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Capstone Reports Strong Third Quarter and Year-to-Date Financial Results

November 12, 2009

Cash Flow from Mining Operations(1) of $36.6 million in Third Quarter and $85.5 million in first 9 months of 2009

64.4 million Pounds of Payable Copper Produced at an Estimated Total Cash Cost(1) of $0.99 per payable pound

(All amounts in US$ unless otherwise specified)

VANCOUVER, Nov. 12 /PRNewswire-FirstCall/ – Capstone Mining Corp. (CS: TSX) today announced its financial results for the third quarter and nine months ended September 30, 2009. For the third quarter, Capstone reported cash flow from mining operations(1) of $36.6 million ($0.19/share) on sales of 24.6 million pounds of copper. This compares to cash flow from operations(1) of $22.6 million ($0.12/share) on sales of 17.8 million pounds of copper in the second quarter. The higher sales of copper metal are primarily a result of the timing of concentrate shipments from the Minto Mine, with two shipments in the third quarter versus only one in the second quarter. Cash flows were higher in the third quarter as a result of the higher metal sales combined with higher metal prices. During the first nine months of 2009, Capstone reported cash flow from mining operations(1) of $85.5 million ($0.47/share) on sales of 69.7 million pounds of copper. Copper produced in the first nine months at Capstone’s two mines, Cozamin and Minto, totalled 64.4 million pounds of payable copper at an estimated total cash cost(1) of $0.99 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://capstonemining.com/s/FinancialStatements.asp. This release should be read in conjunction with the third quarter 2009 financial statements and MD&A. Capstone will hold a conference call Friday November 13, 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. An updated corporate presentation, including charts summarizing the more significant financials results, is also available on the Company’s website at http://capstonemining.com/s/Presentation.asp.

“Capstone’s mining operations continue to generate strong cash flow as a result of our low cost of production and improving metal prices,” said Darren Pylot, Vice Chairman & CEO of Capstone Mining Corp. “Our continued strong cash flow from mining operations(1) of $36.6 million or $$0.19 per share in the third quarter and $85.5 million or $0.47 per share year-to-date reflects these factors” he said. “During this quarter, we continued to strengthen our balance sheet, ending the period with working capital of $106.7 million (including $94.4 million in cash), reduced our long term debt to $19.9 million, and held investments that had a market value of $32.4 million on September 30, 2009.”

“Despite some challenges, Capstone’s two operations, the Cozamin and Minto mines, continued to deliver strong results during the third quarter of 2009,” said Stephen Quin, President & COO of Capstone Mining Corp. “With these challenges now behind us, we 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 forward sales have served us well in the first nine months of the year, generating approximately $22.9 million in cash over the past nine months. We remain well exposed to upward copper price movements, having only 9.4 million pounds of copper production sold forward at $2.51 per pound in the fourth quarter 2009.”

    Highlights

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                                                                      Nine
                                                                     Months
                                          Three Months Ended         Ended
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                                      March    June 30, September  September
                                   31, 2009       2009   30, 2009   30, 2009
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    -------------------------------------------------------------------------
    Earnings (loss) for the period
     ($ millions)                     (16.2)      25.8      (10.3)      (0.7)
    -------------------------------------------------------------------------
    Earnings (loss) per share ($)     (0.10)      0.14      (0.05)     (0.00)
    -------------------------------------------------------------------------
    Including:
    -------------------------------------------------------------------------
    - Earnings from mining
       operations ($ millions)         19.7       18.6       26.7       65.0
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    - Loss on derivative
       instruments ($ millions)       (35.4)     (31.3)     (38.0)    (104.7)
    -------------------------------------------------------------------------
    - Gain on disposal of
       investments ($ millions)           -       40.7        0.1       40.8
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Adjusted net earnings(1)
     ($ millions)                      30.5       16.8       18.1       65.4
    -------------------------------------------------------------------------
    Adjusted Earnings(1)
     per share ($)                     0.19       0.09       0.09       0.36
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash flow from mining
     operations(1) ($ millions)        26.3       22.6       36.6       85.5
    -------------------------------------------------------------------------
    Cash flow from mining
     operations(1) per share ($)       0.16       0.12       0.19       0.47
    -------------------------------------------------------------------------

