -------------------------------------------------------------------------
    Economic Results
    -------------------------------------------------------------------------
    NPV at 0% discount rate                          $ millions          216
    -------------------------------------------------------------------------
    NPV at 8% discount rate                          $ millions          172
    -------------------------------------------------------------------------

    Sensitivity Analysis

    A sensitivity analysis was performed individually on metal price, metal
grade, capital cost and operating cost. The results of this analysis are
summarized in the table below.

                  Sensitivity Analysis for the Cozamin Mine
                  -----------------------------------------
    -------------------------------------------------------------------------
                                      Pre-tax NPV at 8% Discount ($ millions)
                                     ----------------------------------------
    Variable                           -20 %             0 %           +20 %
    -------------------------------------------------------------------------
    Capital Cost                         175             172             169
    -------------------------------------------------------------------------
    Operating Cost                       217             172             128
    -------------------------------------------------------------------------
    Metal Price                           90             172             254
    -------------------------------------------------------------------------
    Grade                                 90             172             254
    -------------------------------------------------------------------------

    Risks and Opportunities

    The principal site specific risks for the LOM Plan identified during SRK's
review include the following:

    1.  Ensuring a supply of water sufficient to sustain 3,000 tonnes per day
        over the long term. Capstone has a new water well in process to
        provide excess water capacity.

    2.  Continuing to ensure that accurate drilling and blasting practices
        are maintained to minimize dilution, minimize secondary breaking and
        optimize extraction, with sufficient stopes developed ahead to allow
        flexibility in the event of problems with any particular stope.

    The principal site specific opportunities identified in SRK's review
include the following:

    1.  Mine life may be extended by exploration on the under-explored
        4 kilometers of the Mala Noche vein successfully discovering and
        delineating additional mineral reserves outside of the existing
        mineral resource area, or by converting the San Roberto inferred
        mineral resources to mineral reserves, inclusion of the San Rafael
        mineral resources to reserves, or by Capstone acquiring existing
        claims which cover the down dip extension of the Mala Noche vein to
        the east of the current mineral reserve area.

    2.  Further review of the 31 drill holes omitted from the resource model
        (due to apparent survey issues) may result in an overall marginal,
        but locally significant, increase in mineral resources. For example,
        drill hole U62 (16.2 meters at 3.3% Copper) intersected significantly
        thicker mineralization than surrounding channel sample data in the
        drift. If, through resurveying or re-drilling (if necessary), this or
        other holes were reintroduced into the database, it may result in an
        increase in the overall mineral resource and reserve.

    3.  Improved ore handing system in the shaft, which is currently in
        process.

    4.  Enhanced 3D mine planning which should result in improvements in
        efficiencies for access development, stope design, dilution control
        and optimal recovery of the resource.

    5.  Continued improvements in metal recoveries, concentrate grades and
        plant throughput. Steady improvements since the completion of the
        Phase III expansion show the potential to consistently exceed the
        life-of-mine assumptions used in the LOM Plan.
    

    In respect of the latter point, the Cozamin mill has consistently
exceeded design capacity since February 2009 and appears capable of sustaining
higher throughput, which would increase the annualized rate of production, as
well as higher recoveries and concentrate grades. Continued outperformance
could result in a revision to the mine plan setting out higher production
targets.

    Mineral Reserve Estimates

    The Cozamin mineral reserves were estimated using the mineral resource
model provided by Robert Sim, P.Geo. of SIM Geological Inc. ("SGI"). The
mineral reserve estimate was prepared by SRK under the supervision of Gordon
Doerksen, P.Eng., a Qualified Person under NI 43-101.
    The mineral resource model was imported into Gemcom GEMS(TM) software.
Mining shapes were created to define the limit of economic mining blocks from
which mineral reserves were estimated. GEMS(TM) was used to interrogate the
resource model and report material within the confines of the mining shapes.
Mining recovery and dilution were calculated individually for each stope with
due consideration given to the mining method.
    An economic NSR cut-off value ("COV") of $35 per tonne was estimated
based on historical and projected costs developed from first principles. The
basis for the COV came from budget operating costs of $18/t for mining,
$12.50/t for processing and $4.50/t for general and administration costs.
Metal prices used in estimating the COV were US$1.50 per lb of copper, US$0.50
per lb of zinc, US$0.45 per lb of lead and US$4.00 per oz of silver (the
latter based on the silver stream agreement).
    Only measured and indicated mineral resource blocks were used in the
estimation of mineral reserves. Inferred resources contained within a mining
shape were assigned a grade equivalent to dilution. Dilution grades, including
any inferred resource blocks, were calculated as the block grade factored down
to 33 % of the block copper grade; 33 % of the block lead grade; 33 % of the
block zinc grade; and 20 % of the block silver grade.

    Technical Report

    A National Instrument 43-101 Technical Report in respect of the matters
reported herein will be filed on SEDAR, under Capstone's profile, within the
next five days.

    
    The TSX does not accept any responsibility for the adequacy or accuracy
    of this press release.
    

    Quality Assurance

    The technical information in this news release has been prepared in
accordance with Canadian regulatory requirements set out in National
Instrument 43-101 and reviewed by Stephen P. Quin, P. Geo., President & COO
for Capstone Mining Corp., Bob Barnes, P.Eng. Vice President, Operations -
Mexico with Capstone Mining Corp. and Gord Doerksen, P.Eng. of SRK Consulting
(Canada) Inc., who is an Independent Qualified Person as defined by National
Instrument 43-101 and is responsible for the mineral reserve estimate.

    Forward-Looking Statements

    This document may contain "forward-looking information" within the
meaning of Canadian securities legislation and "forward-looking statements"
within the meaning of the United States Private Securities Litigation Reform
Act of 1995 (collectively, "forward-looking statements"). These
forward-looking statements are made as of the date of this document and
Capstone Mining Corp. (the "Company") does not intend, and does not assume any
obligation, to update these forward-looking statements.
    Forward-looking statements relate to future events or future performance
and reflect Company management's expectations or beliefs regarding future
events and include, but are not limited to, statements with respect to the
estimation of mineral reserves and mineral resources, the realization of
mineral reserve estimates, the timing and amount of estimated future
production, costs of production, capital expenditures, success of mining
operations, environmental risks, unanticipated reclamation expenses, title
disputes or claims and limitations on insurance coverage. In certain cases,
forward-looking statements can be identified by the use of words such as
"plans", "expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "would", "might" or "will
be taken", "occur" or "be achieved" or the negative of these terms or
comparable terminology. By their very nature forward-looking statements
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such factors include,
among others, risks related to actual results of current exploration
activities; changes in project parameters as plans continue to be refined;
future prices of resources; possible variations in ore reserves, grade or
recovery rates; accidents, labour disputes and other risks of the mining
industry; delays in obtaining governmental approvals or financing or in the
completion of development or construction activities; as well as those factors
detailed from time to time in the Company's interim and annual financial
statements and management's discussion and analysis of those statements, all
of which are filed and available for review on SEDAR at www.sedar.com.
Although the Company has attempted to identify important factors that could
cause actual actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or intended.
The Company provides no assurance that forward-looking statements will prove
to be accurate, as actual results and future events could differ materially
from those anticipated in such statements.
    Accordingly, readers should not place undue reliance on forward-looking
statements.





For further information:

For further information: about Capstone, please contact: Darren Pylot,
Vice Chairman & CEO, Stephen Quin, President & COO, or Investor Relations'
Mark Patchett at (604) 684-8894 or (866) 684-8894, info@capstonemining.com


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