Capstone and Mantos Copper Combine to Create Capstone Copper, a Premier Copper Producer with Transformational Near-Term Growth
November 30, 2021
CAPSTONE AND MANTOS COPPER COMBINE TO CREATE CAPSTONE COPPER, A PREMIER
COPPER PRODUCER WITH TRANSFORMATIONAL NEAR-TERM GROWTH
(All amounts in US$ unless otherwise specified)
Vancouver, British Columbia - Capstone Mining Corp. (“Capstone” or the “Company”) (TSX:CS) and
Mantos Copper (Bermuda) Limited (“Mantos”) are pleased to announce that they have entered into a
definitive agreement (the “Agreement”) to combine pursuant to a plan of arrangement under t he
Business Corporations Act (British Columbia) (the “Transaction”). Upon completion of the Transaction,
Mantos will be renamed Capstone Copper Corp. (“Capstone Copper”), and will remain headquartered
in Vancouver, B.C. Capstone Copper will apply to the Toronto Stock Exchange to list the Capstone
Copper shares on the Toronto Stock Exchange. Pursuant to the Agreement, each Capstone shareholder
will receive 1 newly issued Capstone Copper share per Capstone share (the “Exchange Ratio”) and the
existing Mantos shareholders will continue to hold Capstone Copper shares. Upon completion of the
Transaction, former Capstone and Mantos shareholders will collectively own 60.75% and 39.25% of
Capstone Copper, respectively, on a fully-diluted share basis.
Following completion of the Transaction:
• John MacKenzie, Executive Chairman and Founder of Mantos, will become the Chief Executive
Officer of Capstone Copper
• Darren Pylot , President & CEO and Director of Capstone, will become Executive Chair of
Capstone Copper
• The new board of directors will be composed of seven directors, including the Executive Chair,
CEO and Lead Independent Director, George Brack
• Giancarlo Bruno, CEO of Mantos, will be responsible for the Chilean operations of the combined
business
Concurrent with the announcement of the Transaction:
• Cashel Meagher, formerly SVP and COO of Hudbay Minerals Inc., will become President & COO
of Capstone, effective January 5, 2022
• Brad Mercer, SVP and COO of Capstone, will transition to a newly created role as SVP, Strategic
Projects, effective January 5, 2022
The Transaction will establish Capstone Copper as a premier copper producer with a diversified portfolio
of high-quality, long-life operating assets focused in the Americas with an extensive pipeline of near-
term organic growth opportunities.
Darren Pylot stated, “ This transaction is in-line with our strategic vision of growing a multi -asset and
sustainable copper business in the Americas . The combination of these two companies provides
transformational near-term growth and further deepens our bench strength, particularly with respect to
mine building, operational and leadership experience. I’m excited to join forces with John MacKenzie in
one integrated team. John brings impressive global mining experience and will be a great addition to
further enhance our culture of operational excellence across the combined portfolio.” Mr. Pylot added,
“I would also like to welcome Cashel Meagher a s President & COO. Cashel is a proven mine builder
and operator with extensive experience in South America. He is an innovative leader and will head our
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plan for continuous improvement. I would like to thank Brad Mercer (SVP & COO) who has been an
instrumental leader in the organization. He will now lead key growth projects in North America as SVP,
Strategic Projects. Copper is increasingly being recognized as a critical metal to a greener future, and
we continue to strive to be a significant producer of responsible copper while strengthening communities
by building resilient operations.”
John MacKenzie said, “I am delighted by the opportunity to lead Capstone Copper at this exciting time
and to help deliver on a truly transformational growth story. I am incredibly passionate about helping to
build a Canadian -based copper champion from a solid foundation of long -life assets with a strong
presence in South America, having spent over ten years of my professional mining career in Chile. Over
the past decade, I’ve closely monitored the progress at Santo Domingo and I see meaningful district
scale synergies with Mantoverde as well as further expansion opportunities throughout the combined
portfolio. I firmly believe that copper is an essential component of the global economy’s transition to net
zero, and Capstone Copper will play an important role in its delivery in a sustainable and responsible
manner.”
