Capstone Reports Strong Second Quarter and Year-to-Date Results on Low Cost Production



    
     Cash Flow from Operations (1) of US$22.6 million in Second Quarter and
                  US $48.9 million in first 6 months of 2009
       47.3 million Pounds of Payable Copper Produced at an Estimated Total
                   Cash Cost (1) of $0.93 per payable pound
                All amounts in US$ unless otherwise specified
    

    VANCOUVER, Aug. 13 /CNW/ - Capstone Mining Corp. (CS: TSX) today
announced its financial results for the three and six months ended June 30,
2009. For the three months ended June 30, 2009, Capstone reported cash flow
from mining operations(1) of $22.6 million ($0.12/share) on sales of 17.8
million pounds of copper. This compares to cash flow from operations(1) of
$26.3 million ($0.16/share) on sales of 28.3 million pounds of copper in the
first three months of 2009. The lower sales of copper metal are primarily a
result of the timing of concentrate shipments with only one shipload of Minto
concentrates sold in the second quarter versus two in the first. Cash flows
were similar in the two periods as a result of significantly higher copper
prices in the second quarter. During the first six months of 2009, Capstone
reported cash flow from operations(1) of $48.9 million ($0.28/share) on sales
of 45.1 million pounds of payable copper sold. Copper produced, as opposed to
sold, in the first six months at Capstone's two mines, Cozamin and Minto,
totals 47.3 million pounds of payable copper at an estimated total cash
cost(1) of $0.93 per payable pound.
    Copies of Capstone's financial statements and management's discussion and
analysis ("MD&A") are available on Capstone's website at
http://www.capstonemining.com/investors/financials/. This release should be
read in conjunction with the second quarter 2009 financial statements and
MD&A. Capstone will hold a conference call Friday August 14, 2009 at 8:00 AM
Pacific time (11:00 AM Eastern time) to discuss these results; call-in details
are at the end of this release.
    "Capstone's second quarter 2009 financial results continued to be strong
as a result of our low cost production from both our mines," said Darren
Pylot, Vice Chairman & CEO of Capstone Mining Corp. "Cash flow from mining
operations(1) of $22.6 million, despite lower sales, reflects the higher
copper price, quarter over quarter, the strong operational performance of our
mines and low operating costs," he said. "During this quarter, we also took
the opportunity to restructure our balance sheet and, as of June 30, 2009,
Capstone had approximately $111.6 million in working capital, including $70.4
million in unrestricted cash, total debt was reduced to $29.3 million, we have
a $40.0 million undrawn bank facility and investments with a market value of
$21.6 million on June 30, 2009."
    "Capstone's two operations, the Cozamin and Minto mines, continued to
deliver strong copper production during the second quarter of 2009 following
commissioning of their most recent expansions in the prior quarter," said
Stephen Quin, President & COO of Capstone Mining Corp. "While production was
somewhat lower compared to the first quarter, our operations are well
positioned to deliver favourable production and costs for the balance of 2009
while continuing our organic growth through exploration and production
expansions," he said. "Capstone's modest hedge position has served us well in
the first half of the year, generating approximately $23.8 million in cash
over the past six months, but we are well exposed to upward copper price
movements going forward having less than one third of the rest of this year's
forecast production hedged at $2.56 per pound."

    
    Highlights

    -------------------------------------------------------------------------
                                             Three Months Ended    Six Months
                                                                      Ended
    -------------------------------------------------------------------------
                                            March 31,    June 30,    June 30,
                                                2009        2009        2009
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Earnings (loss) for the period
     ($ millions)                              (16.2)       25.8         9.6
    -------------------------------------------------------------------------
    Earnings (loss) per share                  (0.10)       0.14        0.05
    -------------------------------------------------------------------------
    Including:
    - Earnings from mining operations
     ($ millions)                               19.7        18.6        38.3
    -------------------------------------------------------------------------
    - Loss on derivative instruments
     ($ millions)                              (35.4)      (31.3)      (66.7)
    -------------------------------------------------------------------------
    - Gain on disposal of investments
     ($ millions)                                  -        40.7        40.7
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Adjusted Earnings (1) ($ millions)          30.5        16.8        47.3
    -------------------------------------------------------------------------
    Adjusted Earnings (1) per share             0.19        0.09        0.27
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flow from mining operations(1)
     ($ millions)                               26.3        22.6        48.9
    -------------------------------------------------------------------------
    Cash flow from mining operations(1)
     per share                                  0.16        0.12        0.28
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Working capital at end of period
     ($ millions)                               77.0       111.6       111.6
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Copper sold (millions lbs)                  27.3        17.8        45.1
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Payable copper produced (millions lbs)      25.1        22.2        47.3
    -------------------------------------------------------------------------
    Total cash cost(1) per payable pound
     of copper produced                         0.91        0.97        0.93
    -------------------------------------------------------------------------

    Overview

    Financial and Production and Highlights for the Three Months Ended June
30, 2009

        -  Recorded net earnings of $25.8 million or $0.14 per common share
           which mainly included:
           -  Earnings from mining operations of $18.6 million,
           -  Gain on disposal of investments of $40.7 million, and
           -  Net loss of $31.3 million on derivative instruments which is
              comprised of:
              -  A realized gain of $5.7 million on positions settled during
                 the period, and
              -  An unrealized non-cash loss of $37.0 million on the
                 reduction of the derivative instrument asset mark-to-market
                 value over the period due to the increase in the copper
                 price.