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    Working capital at end of
     period ($ millions)               77.0      111.6      106.7      106.7
    -------------------------------------------------------------------------

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    Copper sold - (millions lbs)       27.3       17.8       24.6       69.7
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    Payable copper produced -
     (millions lbs)                    25.1       22.2       17.0       64.4
    -------------------------------------------------------------------------
    Total cash cost per payable
     pound of copper(1) ($)            0.91       0.97       1.14       0.99
    -------------------------------------------------------------------------

    Comparative information is not provided here as 2008 would only include
    the pre-merger Sherwood results.

    Overview

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

        -  Recorded a net loss of $10.3 million or $0.05 per common share
           which mainly included:

           -  Earnings from mining operations of $26.7 million; and

           -  Loss of $38.0 million on derivative instruments, which is
              comprised of:

              -  A realized loss of $1.0 million on instruments 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 $18.1 million or $0.09 per common
           share, after making adjustments for certain non-cash and one-time
           items.

        -  Generated cash flow from mining operations(1) of $36.6 million or
           $0.19 per common share.

        -  Working capital, which includes $94.4 million in unrestricted
           cash, was $106.7 million at September 30, 2009 compared with
           $111.6 million at June 30, 2009.

        -  Sold 24.6 million pounds of copper, 2.9 million pounds of zinc,
           2.8 million pounds of lead, 9,449 ounces of gold and 446,113
           ounces of silver.

        -  Produced a total of 17.0 million pounds of payable copper at an
           estimated total cash cost(1) of $1.14 per pound of payable copper.

    Financial and Production Highlights for the Nine Months Ended
    September 30, 2009

        -  Recorded a net loss of $0.7 million or $0.00 per common share
           which mainly included:

           -  Earnings from mining operations of $65.0 million;
           -  Gain on disposal of investments of $40.8 million; and
           -  Net loss of $104.7 million on derivative instruments, which is
              comprised of:

              -  A realized gain of $22.9 million on derivative instruments
                 settled during the period; and
              -  An unrealized non-cash loss of $127.6 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 $65.4 million, or $0.36 per common
           share, after making adjustments for certain non-cash and one-time
           items.

        -  Generated cash flow from mining operations(1) of $85.5 million or
           $0.47 per common share.

        -  Working capital, which includes $94.4 million in unrestricted
           cash, increased to $106.7 million at September 30, 2009 from $35.4
           million at December 31, 2008.

        -  Repaid $54.9 million of debt related to the project loan facility,
           capital leases and the convertible debentures

        -  Sold 69.7 million pounds of copper, 10.4 million pounds of zinc,
           6.6 million pounds of lead, and 26,811 ounces of gold and
           1,323,270 ounces of silver.

        -  Produced a total of 64.4 million pounds of payable copper at an
           estimated total cash cost(1) of $0.99 per pound of payable copper.

    Additional Highlights

        -  Purchased three mineral claims that are within the immediate area
           of the Cozamin Mine resources and reserves, opening up potential
           for the discovery and definition of additional mineral resources
           on these newly acquired claims.

        -  Issued a Preliminary Economic Assessment on the Kutcho Project
           that defined a higher grade, lower risk underground development
           scenario with a significantly reduced environmental footprint.
           Recommendations for going forward included focusing on
           opportunities for enhanced returns from improved metallurgical
           performance and reduced energy costs.

        -  Announced additional high grade results from drilling on the Minto
           North deposit as infill drilling was completed in preparation for
           incorporation of this mineral resource into the Phase IV expansion
           of the Minto Mine.