STRATEGIC RATIONALE
Key strategic, financial and operational advantages for the combination include:
Diversified Operating Platform in Prolific Mining Districts with Long-Life Assets in the Americas
• High quality operations with a combined 2021 copper production base of over 175,000 tonnes
of copper from four mines located in districts with deep mining history
• Combined contained copper reserves of 4.9 million tonnes and (additional) contained copper
M&I resources of 5.5 million tonnes, on an attributable basis
Significant Growth Potential with Robust Pipeline of Fully-permitted, Multi -staged Growth
Projects Across the Portfolio
• Over 45% production growth by 2024 to ~260,000 tonnes of copper per annum from fully-
financed projects with Mantos Blancos currently ramping up and construction underway at
Mantoverde
• Further transformational growth of approximately 45% to ~380,000 tonnes of copper per annum
with the development of Santo Domingo
• Additional upside with copper production expansion projects across the combined portfolio and
the cobalt opportunities at Mantoverde and Santo Domingo
Strong Financial Position and EBITDA Generation
• Pro-forma net cash 1 of approximately $220 million and available revolving credit facility of
$225 million
• Expected to generate cumulative consolidated EBITDA2 of over $1.3 billion over the next two
years at $4.00 per pound copper
• Fully-financed growth at Mantoverde with commercial sulphide production expected in 2024
1 Reflects Capstone’s net cash position of $208 million and Mantos’ net cash position of approximately $15 million (on a consolidated basis),
as at September 30, 2021. Net cash is an alternative performance measure
2 Adjusted EBITDA is an alternative performance measure; Adjusted EBITDA shown on a consolidated basis (100%) though Mantos owns
70% of the Mantoverde mine, because we expect to fully consolidate its results in our financial statements. Adjusted EBITDA a lso excludes
corporate G&A. Refer to the Company’s MD&A for the three and nine months ended September 30, 2021 for more information on alternative
performance measures
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A Unique Opportunity to Unlock District Scale Synergies for Mantoverde and Santo Domingo
• Mantos’ existing Mantoverde operation is located approximately ~30km southwest of the Santo
Domingo project
• Infrastructure synergies include opportunities to share critical off-site items including desalination
plant, power, roads, pipeline and port facilities, providing economic benefits and a reduced
environmental footprint by avoiding unnecessary duplication of water and transportation
infrastructure
• Excess electrowinning capacity at Mantoverde to potentially process Santo Domingo oxide
material and additional low-grade sulphides enabled by Jetti catalytic leach technologie s which
Capstone has been first to implement on a commercial scale at Pinto Valley
• Potential c obalt plant at Santo Domingo also enables additional cobalt production from
Mantoverde while by -product sulphuric acid production can be used internally to further lower
operating costs
Experienced Mine Building and Operational Leadership Team Focused on Value Creation
• Combines experienced public company leadership and diverse bench strength in operational
and exploration excellence with an experienced mine operating and building team in Chile
consisting of 2,500 employees and contractors
• Enhancement of executive team with the inclusion of John Mac Kenzie as CEO and Cashel
Meagher as President and COO , both of whom bring significant mine building and operating
experience in South America
• Value creation at Santo Domingo to benefit from Mantos Copper team’s success in permitting,
financing, and constructing Mantos Blancos (construction complete with ramp -up ongoing) and
Mantoverde (construction underway)
Committed to the Highest Standards of ESG
• Committed to creating and preserving value for all stakeholders while safeguarding the health
and safety of people, minimizing the impact of our activities on the ecosystem, following the new
Global Industry Standard on Tailings Management, respecting the conditions of the natural
environment and communities in which we operate to the highest standards of ESG, and seeking
further ways to reduce the carbon footprint of our business
• Targeting Copper Mark status at all operations
TRANSACTION CONDITIONS AND TIMING
The Transaction will be effected by way of a plan of arrangement under the Business Corporations Act
(British Columbia). Upon completion of the Transaction, all Capstone common shares will be exchanged
for newly issued Capstone Copper shares, based on the Exchange Ratio. The Transaction will require
the approval of: (i) 66 2/3% of Capstone's shareholders, (ii) 66 2/3% of Capstone's shareholders and
incentive award holders voting together as a single class, and (iii) "min ority approval" (as defined in
Multilateral Instrument 61 -101 - Protection of Minority Security Holders in Special Transactions) of
Capstone's shareholders.
The Transaction is also subject to receipt of Competition Act (Canada) approval, receipt of United States
Hart-Scott-Rodino Antitrust Improvements Act approval, the approval of the Mexican Federal Economic
Competition Commission, approval of the Toronto Stock Exchange, consents from certain third parties
and other customary closing c onditions. The Arrangement Agreement includes a non -solicitation
provision, a right to match a superior proposal and a C$75 million termination fee payable in certain
circumstances.
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Officers and directors of Capstone, along with Capstone’s largest shareholder , have entered into
support and voting agreements, agreeing to vote their shares in favour of the Transaction (representing
approximately 26.5% of the issued and outstanding common shares of Capstone).