        -  Adjusted net earnings(1) were $16.8 million or $0.09 per common
           share after making adjustments for certain non-cash and onetime
           items, including exclusion of non-cash loss on the reduction of
           derivative instrument asset and the gain on the disposal of
           investments.
        -  Generated cash flow from mining operations(1) of $22.6 million or
           $0.12 per common share.
        -  Working capital, which includes $70.4 million in unrestricted
           cash, increased to $111.6 million at June 30, 2009 from $77.0
           million at March 31, 2009.
        -  Sold 17.8 million pounds of copper, 6.6 million pounds of zinc,
           2.1 million pounds of lead, 6,054 ounces of gold and 380,948
           ounces of silver.
        -  Produced a total of 22.2 million pounds of payable copper at an
           estimated total cash cost(1) of $0.97 per pound of payable copper.

    Financial and Production and Highlights for the Six Months Ended June 30,
2009

        -  Recorded net earnings of $9.6 million or $0.05 per common share
           which mainly included:
           -  Earnings from mining operations of $38.3 million,
           -  Gain on disposal of investments of $40.7 million, and
           -  Net loss of $66.7 million on derivative instruments which is
              comprised of:
              -  A realized gain of $23.8 million on positions settled during
                 the period, and
              -  An unrealized non-cash loss of $90.5 million on the
                 reduction of the derivative instrument asset mark-to-market
                 value over the period due to the increase in the copper
                 price.

        -  Adjusted net earnings(1) were $47.3 million or $0.27 per common
           share after making adjustments for certain non-cash and onetime
           items, including exclusion of non-cash loss on the reduction of
           derivative instrument asset and the gain on the disposal of
           investments.
        -  Generated cash flow from mining operations(1) of $48.9 million or
           $0.28 per common share.
        -  Working capital, which includes $70.4 million in unrestricted
           cash, increased to $111.6 million at June 30, 2009 from $35.4
           million at December 31, 2008.
        -  Sold 45.1 million pounds of copper, 7.5 million pounds of zinc,
           3.8 million pounds of lead, and 17,362 ounces of gold and 877,157
           ounces of silver.
        -  Produced a total of 47.3 million pounds of payable copper at an
           estimated total cash cost(1) of $0.93 per pound of payable copper.

        Additional Highlights

        -  Repaid $18.9 million of the Macquarie project loan facility (the
           "PLF"), $11.0 million of which was scheduled, with the balance
           representing early payments made at the Company's election. These
           payments reduce the balance owing under the PLF to $11.0 million,
           which is now scheduled to be fully repaid by December 31, 2009.
        -  Sold by way of a bought deal equity financing 31,165,000 common
           shares at a price of C$1.85 per common share for gross proceeds of
           C$57.7 million ($49.5 million). The net proceeds were used to
           repay debt, for future acquisition opportunities and general
           working capital purposes.
        -  Repaid the $40.0 million balance on the Bank of Nova Scotia
           corporate revolving term credit facility (the "RTF") with the
           proceeds of the private placement. The funds can be redrawn over
           the next three years but are subject to an $8.0 million reduction
           each six months starting January 2010.
        -  Announced a new eight year life-of-mine plan for the Cozamin Mine
           with a mineral reserve estimate of 8.1 million tonnes grading
           1.66% copper, 1.1% zinc, 0.3% lead and 60 grams per tonne silver.
        -  Announced drill results from the Minto North discovery at the
           Minto Mine Phase 1 drill program, including some exceptional high-
           grade copper-gold intercepts over significant thicknesses - the
           best intercepts ever drilled on the Minto Mine property in 35
           years of exploration.
        -  Commenced Phase 2 drill program on Minto North in late June, with
           the objective of upgrading the mineralization at Minto North to
           standards suitable for detailed mine planning.
        -  Announced assay results for exploration drill holes completed in
           areas south of the Minto Mine open pit, including several high-
           grade copper-gold intersections from the southeast portion of the
           Ridgetop deposit, an area not previously known for high-grade
           mineralization.
        -  Announced the results of National Instrument 43-101 compliant
           mineral resource estimate for the Minto Mine which include the
           Minto Main pit (net of mining), Area 2/Area 118 deposits, the
           Ridgetop deposit and the Minto North deposit, providing an
           estimated increase in the measured and indicated mineral resource
           of 32% for contained copper, 38% for contained gold and 28% for
           contained silver over the last consolidated mineral resource
           estimate, reported in early 2007.
        -  Reported a robust, high-grade resource for the Kutcho Copper
           Project with a measured and indicated mineral resource of 10.4
           million tonnes grading 2.1% copper, 2.8% zinc, 0.4g/t gold and
           32g/t silver.
        -  Commenced internal evaluation of options for the development of a
           smaller tonnage, higher grade operation at Kutcho, likely with
           underground extraction of the ore.
        -  Recorded a gain of $39.9 million on the 4,956,107 Silver Wheaton
           Corp. ("SLW") shares received in exchange for all the Silverstone
           Resources Corp. ("SST") shares and warrants held.

