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Capstone Reports Strong Production & Cash Operating Costs for the First Half of 2009

Posted on: Wednesday, 15 July 2009, 06:15 CDT

VANCOUVER, July 15 /PRNewswire-FirstCall/ --

- 49.2 Million pounds of Copper in Concentrates With an Estimated Total Cash Cost(1) of US$0.93 per Pound of Payable Copper

Capstone Mining Corp. (CS: TSX) today announced its operating results for the three and six months ended June 30, 2009, with strong production and operating costs from its two operations, the Cozamin and Minto mines. Combined production totalled 23.1 and 49.2 million pounds of copper in concentrates in the second quarter and first six months, respectively, with additional significant by-products of lead, zinc, silver and gold. The total cash costs(1), net of estimated by-product credits and selling costs, were US$0.97 and US$0.93 per pound of payable copper produced, respectively.

"Capstone's two operations, the Cozamin and Minto mines, turned in another strong quarter, bringing first half production to 49.2 million pounds of copper in concentrates at a total cash cost of just US$0.93 per pound of payable copper," said Stephen Quin, President & COO of Capstone Mining Corp. "These results are a reflection of the quality of our operating teams and our assets."

------------------------------------------------------------------------- Q1 2009 Q2 2009 YTD 2009 ------------------------------------------------------------------------- Copper in concentrates (millions of pounds) ------------------------------------------------------------------------- - Cozamin 9.8 9.9 19.7 ------------------------------------------------------------------------- - Minto 16.3 13.2 29.5 ------------------------------------------------------------------------- Total 26.1 23.1 49.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total Cash Costs(1) (US$/lb) ------------------------------------------------------------------------- - Cozamin $1.00 $0.81 $0.90 ------------------------------------------------------------------------- - Minto((x)) $0.86 $1.08 $0.96 ------------------------------------------------------------------------- Average $0.91 $0.97 $0.93 ------------------------------------------------------------------------- ((x)) Minto's operating costs are adjusted to exclude mining of ore and waste not related to concentrate produced in the period, these costs are capitalized or inventoried in the financial statements, then expensed when the associated ore is processed.

Operational Highlights for the three and six months ended June 30, 2009

The following is a summary of operational highlights for Capstone during the second quarter and six months, respectively, ended June 30, 2009:

- Production of 23.1 and 49.2 million pounds of contained copper, respectively, which is within previously reported guidance of 95-105 million pounds of copper in concentrates for 2009. - By-product production of 3.3 and 5.7 million pounds of zinc, 2.3 and 3.5 million pounds of lead and 455,566 and 875,520 ounces of silver in concentrates, for the second quarter and first six months, respectively. Final gold production is not available since assaying is done off site, but is estimated at 7,564 and 16,091 ounces. - Production of 22.2 and 47.4 million pounds of payable copper in concentrate for the second quarter and first six months of 2009, respectively. - Total cash cost per pound of payable copper produced(1) of US$0.97 and US$0.93 in the second quarter and first six months, respectively, versus previously published guidance of approximately US$1.00 per pound, which represents good progress in cost reductions since year end 2008 as the expansions at both operations ramped up to design capacity (and more). Readers should note that some stripping in excess of that needed to sustain operations at the Minto Mine was inadvertently not capitalized in accordance with Capstone's (and formerly Sherwood's) policy in the first quarter of 2009 and costs for this period have been adjusted to make the first quarter comparable to all prior reporting periods. - Cozamin Mine results for the three and six months ended June 30, 2009, respectively, were: - Produced 9.9 and 19.7 million pounds of copper contained in concentrates, along with by-products of 3.3 and 5.7 million pounds of zinc, 2.3 and 3.5 million pounds of lead and 390,639 and 708,602 ounces of silver, respectively, for the second quarter and first six months of 2009; - Processed 249,975 tonnes (2,741 tpd) and 498,300 tonnes (2,753 tpd) of ore averaging 1.92% and 1.94% copper, 1.01% and 0.91% zinc, 0.61% and 0.47% lead, with 66 and 61 grams per tonne ("g/t") silver respectively, for the second quarter and first six months; - Total tonnes processed was below potential capacity of the mine because of (1) the five day shutdown related to Mexican government order aimed to slow the spread of the H1N1 flu virus and (2) slower than anticipated timing for bringing the high grade, large scale stopes on line, which resulted in the plant running out of feed on some days. When feed was available, the plant typically averaged 3,200 to 3,500tpd and achieved a single day throughput record of 4,088 tonnes processed in June. - Produced 17,595 and 36,056 dry metric tonnes ("dmt") of copper concentrate averaging 25.5% and 24.8%, 3,312 and 5,727 dmt of zinc concentrate averaging 45.5% and 45.2% and 1,500 and 2,282 dmt of lead concentrate averaging 70.5% and 69.4%; - Estimated total cash cost(1), net of estimated by-product credits and estimated selling costs, was US$0.81 and $0.90 per pound of payable copper produced; and - Announced a new life-of-mine plan and mineral reserve estimate for the Cozamin Mine on June 1, 2009. However, the process plant has Demonstrated sustained ability to exceed the assumptions used in the life of mine plan for throughput, copper recoveries and copper concentrate grades, suggesting potential for sustained higher than planned copper production, once the larger stopes discussed above are brought on line. - Minto Mine results for second quarter and the six months ended June 30, 2009, respectively, were: - Produced 13.2 and 29.4 million pounds of copper contained in concentrates, along with by-product 64,927 and 166,918 ounces of silver and gold estimated at 7,564 and 16,091 ounces, respectively, for the second quarter and first six months; - Processed 267,254 tonnes (2,937 tpd) and 500,783 tonnes (2,767 tpd) of ore averaging 2.41% and 2.86% copper, an estimated 1.0g/t and 1.3g/t gold and 9.6g/t and 12.7g/t silver; - Plant throughput exceeded budget during the second quarter, and continued to trend upwards during the three month period, typically averaging 3,200 to 3,500 tonnes per operating day (excluding maintenance days) and reaching up to 3,700 tonnes processed on individual days; - Produced 14,667 and 31,950 dmt of copper concentrate averaging 40.8% and 41.6%; - Produced 12.7 and 28.5 million pounds of payable copper at an estimated total cash cost(1) of US$1.08 and $0.96 per pound of payable copper; - Copper production in Q2/09 was somewhat reduced as compared to Q1/09 as a result of excess spring run-off waters being diverted into the open pit to ensure no non-compliant discharges occurred, thereby restricting access to higher grade ore in the pit. This was anticipated in the budget for 2009 and milling operations continued uninterrupted from stockpiled material, albeit of somewhat lower grade than in prior months. However, freshet began a few days earlier than budgeted and more water than was anticipated was diverted into the pit. The latter will delay re- entry (see 'Outlook' below) to the pit and result in the operation continuing to rely on lower grade stockpiles until access to the pit is regained; - Announced updated mineral resource estimate for Minto on June 9, 2009, which demonstrated a 32% increase in contained copper over the prior estimate reported in early 2007, and a 163% increase since the acquisition of the Minto property in 2005. - Kutcho Project: - Completed evaluation of options for the development of a smaller tonnage, higher grade operation with robust project economics, with the optimal scenario for an entirely underground mine to be detailed in a preliminary economic assessment to be released in Q3/09.

Operating Details - Cozamin Mine

Key operating statistics for the Cozamin Mine for the first and second quarter and year-to-date for 2009 are presented below:

------------------------------------------------------------------------- Q1 2009 Q2 2009 YTD 2009 ------------------------------------------------------------------------- Production(2) (contained in concentrates) ------------------------------------------------------------------------- - Copper (000s pounds) 9,812 9,881 19,693 ------------------------------------------------------------------------- - Lead (000s pounds) 1,155 2,331 3,486 ------------------------------------------------------------------------- - Zinc (000s pounds) 2,388 3,325 5,713 ------------------------------------------------------------------------- - Silver (ounces) 317,963 390,639 708,602 ------------------------------------------------------------------------- Mine ------------------------------------------------------------------------- - Tonnes of ore mined 248,507 243,494 492,001 ------------------------------------------------------------------------- Mill ------------------------------------------------------------------------- - Tonnes processed 248,325 249,975 498,300 ------------------------------------------------------------------------- - Tonnes processed per day 2,759 2,741 2,753 ------------------------------------------------------------------------- - Copper grade (%) 1.96 1.92 1.94 ------------------------------------------------------------------------- - Lead grade (%) 0.33 0.61 0.47 ------------------------------------------------------------------------- - Zinc grade (%) 0.81 1.01 0.91 ------------------------------------------------------------------------- - Silver grade (g/t) 56 66 61 ------------------------------------------------------------------------- Recoveries ------------------------------------------------------------------------- - Copper (%) 91.4 93.4 92.4 ------------------------------------------------------------------------- - Lead (%) 64.8 69.4 67.5 ------------------------------------------------------------------------- - Zinc (%) 53.9 59.5 56.5 ------------------------------------------------------------------------- - Silver (%) 71.0 73.6 72.5 ------------------------------------------------------------------------- Concentrate(2) ------------------------------------------------------------------------- - Copper (dmt) 18,461 17,595 36,056 ------------------------------------------------------------------------- - Copper (%) 24.1 25.5 24.8 ------------------------------------------------------------------------- - Silver (g/t) 463 561 511 ------------------------------------------------------------------------- - Lead (dmt) 782 1,500 2,282 ------------------------------------------------------------------------- - Lead (%) 67.1 70.5 69.4 ------------------------------------------------------------------------- - Silver (g/t) 1,738 1,511 1,589 ------------------------------------------------------------------------- - Zinc (dmt) 2,415 3,312 5,727 ------------------------------------------------------------------------- - Zinc (%) 44.8 45.5 45.2 ------------------------------------------------------------------------- On site Operating Costs (US$/t milled)(1) US$34.97 US$34.03 US$34.50 ------------------------------------------------------------------------- Total cash cost per pound of payable copper(1) US$1.00 US$0.81 US$0.90 ------------------------------------------------------------------------- (2) Adjustments based on final settlements will be made in future periods.

Overall, the Cozamin Mine performed well, despite the Mexican Government ordered 5-day production interruption related to the H1N1 flu virus and shortages of feed related to delays in bringing the new, higher grade stopes on line. Development of very wide (20-30m) high grade areas of the Cozamin deposit were delayed because the wide mineralization extended deeper than anticipated from drilling and this mineralization needs to be extracted from the bottom up in order to ensure geotechnical stability. As a result, development had to be pushed deeper to get to the bottom of the high grade and, in the interim, production had to come from shallower areas with lower copper but higher lead content.

Development of the wider ore zones should be completed in Q3/09 and production is then expected to ramp up very quickly. In addition, access to mining areas to the west and to the east of the present zone will provide additional mining zones in Q3/09. Improved metallurgical performance since March, resulting from some improved reagents and regrinding of the copper-lead concentrate, has resulted in sustained higher copper recoveries (93.4% in Q2/09 vs. 91.4% in Q1/09) and concentrate grade (25.5% in Q2/09 vs. 24.1% in Q1/09), which performance is expected to be sustainable over the longer term but is not factored into the recently announced life-of-mine plan.

During the three months ended June 30, 2009, the Cozamin Mine shipped and recorded as revenue 17,139 dmt of copper, 1,487 dmt of lead and 8,810 dmt of zinc concentrates. During the first six months of 2009, a total of 36,620 dmt of copper, 2,913 dmt of lead and 9,812 dmt of zinc concentrates were shipped and recorded as revenue.

Operating Details - Minto Mine

Key operating statistics for the Minto Mine for the first and second quarter and year-to-date for 2009 are presented below:

------------------------------------------------------------------------- Q1 2009 Q2 2009 YTD 2009 ------------------------------------------------------------------------- Production(3) (contained in concentrates) ------------------------------------------------------------------------ - Copper (000s lbs) 16,230 13,178 29,408 ------------------------------------------------------------------------- - Gold (oz)(2) 8,527 7,564 16,091 ------------------------------------------------------------------------- - Silver (oz) 101,991 64,927 166,918 ------------------------------------------------------------------------- Mining ------------------------------------------------------------------------- - Waste (tonnes) 2,196,728 2,845,300 5,042,028 ------------------------------------------------------------------------- - Ore (tonnes) 292,593 289,010 581,603 ------------------------------------------------------------------------- - Total material mined (tonnes) 2,489,321 3,134,310 5,623,631 ------------------------------------------------------------------------- Milling ------------------------------------------------------------------------- - Tonnes processed 233,529 267,254 500,783 ------------------------------------------------------------------------- - Tonnes processed per day 2,595 2,937 2,767 ------------------------------------------------------------------------- - Copper grade (%) 3.39 2.41 2.86 ------------------------------------------------------------------------- - Gold grade (g/t)(2),(3) 1.57 0.97 1.28 ------------------------------------------------------------------------- - Silver grade (g/t) 16.0 9.6 12.7 ------------------------------------------------------------------------- Recoveries ------------------------------------------------------------------------- - Copper (%) 93.0 92.6 93.0 ------------------------------------------------------------------------- - Gold (%)(2),(3), 72.8 71.9 72.0 ------------------------------------------------------------------------- - Silver (%) 83.5 79.6 81.7 ------------------------------------------------------------------------- Concentrate ------------------------------------------------------------------------- - Dry tonnes produced 17,283 14,667 31,950 ------------------------------------------------------------------------- - Copper grade (%) 42.6 40.8 41.6 ------------------------------------------------------------------------- - Gold grade (g/t)(2),(3) 15.53 12.5 13.9 ------------------------------------------------------------------------- - Silver grade (g/t) 183 139 162 ------------------------------------------------------------------------- On site Operating Costs(1) (US$/t milled)(4) US$47.85 US$44.52 US$46.01 ------------------------------------------------------------------------- Total cash cost per pound(1) of payable copper(4) US$0.86 US$1.08 US$0.96 ------------------------------------------------------------------------- (2) Gold is not assayed on site, resulting in a significant lag in receiving this data. (3) Adjustments based on final settlements will be made in future periods. (4) Minto's operating costs are adjusted to exclude mining of ore and waste not related to concentrate produced in the period, these costs are capitalized or inventoried in the financial statements, then expensed when the associated ore is processed.

The Minto Mine exceeded budgeted Phase III throughput capacity in Q2/09, which budget factors in maintenance and availability versus the nominal design capacity of 3,200tpd. The Phase 3 North pit pushback was completed in March and attention was focused on stripping the Phase 3 South pushback and commencing the Phase 4 pit pushback, with mill production coming entirely from stockpiles throughout the quarter. As with prior pushbacks, the Minto Mine depletes stockpiles in grade order, from highest to lowest, until the high grade from the Phase 3 South pit pushback is accessed later in 2009. As noted above, excess water, over and above what could be contained in the water storage pond, was diverted into the open pit during freshet in order to prevent a non-compliant discharge. This diversion was anticipated in the budget for 2009. However, the snowpack was greater than usual, resulting in more water being diverted into the open pit than planned. The Minto Mine has received approvals from regulators to discharge approximately half of the excess water, and is doing so, and is working on the appropriate measures for the treatment and discharge of the remainder of the excess water. The timing of the discharge will affect the timing of re-entry into the open pit and therefore access to higher grade ore in the pit bottom. In the meantime, milling operations continue uninterrupted from available stockpiles and stripping of the Phase 4 pushback is well advanced and continuing. See 'Outlook' below.

During the three months ended June 30, 2009, the Minto Mine shipped and recorded as revenue 9,741 dmt of copper concentrate. For the six months a total of 29,385 dmt were shipped and recorded as revenue. The ice bridge across the Yukon River closed in early April due to the spring break up and, as expected, the barging season commenced in early June 2009, limiting the amount of concentrate that could be trucked from the mine during the second quarter. A minimum of two 10,000 dmt shipments are expected during the third quarter. During the period, final pricing on concentrates shipped in prior periods, settled positively, as a result of higher copper prices. For 2009, Minto's concentrate off-taker has elected to settle on the basis of shipment date plus one month, as opposed to plus three months in 2008, reducing the time lag between provisional payment and final settlement, and likely thereby reducing the volatility of provisional pricing adjustments.

Outlook

As a result of the timing of a number of events at the Cozamin and Minto mines, Capstone anticipates that the third quarter 2009 will be a below average production quarter and the fourth quarter 2009 will be above average. These events include:

1. Completing access to the higher grade, very wide mining areas at the Cozamin Mine during Q3/09, which will result in mine production coming from slightly lower copper (but higher lead and zinc) grade areas until this highly productive area is fully developed. This could limit mill throughput to around design capacity, which is well below recently achieved throughput, but then should ramp up significantly in Q4/09.

2. Until the water is removed from the open pit, the Minto Mine will be restricted to processing stockpiled ore, of which there is sufficient to sustain operations for several months. As noted above, the Minto Mine is already discharging some of the excess water captured in the pit and is working on measures for the discharge of the remainder. High grade ore stripped in the Phase 3 south pit pushback was already exposed, drilled and blasted prior to the freshet inflow, but not removed from the pit, which ore will be readily available as soon as the water level is reduced to the level of the ore.

3. The Minto Mine has been working on a new water management plan for the site for the past two plus years to address higher quantities of water within the Minto Mine site than were anticipated in the original 1990's permitting process. This plan should be submitted to regulators during July 2009 and is intended to eliminate the need for one off discharge approvals.

4. Waste stripping for the Phase 4 north pit pushback is proceeding on plan, which should expose ore in late 2009. As a result of both the Phase 3 south and Phase 4 north pushbacks nearing completion, the Minto Mine will have considerable high and medium grade ore available for processing in the latter part of 2009 and in 2010.

Overall, taking into the account the above items, combined with their anticipated resolution and the proven capacity of both the Cozamin and Minto mines to exceed design mill throughput, Capstone anticipates it will meet its production guidance for 2009.

Second Quarter Financial Results Timing

Capstone will report its second quarter 2009 financial results on Thursday, August 13, 2009 and will host a conference call and webcast to discuss these results as noted below. Conference call and webcast details are as follows: Date: Friday August 14, 2009 Time: 8:00 AM PST (11:00 AM EST) Dial in: North America - 1-800-595-8550, International - 1-416-644-3422 Webcast: 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 number sign.

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

(1) These are non-GAAP performance measures and readers should refer to Non-GAAP Performance Measures note at the end of this news release for further details.

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 Capstone Mining Corp. (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 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. There can be 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 news release ("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 following employees of Capstone, each a Qualified Person, reviewed Technical Information contained in this news release: Robert Barnes, Professional Engineer reviewed Technical Information related to the Cozamin Mine and Stephen Quin, Professional Geologist reviewed all Technical Information in this news release. In addition, Randall Thompson, General Manager, reviewed Technical Information related to the Minto Mine.

(1) Non-GAAP Performance Measures

"Total Cash Cost per Pound of Payable Copper" and "On site operating costs per tonne milled" are Non-GAAP Performance Measures. These performance measures are included because these statistics are key performance measures that management uses to monitor performance. Management uses these statistics to assess how the Company is performing to plan and to assess the overall effectiveness and efficiency of mining operations. These performance measures do not have a meaning within GAAP and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with GAAP.

For further information: about Capstone, please contact: Darren Pylot, Vice Chairman & CEO or Stephen Quin, President & COO Or Mark Patchett, Investor Relations, at +1-604-684-8894 or toll free at +1-866-684-8894; info@capstonemining.com

SOURCE Capstone Mining Corp.

Source: PR Newswire

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