Upon completion of the Transaction, Mantos’ largest shareholder, funds managed by Orion Resource
Partners (“Orion”), will become an approximately 32% shareholder of Capstone Copper. Pursuant to a
Registration and Board Nomination Rights Agreement, Orion will have the right to nominate up to two
directors to the Capstone Copper board and has agreed to certain restrictions on its ability to sell
Capstone Copper shares for up to a one year period following the completion of the Transaction. Upon
completion of the Transaction, the Capstone Copper board of directors is expected to be composed of
the following directors: George Brack (Lead Independent Director), Darren Pylot (Executive Chair), John
MacKenzie (CEO & Director), Alison Baker, Bob Gallagher, Anne Giardini, and Peter Meredith.
BOARD OF DIRECTORS’ RECOMMENDATIONS
Following the unanimous recommendation of a special committee of independent Capstone directors
(the “Special Committee”), t he Board of Directors of Capstone has unanimously approved the
Transaction and recommend that shareholders vote in favour of the Transaction. GenCap Mining
Advisory Ltd. and CIBC World Markets Inc. have provided fairness opinions dated November 29, 2021
to the Board of Directors and the Special Committee, respectively, stating that, as of the date of such
opinions and based upon and subject to the assumptions, limitations and qualifications stated in such
opinions, the consideration to be received by the Capstone shareholders is fair, from a financial point of
view, to such holders.
It is anticipated that the Capstone shareholder meeting to approve the Transaction and, subject to
satisfaction of the conditions under the Agreement, closing will occur in the first quarter of 2022.
MANTOS COPPER HIGHLIGHTS
Mantos Copper was founded in 2015 by funds managed by Orion Resource Partners and Audley Mining
Advisors Ltd. upon the acquisition of the Mantos Blancos and Mantoverde mines from Anglo American.
Orion is a global alternative investment management firm that specializes in institutional metals and
mining investment strategies in the base and precious metals space. Audley Mining Advisors is a special
purpose vehicle owned by the founders of Mantos Copper.
Since 2015, the Mantos Copper team, led by John MacKenzie (Executive Chairman & Founder ),
Giancarlo Bruno (Chief Executive Officer), and John Dyer (CFO), has transformed Mantos Blancos and
Mantoverde through operational improvements of the existing operations a nd the development of
significant development projects at both mines. Since 2015, reserves at the two mines have increased
by over 250% and the team has successfully permitted and fully -financed the Mantos Blancos
Concentrator Debottlenecking Project (“MB-CDP”) and the Mantoverde Development Project (“MVDP”).
MB-CDP is currently in ramp -up and construction at MVDP is well underway. Combined, these two
projects will drive production growth at Mantos Copper of 120% from 79kt in 2020 to 173kt in 2024. In
parallel, all-in sustaining costs 3 are expected to decrease by approximately 35%. Mantos Copper is
committed to the highest standards of ESG and is recognized as a leader in health and safety within the
Chilean mining industry.
3 All-in sustaining costs (“AISC”) is an alternative performance measure
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MANTOS BLANCOS HIGHLIGHTS
• Ownership: 99.99% Mantos
• Located in the Antofagasta region of Chile, approximately 45km northeast of Antofagasta
• Sulphide and oxide operations with a track record dating back to 1960
• Production of clean, high -grade copper concentrates and +90% LME Grade A cathode copper
from a SX-EW plant with a capacity of up to 60,000 tonnes of cathode copper per annum
• Currently transitioning to a 20,000 tonne per day sulphide operation via the ongoing MB-CDP;
construction complete with ramp-up ongoing
• MB-CDP will enable production growth of approximately 25% from 42kt in 2020 to 53kt in 2024
• Studies for a further expansion at Mantos Blancos (Phase II) that would increase mill processing
capacity from 20ktpd to 27ktpd are already underway
• Located near smelters and ports with secured water supply and power
• Large reserve base to sustain a 16+ year mine life
• Extensive exploration potential with a significant land package of 57,620 hectares
MANTOVERDE HIGHLIGHTS
• Ownership: 69.99% Mantos; 30% Mitsubishi Materials Corp.