        -  Received permission from regulators to discharge excess run-off
           water collected in the Minto Mine open pit following an unusually
           high freshet in Q2/09. Discharge continued throughout Q3/09,
           during which there was no access to ore in the pit, forcing the
           mill to rely on lower grade stockpiles for the period. Access to
           the pit was re- established at the end of Q3/09.

        -  Announced delays in commencing production from higher grade
           portions of the Cozamin deposit, restricting mine production to
           less than the available mill capacity.

    Highlights Subsequent to the Nine Months Ended September 30, 2009

        -  Discharge of excess water from the Minto Mine open pit was
           essentially complete in the first week of October, allowing
           extraction of high grade ore from the open pit for the balance of
           the year. Access to the upper benches of pit were re-established
           by the end of Q3/09, while pumping of limited quantities of
           remaining water continued from deeper areas of the pit into Q4/09.

        -  Completed development of the higher grade portions of the Cozamin
           deposit and commenced production in late October 2009.

        -  Purchased 4.5 million units in Nevada Copper Corp. ("Nevada
           Copper") by way of a private placement, each unit consisting of
           one common share and one-half of a common share purchase warrant.
           The cost of each unit was C$2.50 for a total investment of C$11.25
           million. Each whole warrant is exercisable into one common share
           for a period of two years from the closing date at a price of C
           $3.00 per common share. The investment in Nevada Copper gives
           Capstone exposure to a large tonnage, relatively higher grade
           copper deposit located in a mining friendly jurisdiction.

    Results of Operations

        -  Cozamin Mine:

           -  Access to some of the wider, higher grade ore zones was
              delayed, resulting in mine output being limited to less than
              mill capacity;

           -  Produced 8.2 million pounds of contained copper in
              concentrates, along with by-product 3.2 million pounds of zinc,
              5.1 million pounds of lead and 0.4 million ounces of silver;

           -  Processed 236,938 tonnes (2,581tpd) of ore averaging 1.73%
              copper, 1.51% zinc, 0.89% lead and 67 grams per tonne ("g/t")
              silver, with mill throughput constrained by ore availability
              from underground;

           -  Produced 14,710 dmt of copper concentrate averaging 25.3%
              copper; and

           -  Produced 7.8 million pounds of payable copper at a total cash
              cost(1) of US$0.75 per pound.

        -  Minto Mine:

           -  Benefited from the Phase III mine expansion to a nominal 3,200
              tpd of mill throughput (completed at the end of the first
              quarter), supported by increased mine production, with higher
              throughput somewhat offsetting lower stockpile grades while
              access to the pit was limited;

           -  Produced 9.5 million pounds of contained copper in
              concentrates, along with 3,698 ounces of gold and 45,198 ounces
              of silver as by-products;

           -  Processed 269,411 tonnes (2,870 tpd) of ore averaging 1.76%
              copper, 0.6g/t gold and 6.7g/t silver and a single day record
              of 4,014 tonnes processed in July and a monthly record of
              95,869 tonnes processed in September;

           -  Produced 10,834 dmt of copper concentrate averaging 40.3%
              copper; and

           -  Produced 9.1 million pounds of payable copper at a total cash
              cost(1) of US$1.47 per pound.

    Outlook

    Despite production delays at both the Cozamin and Minto mines, the current
year continues to unfold positively for Capstone, based on the following:

        -  Forecast production of approximately 95 million of copper in
           concentrates at a total estimated cash cost(1) of approximately
           $1.00 per pound, net of by product credits, at the lower end of
           its prior production guidance range for 2009.

        -  At the Cozamin Mine:

           -  The Company previously provided guidance that the Cozamin Mine
              production in 2009 was expected to total 35 to 40 million
              pounds of copper in concentrates, with by-product lead, zinc
              and silver. This forecast is dependent on sustaining
              production from the wider, higher grade stopes for the balance
              of the year.