    Highlights Subsequent to the Three Months Ended June 30, 2009

        -  Completed 56 infill drill holes at Minto North, with the results
           for the first 20 holes released on August 10, 2009, confirming the
           high grade nature of the Minto North deposit.
        -  Completed approved discharge of 300,000 cubic metres of excess
           water accumulated at the Minto Mine as a result of the melting of
           a high snowpack from the recent winter.
        -  Commenced approved discharge of up to an additional 705,000 cubic
           metres of excess water which is sufficient to remove all of the
           water collected in the pit; mining of fresh ore within the pit is
           expected to resume by around the end of September 2009.

    Results of Operations

        -  Cozamin Mine:
           -  Benefited from the Phase III mine expansion to 3,000 tonnes per
              day ("tpd") of throughput completed in the prior quarter and
              established access to some of the wider, higher grade ore zones
              that are now in production and some of which are anticipated to
              be accessed in the third quarter of 2009;
           -  Produced 9.9 million pounds of contained copper in
              concentrates, along with by-product 2.3 million pounds of zinc,
              3.3 million pounds of lead and 0.4 million ounces of silver;
           -  Processed 249,975 tonnes (2,741 tpd) of ore averaging 1.92%
              copper, 1.01% zinc, 0.61% lead and 66 grams per tonne ("g/t")
              silver and a single day record of 4,088 tonnes processed in
              June, with ore throughput constrained by ore availability from
              underground;
           -  Produced 17,595 dmt of copper concentrate averaging 25.5%
              copper; and
           -  Produced 9.5 million pounds of payable copper at a total cash
              cost(1) of US$0.81 per pound.

        -  Minto Mine:

           -  Benefited from the Phase III mine expansion to 3,200 tpd of
              mill throughput completed at the end of the first quarter,
              supported by increased mine production;
           -  Produced 13.2 million pounds of contained copper in
              concentrates, along with 7,564 ounces of gold and 0.1 million
              ounces of silver as by-products;
           -  Processed 267,254 tonnes (2,937 tpd) of ore averaging 2.41%
              copper, 1.0g/t gold and 9.6g/t silver and a single day record
              of 3,762 tonnes processed in July;
           -  Produced 14,667 dmt of copper concentrate averaging 40.8%
              copper;
           -  Produced 12.7 million pounds of payable copper at a total cash
              cost(1) of US$1.08 per pound.

    Outlook for 2009

    The current year, continues to unfold positively for Capstone, based on
the following:

        -  Forecast production of 95 million to 105 million pounds of copper
           at a total estimated cash cost(1) of approximately $1.00 per
           pound, net of by product credits.

        -  At the Cozamin Mine:

           -  The Company provided guidance that the Cozamin Mine production
              in 2009 is expected to total 35 to 40 million pounds of copper
              in concentrates, with by-product lead, zinc and silver, at a
              total estimated cash cost of approximately $1.00 per pound.

           -  This production will come principally from the recently
              accessed 9, 10 and 11 Levels of the mine, and the 12 Level,
              which is to be accessed in 2009. Grades are forecast to average
              approximately 2% copper for the year. This forecast is
              dependent on bringing the wide, higher grade stopes on line on
              schedule.

           -  As noted in prior disclosure, access to some of these stopes
              has taken longer than anticipated, which will result in the
              third quarter being a lower than average production quarter
              but, given the mill's ability to exceed design throughput on a
              sustained basis and the above average grade of these new
              stopes, any production shortfalls are anticipated to be
              recouped in the fourth quarter of 2009.

           -  Following the investment in production expansions in prior
              years, capital expenditures of only $8.7 million are forecasted
              in 2009, including some remaining expenditures related to the
              Phase III expansion. The capital programs are primarily
              sustaining capital, capital equipment to support the expanded
              underground mining and modest efficiency and throughput
              improvements, as well as connecting the mine to a higher
              capacity power line that bypasses the city of Zacatecas.