• Located in the Atacama region of Chile, approximately 45km from the coast and approximately
30km southwest of Santo Domingo
• Current oxide operations have been in production since 1995, with a current SX-EW plant
capacity of 60,000 tonnes of cathode copper per annum
• Approval granted in February 2021 to commence construction of the fully -financed MVDP to
capitalize on the high grade sulphide reserves
• MVDP construction commenced in February 2021 and the project is expected to increase
production at Mantoverde by over 230% from 37kt (oxide-only) in 2020 to 120kt in 2024 (majority
sulphide production)
• MVDP is based on a conventional sulphide concentrate flowsheet with a 32,000 tonne per day
concentrator producing clean copper concentrates
• Importantly, the MVDP is a brownfield expansion that has been significantly de -risked and has
a lump-sum turn-key EPCM contract in place with Ausenco
• The wholly-owned desalination plant provides 100% of the water required and will be expanded
to fully meet the needs of MVDP
• Large reserve base to sustain a 21+ year mine life
• Studies on a potential further expansion in throughput at Mantoverde have commenced (Phase
II would follow after the completion of MVDP) ; additional optionality exists around the potential
recovery of cobalt and magnetite
• Extensive exploration potential with a significant land package of 39,485 hectares and a 23km
strike length in the Atacama Fault System
• Strong partner support from Mitsubishi Materials Corp.
MANTOS BLANCOS MINERAL RESERVE ESTIMATE (as of December 31, 2020)
A full review of input data, methodology, and results supporting the work done by Mantos Copper was
completed by NCL and Carlos Guzmán (RM CMC, FAusIMM of NCL Ingeniería y Construcción SpA.),
the Qualified Person (as defined in the National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”) for the Mineral Reserves estimate. Criteria, methodologies, and algorithms are
standards practices in the mining industry and conform to the requirements of the Canadian Institute of
Mining, Metallurgy and Petroleum (“CIM”) . Mantos Blancos Mineral Reserves have been estimated in
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conformity with generally accepted CIM Estimation of Mineral Resources and Mineral Reserves Best
Practice Guidelines (November 2019) and are reported in accordance with CIM (2014) Standards.
The estimated mineral reserves are reported using metal prices of $2.90/lb Cu and $17/t-oz Ag. Mineral
reserves are reported effective 31 December 2020.
Mineral Reserves Contained Metal
Category Tonnage TCu SCu Ag Cu Ag
(Mt) (%) (%) (g/t) (kt) (koz)
Sulphide
Proven 72.6 0.78% - 6.41 567 14,968
Probable 50.0 0.57% - 4.57 288 7,339
Total
Reserves 122.6 0.69% - 5.66 854 22,307
Oxide
Proven 2.8 - 0.36% - 10 -
Probable 1.8 - 0.28% - 5 -
Total
Reserves 4.6 - 0.33% - 15 -
Dump
Leach
Stockpile
Proven - - - - - -
Probable 6.7 - 0.18% - 12 -
Total
Reserves 6.7 - 0.18% - 12 -
Notes to accompany Mineral Reserves table:
1. Mineral Reserves are reported effective 31 December 2020.
2. The Qualified Person for the estimate is Mr. Carlos Guzmán (RM CMC, FAusIMM).
3. Mineral Reserves are reported on a 100% basis using average off -site costs (selling cost) of $0.27/lb for sulphides
and $0.42/lb for oxides.
4. Mineral Reserves are contained within an optimized pit shell. Mining will use conventional open pit methods and
equipment and use a stockpiling strategy (direct mining costs is estimated at the base bench at 900 masl, averaging
$1.60/t of material mined).
5. Processing costs average $9.98/t of m illed material, including concentrator, tailings storage facility, port, and
desalination costs.
6. Processing cost for material sent to dump leach was $1.47/t.
7. Total copper recoveries average 83.1% for sulphides and silver recoveries average 77.2%.
8. Soluble copper recoveries average 47.9% for material sent to the dump leach process.
9. Inter-ramp angles vary from 36–59º. The life-of-mine strip ratio is 4 to 1.
10. Tonnage and contained copper are reported in metric units and grades are reported as percentages. Contained silver
is reported in troy ounces and grades in grams per tonne.
11. Grade % TCu refers to total copper grade in percentage sent to the mill. Grade % SCu refers to soluble copper grade
in percentage sent to the leaching processes.
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12. Rounding as required by r eporting guidelines may result in apparent summation differences between tonnes, grade
and contained metal.
MANTOVERDE MINERAL RESERVE ESTIMATE (as of December 31, 2020)
A full review of input data, methodology, and results supporting the work done by Mantos Copper was
done by NCL and Carlos Guzmán (RM CMC, FAusIMM of NCL Ingeniería y Construcción SpA.), the
Qualified Person for the mineral reserves estimate. Criteria, met hodologies, and algorithms are
standards practices in the mining industry and conform to the requirements of Canadian Institute of
Mining, Metallurgy and Petroleum (“CIM”).