           -  This production has and 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 late 2009. Grades are forecast to
              average approximately 2% copper for the year.

           -  As noted in prior disclosure, access to some of these wider,
              higher grade stopes took longer than anticipated, which
              resulted in the third quarter having a lower than average
              copper grade, but higher lead and zinc grades, for the quarter.
              However, given the mill's ability to exceed design throughput
              on a sustained basis (when feed is available) and the above
              average grade and thickness of the new stopes recently brought
              on line, production is expected to remain within guidance for
              2009.

           -  Following the investment in production expansions in prior
              years, capital expenditures of only $8.3 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 increased
              underground mining rate 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 at
              September 30, 2009, $3.7 million of the forecast capital had
              been spent.

           -  As a result of the recently completed assessment of the
              exploration potential of the Cozamin property, plans for
              surface exploration at Cozamin have been expanded, and now
              include airborne and ground geophysics, soil geochemistry and
              detailed mapping of the Cozamin property, resulting in
              anticipated expenditures of $0.8 million in 2009, and providing
              the basis for an exploration drilling program in 2010.

           -  Following the acquisition of the three new claims immediately
              adjacent to the resources and reserves at Cozamin, drifting is
              underway to provide access for evaluation of these new claims
              in 2010.

        -  At the Minto Mine:

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

           -  Now that discharge of the excess water from the pit is
              essentially complete, the Company is focused on extracting high
              grade ore from the Phase 3 South area of the pit and, combined
              with the mill's proven ability to process higher quantities of
              ore, the Company anticipates a strong fourth quarter in 2009.

           -  Overall production is forecast to come in at approximately 55
              million pounds in 2009, slightly below the range of the prior
              forecast of 60 to 65 million pounds.

           -  An independent pre-feasibility study, which is designed to
              convert a portion of the mineral resources discovered since the
              last resource update in 2007 to mineral reserves, and to
              incorporate a further Phase IV increase in mining and
              throughput to 4,000 tpd, is nearing completion. Additional
              consideration of further expansions, either to a larger open
              pit operation or a combined open pit-underground operation are
              underway;

           -  Capital expenditures (excluding deferred stripping) of
              approximately $10.5 million are forecast for the Minto Mine in
              2009, which include sustaining capital and modest efficiency
              improvements and advancing the technical and permitting work
              related to the proposed Phase IV mine expansion (to 4,000 tpd).
              Also included in this capital amount is $5.0 million for the
              manufacturing of a larger scale water treatment plant and water
              diversion system designed to eliminate the need for future one
              off water discharge permits and $0.9 million for the
              installation of a new hydra-cone crusher to replace contract
              secondary crushing and to sustain planned Phase IV mill
              capacities. As at September 30, 2009, $6.4 million of this
              capital had been spent;

           -  Continued exploration is focused on the discovery of new, high
              grade, deposits using a combination of geophysics and drilling.
              A total of $4.9 million is expected to be spent on exploration
              during 2009.

        -  Continued strong cash flow from operations based on the above
           noted production outlook and current higher metal prices, combined
           with 9.4 million pounds of copper forward sold in Q4/09 at an
           average price of $2.51 per pound.

Conference Call Details

Capstone will host a conference call on Friday, November 13, 2009 to discuss these results. The conference call and webcast details are as follows:

    Date:     Friday November 13, 2009
    Time:     8:00 AM Pacific Time (11:00 AM Eastern Time)
    Dial in:  North America - 1.800.589.8577, International - 1.416.644.3422
    Webcast:  http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2844820
    Replay:   North America - 1.877.289.8525, International - 1.416.640.1917
              Replay Pass code:  4173297 (followed by the number sign).

The conference call replay will be available until November 27, 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”, “outlook”, “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 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 and Telesforo Martinez, General Manager, reviewed the Technical Information related to the Cozamin Mine.

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

SOURCE Capstone Mining Corp.


Source: newswire



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