           -  As a result of the recently completed assessment of the
              exploration potential of the Cozamin property, plans for
              exploration at Cozamin will be adjusted upwards from the prior
              guidance of $0.3 million for 2009, with additional details to
              be provided when appropriate.

        -  At the Minto Mine:

           -  The Company provided guidance that the Minto Mine production in
              2009 is expected to total 60 to 65 million pounds of copper,
              with by-product gold and silver, at a total cash cost of
              approximately $1.00 per pound.

           -  The production for the remainder of the year will come from the
              Phase 3 South and 4 North of the Minto main pit and ore
              stockpiles.

           -  As noted in prior disclosure, this forecast is dependent on the
              timing of removal of excess snow melt water collected in the
              pit during freshet. This excess water has delayed re-entry to
              the open pit post-freshet and limited processing to lower grade
              stockpiles.

           -  Now that permission to discharge the excess water has been
              given by the Yukon Water Board, the Company will reforecast is
              outlook for the remainder of the year to determine whether its
              guidance needs to be adjusted. However, given the mill's proven
              ability to outperform its design parameters and the presence of
              some very high grades in the Phase 3 South and Phase 4 North of
              the pit, processing higher than budgeted grades at higher
              throughputs provide opportunities to still meet forecast.

           -  The June 2009 update of mineral resource estimates provides the
              basis for an independent pre-feasibility study designed to (a)
              convert a significant portion of these new mineral resources to
              mineral reserves and (b) incorporate a further Phase IV
              increase in mining and throughput, perhaps to somewhere in the
              range of 4,000tpd to 5,000tpd;

           -  Capital expenditures of approximately $9.3 million comprised of
              $5.4 million in process plant improvements and sustaining
              capital, plus an additional $3.9 million in exploration
              expenditures on the Minto Mine property. Some additional
              capital may be incurred in 2009 related to implementation of
              the new water management plan recently submitted to regulators;
              and

           -  Continued exploration focused on following up on the new, high
              grade, shallow Minto North discovery, both with in-fill
              drilling and exploring for more such deposits.

        -  Strong cash flow from operations based on the above noted
           production and current metal prices, combined with 16.4 million
           pounds of copper forward sold in the remainder of 2009 at an
           average price of $2.56 per pound.

        -  A preliminary economic assessment is expected to be completed in
           Q3/09 based on the new mineral resource estimate that was
           completed and announced in February 2009 for all three of the
           deposits (Main, Sumac and Esso) at the Kutcho Project. This study
           assesses potential development options, including open pit and/or
           underground extraction of some or all of the mineral resources and
           will provide the basis for additional work on the project. Only
           minimal exploration work is planned for 2009, and is primarily
           focused on regional targets.

    Conference Call Details

    Capstone will host a conference call on Friday, August 14, 2009 to discuss
these results. The conference call and webcast details are as follows:

    Date:        Friday August 14, 2009
    Time:        8:00 AM PT (11:00 AM ET)
    Dial in:     North America - 1.800.595.8550,
                 International - 1.416.644.3422
    Webcast:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2740540
    Replay:      North America - 1.877.289.8525,
                 International - 1.416.640.1917
                 Replay Pass code: 21311141 followed by the number sign.

    The conference call replay will be available until August 28, 2009. A
transcript of the call will also be made available on Capstone's website
(www.capstonemining.com) within 24 hours of the call.

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

    Forward-Looking Information

    "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 the
Company does not intend, and does not assume any obligation, to update these
forward-looking statements, except as required under applicable securities
legislation.
    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 under the Company's profile 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.

    43-101 Compliance

    Unless otherwise indicated, Capstone has prepared the technical
information in this document ("Technical Information") based on information
contained in the technical reports and news releases (collectively the
"Disclosure Documents") available under Capstone Mining Corp.'s and Sherwood
Copper Corp.'s company profile on SEDAR at www.sedar.com. Each Disclosure
Document was prepared by or under the supervision of a qualified person (a
"Qualified Person") as defined in National Instrument 43-101 - Standards of
Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI
43-101"). Readers are encouraged to review the full text of the Disclosure
Documents which qualifies the Technical Information. Readers are advised that
mineral resources that are not mineral reserves do not have demonstrated
economic viability. The Disclosure Documents are each intended to be read as a
whole, and sections should not be read or relied upon out of context. The
Technical Information is subject to the assumptions and qualifications
contained in the Disclosure Documents.

    The disclosure in this document of technical information has been
prepared under the supervision of Stephen Quin, Professional Geologist, a
Qualified Person under NI 43-101.

    
    (1) These are non-GAAP performance measures and readers should refer to
        Non-GAAP Performance Measures in the Company's Interim Management
        Discussion and Analysis for the three and six months ended June 30,
        2009 as filed on SEDAR for further details.
    





For further information:

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


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