Mantoverde Mineral Reserves have been estimated in conformity with generally accept ed CIM
Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 2019) and
are reported in accordance with CIM (2014) Standards.
The estimated Mineral Reserves are reported using metal prices of $2.90/lb Cu and $1,100/t -oz Au.
Mineral reserves are reported effective 31 December 2020.
Mineral Reserves Contained Metal
Category Tonnage TCu SCu Au Cu Au
(Mt) (%) (%) (g/t) (kt) (koz)
Sulphide
Proven 170.0 0.63% - 0.11 1,071 580
Probable 65.7 0.53% - 0.11 347 228
Total
Reserves 235.7 0.60% - 0.11 1,419 807
Oxide
Proven 189.8 - 0.25% - 481 -
Probable 65.8 - 0.21% - 135 -
Total
Reserves 255.6 - 0.24% - 617 -
Notes to accompany Mineral Reserves table:
1. Mineral Reserves are reported effective December 31, 2020.
2. The Qualified Person for the estimate is Mr. Carlos Guzmán (RM CMC, FAusIMM).
3. Mineral Reserves are reported on a 100% basis using average off -site costs (selling cost) of $0.28/lb for sulphides
and $0.30 for oxides.
4. Mineral Reserves are contained within an optimised pit shell. Mining will use conventional open pit methods and
equipment and use a stockpiling strategy (direct mining costs are estimated by geological unit, averaging $1.85/t of
material mined).
5. Processing costs were estimated by geometallurgical units (from UG1 to UG10) averaging $7.28/t of milled material,
including concentrator, tailings storage facility, port, and desalination costs.
6. Processing cost for material sent to the heap leach was $6.24/t. For material sent to the run-of-mine dump leach, the
processing cost was $2.12/t.
7. Total copper recoveries average 88.4% for sulphides and gold recoveries average 71.2%.
8. Soluble copper recoveries average 76.4% for material sent to the heap leach, and 45.8% for material sent to the dump
leach process.
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9. Inter-ramp angles vary from 26-60º. The life-of-mine strip ratio is 2.12 to 1.
10. Tonnage and contained copper are reported in metric units and grades are reported as percentages. Contained gold
is reported in troy-ounces and grades in grams per tonne.
11. Grade % TCu refers to total copper grade in percentage sent to the mill. Grade % SCu refers to soluble copper grade
in percentage sent to the leaching processes.
12. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade
and contained metal.
ADVISORS AND COUNSEL
Capstone has engaged GenCap Mining Advisory Ltd. as its financial advisor and Blake, Cassels &
Graydon LLP as its legal advisor in connection with the Transaction. The Capstone Special Committee
has engaged CIBC World Markets Inc. as its financial advisor.
Mantos has engaged Scotiabank as its financial advisor and Stikeman Elliott LLP as its legal advisor.
CONFERENCE CALL AND WEBCAST
Capstone and Mantos will hold a joint conference call and webcast on Tuesday, November 30, 2021 at
5:00 am PT/8:00 am ET to discuss the Transaction. Participants may join using any of the options below:
Link to join the live webcast and audio:
https://produceredition.webcasts.com/starthere.jsp?ei=1516621&tp_key=f24098fc02
Dial-in numbers for the audio-only portion of the conference call
Toronto 416-764-8650
Vancouver 778-383-7413
North American Toll Free 1-888-664-6383
Confirmation Nr. 71031342
Due to an increase in call volume, participants are asked to dial -in at least five minutes prior to the call
start to ensure placement into the conference line on time.
The conference call will be avai lable for playback until December 30, 2021. To listen to the replay,
please dial.
Toronto 416-764-8677
North American Toll Free 1-888-390-0541
Confirmation Nr. 031342 #
The webcast will be archived on Capstone’s website at www.capstonemining.com until the Transaction
closes.
FURTHER INFORMATION
Capstone will file a material change report in respect of the Transaction in compliance with Canadian
securities laws, as well as copies of the Agreement and form of support and voting agreements, which
will be available under Capstone’s SEDAR profile at www.sedar.com.
Full details of the Transaction will be included in a management information circular of Capstone that is
expected to be mailed to their respective shareholders in the first quarter of 2022.
QUALIFIED PERSONS The following Qualified Persons (QPs) as defined in NI 43-101 are independent
from Capstone (except as noted below) and have reviewed and approved the content of this news
release that is based on content from their respective portions of the technical report: