Capstone Cozamin Mine to Average 61.4 MIbs Cu and 1.75 Mozs Ag Annually for 2021-2023; Pillar Extraction Pre-Feasibility Study Underway
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September 9, 2020
Capstone Cozamin Mine to Average 61.4 MIbs Cu and 1.75 Mozs Ag Annually
for 2021-2023; Pillar Extraction Pre-Feasibility Study Underway
(All amounts in US$ unless otherwise specified)
Vancouver, British Columbia - Capstone Mining Corp. (“Capstone” or the “Company”) (TSX:CS) announce s
updated Proven and Probable Mineral Reserves and positive results of an updated Technical Report for its
Cozamin Mine in Zacatecas, Mexico.
HIGHLIGHTS
• Proven and Probable Mineral Reserves increased by 97% relative to December 31, 2019, to 10.2 million
tonnes grading 1.79% copper.
• Ramp-up to 1.35 million tonnes milled per annum (“tpa”) by Q2 2021 is on time and budget. A new
section of ramp to complete a one-way traffic circuit remains on schedule for completion in Q4 2020.
• Updated life of mine plan (“LOMP”) released. For the three years post-expansion (2021-2023) when
compared to the three years pre-expansion (2018-2020), annual average copper and silver production
increases by 70% to 61.4 million pounds and 43% to 1.75 million ounces, respectively. Additionally, average
annual C1 costs (net of by-products) are expected to move 23% lower to $0.67 per payable pound of copper.
• Tailings management transformation activities are progressing on schedule , including design and
permitting of a filtered (dry stack) tailings storage facility. This strategy aligns with industry leading
environmental best practice for tailings management.
• A pre-feasibility study (“PFS”) of an underground paste backfill system is underway to assess the
potential for increasing the extraction ratio from Vein 20 in the Mala Noche Footwall Zone (“MNFWZ ”). The
updated LOMP currently excludes these pillars and assumes an extraction ratio of 74%, leaving 3.5 million
tonnes of Indicated Mineral Resources grading 1.89% copper and 42 g/t silver in unmined pillars that will be
the subject of the PFS. This pillar extraction PFS is targeted for completion in Q4 2020 and assuming positive
economics, it will include updated capital and net present value estimates and changes to the LOMP presented
herein.
• A new step-out hole drill program totalling 80 holes targeting the down dip extension to the southeast of both
Vein 10 and Vein 20 is underway. Hole S499 and S503 intersected high grade polymetallic copper, zinc, lead
and silver in a 650-meter step-out from the current mineral resource. A 1 km exploration drift is being
considered to provide a drilling platform to target this new area.
• An updated Mineral Resource Estimate is expected to be released with the pillar extraction PFS results.
Drilling on the outer edges of the current resource is ongoing and will include all new drill holes with assay data
received since April 30, 2020 (see Table 5 for current Mineral Resource Estimate).
Brad Mercer, Capstone’s SVP Exploration and Operations said, “We decided to take a two-phase approach and
release the Mineral Reserves ahead of our 2021 budgeting cycle, allowing us to greenlight key projects by year-
end. The second phase of this work, targeted for completion in Q4 2020, will focus on opportunities we have
identified, such as the feasibility of high-grade pillar extraction using paste backfill, updating the block model with
ongoing exploration results and ongoing metallurgical and geotechnical work on Vein 10 not in Reserve.”
Darren Pylot, Capstone’s President and CEO said, “I’m pleased to see Cozamin evolving into a safer and more
productive mine with the one-way ramp in service and the potential for truckless headings as we look to add ore
passes in our mine design. Additionally, it will be a more socio-environmentally responsible operation with the
transition to dry-stack tailings and potentially a paste backfill plant that could return up to 60% of our tailings
underground, so we can safely recover high grade pillars. This plan reinforces my view that Cozamin is a Tier 1
asset that will continue to generate exceptional value for all stakeholders.”
Suite 2100 – 510 West Georgia Street
Vancouver, BC, V6B 0M3, Canada
Tel: 604-684-8894 Fax: 604-688-2180
www.capstonemining.com
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MINERAL RESERVE ESTIMATE
Table 1 presents the Mineral Reserve estimate for all zones as of April 30, 2020. Estimated Reserves have
increased by 97% relative to December 31, 2019, and average copper grade of these Reserves has increased
from 1.50% to 1.79%. Contained copper and silver have increased by 134% and 102%, respectively.
Approximately 92% of current Reserves are in Vein 20, the principal vein in the MNFWZ.
TABLE 1 – Mineral Reserve Estimate as of April 30, 2020 at a US$52.29/t Net Smelter Return Cut-off
Category Tonnes
(kt)
Copper
(%)
Silver
(g/t)
Zinc
(%)
Lead
(%)
Copper
Metal
(kt)
Silver
Metal
(koz)
Zinc
Metal
(kt)
Lead
Metal
(kt)
Proven - - - - - - - - -
Probable 10,178 1.79 41 0.36 0.05 182 13,527 36 5
Proven +
Probable 10,178 1.79 41 0.36 0.05 182 13,527 36 5
Compared to
Dec 31, 2019 +97% +19% +2% -45% -63% +134% +102% +9% -27%
NOTES: Tucker Jensen, P.Eng., Superintendent Mine Operations at Capstone Mining Corp., is the Qualified Person for this Cozamin Mineral
Reserve update. Disclosure of the Cozamin Mineral Reserves as of April 30, 2020 was completed using fully diluted mineable stope shapes
generated by the Maptek Vulcan Mine Stope Optimizer software and estimated using the 2020 MNFWZ resource block model created by
Garth Kirkham, P.Geo., FGC and the 2017 MNV resource block model created by J. Vincent, P.Geo., formerly of Capstone Mining Corp.
Mineral Reserves are reported at a US$52.29/t net smelter return (“NSR”) cut-off using the NSR20CuRSV formula: ($50.762*%Cu +
$0.412*Ag ppm)*(1-NSRRoyalty%) for copper zones based on metal price assumptions (in US$) of Cu = $2.75/lb and Ag = $17.00/oz, and
metal recoveries of 96% Cu, 86% Ag and the NSR20ZnRSV formula: ($49.756*%Cu + $0.381*Ag ppm + $8.035*%Pb + $11.820*%Zn)*(1-
NSRRoyalty%) for zinc zones based on metal price assumptions (in US$) of Cu = $2.75/lb, Ag = $17.00/oz, Pb = $0.90/lb, Zn = $1.00/lb and
metal recoveries of 94% Cu, 78% Ag, 47% Pb and 67% Zn. Mineral reserve calculations consider mining by long-hole stoping and mineral
processing by flotation. Tonnage and grade estimates include dilution and mining losses and do not include unmined pillars as described in
Table 4. The NSR royalty rate applied varies between 1% and 3% depending on the mining concession, and royalties are treated as costs in
mineral reserve estimation. An exchange rate of MX$20 per US$1 is assumed. All metals are reported as contained. Figures may not sum
exactly due to rounding.
LIFE OF MINE PLAN AS OF APRIL 30, 2020
Cozamin’s LOMP has been updated based on the Mineral Reserves presented in Table 1 above. The LOMP
should be considered interim as it is subject to change should the pillar extraction PFS prove positive in Q4 2020
(see Short-Term Opportunities section below for details). This interim plan includes full throughput rates of
approximately 1.35 to 1.38 million tonnes per annum from 2021 through 2026, followed by declining rates to early
2029. See Table 3 below for a detailed year-by-year mine plan.
For the three years post-expansion (2021-2023) when compared to the three years pre-expansion (2018-2020),
annual average copper and silver production increases by 70% and 43%, respectively, and copper grades increase
by 31% with recoveries increasing for copper to 96.1% from 95.0% and silver to 85.5% from 78.0%. Silver
recoveries are expected to benefit from improved metallurgical performance by processing copper -silver ore only
versus a blend of copper-silver and lead-zinc-silver ore. Economies of scale and mining productivity improvements
helped by one-way ramp completion have moved the three-year (2021-2023) average per tonne mining costs,
milling costs and G&A costs by -14%, -4%, and -13%, respectively, relative to 2018-2020. See Table 2 below for
detailed pre- and post-expansion comparisons on an annual average basis.
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TABLE 2 – Comparison of Three Years Average Annual Pre- and Post-Expansion
3 Years Annual Average
Pre-Expansion (1.07 Mtpa)
2018-20201
3 Years Annual Average
Post-Expansion2 (1.36 Mtpa)
2021-2023
%
Difference
Cu Production (M lbs) 36.2 61.4 70%
Ag Production (M troy ozs) 1.22 1.75 43%
Pb Production (M lbs) 2.5 - -100%
Zn Production (M lbs) 15 - -100%
Tonnes milled (M t) 1.07 1.36 28%
Cu Grade (%) 1.62% 2.12% 31%
Cu Recovery (%) 95.0% 96.1% 1%
Ag Grade (g/t) 45.2 46.5 3%
Ag Recovery (%) 78.0% 85.5% 10%
Mining Cost ($/t milled) $29.34 $25.13 -14%
Milling Cost ($/t milled) $10.46 $10.00 -4%
G&A Cost ($/t milled) $7.25 $6.33 -13%
C1 Costs3 ($/lb payable Cu) $0.87 $0.67 -23%
Sustaining CAPEX (M$) $23.0 $26.0 14%
AISC3 ($/lb payable Cu) $1.69 $1.16 -31%
NOTES:
1. 2020E figures are for 12 months and are a combination of actual results and estimates for the remainder of the year.
2. Weighted average of the updated LOMP based on the April 30, 2020 reserve update. Operating and Capital costs assume an exchange
rate of MXN$21 per USD$1. C1 Costs3 and AISC3 assume by-product pricing for Ag of $22.00/oz. The updated LOMP is subject to
change pending results of the pillar extraction PFS, targeted for completion in Q4 2020.
3. This is an alternative performance measure; please see "Alternative Performance Measures" at the end of this release. C1 Costs and
AISC are net of by-products.
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TABLE 3 – Updated LOMP Subject to Change Pending Results of Pillar Extraction PFS1 Targeted for Completion in Q4 2020
Pre-Expansion
(1.07 million tpa)
Post-Expansion2
(up to 1.38 million tpa)
2018A 2019A 2020E3 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E
Cu Production (M lbs) 36.2 35.8 36.5 47.7 65.6 70.9 61.2 47.2 43.8 19.9 1.3 0.1
Ag Production (M troy ozs) 1.164 1.366 1.125 1.344 1.883 2.010 1.629 1.299 1.297 0.809 0.164 0.018
Pb Production (M lbs) 3.2 3.4 0.9 - - - - - - 0.6 1.3 0.3
Zn Production (M lbs) 14.9 18.5 11.8 - - - - - - - 9.4 1.9
Tonnes milled (M tonnes) 0.986 1.146 1.071 1.345 1.371 1.374 1.378 1.375 1.376 0.937 0.245 0.03
Cu Grade (%) 1.75 1.50 1.62 1.68 2.25 2.43 2.10 1.63 1.52 1.05 0.36 0.16
Cu Recovery (%) 95.0 94.4 95.6 95.6 96.3 96.4 96.2 95.5 95.1 91.6 67.1 49.8
Ag Grade (g/t) 47.5 46.7 41.4 37.5 49.4 52.3 42.8 35.7 36.2 36.1 37.0 33.3
Ag Recovery (%) 77.2 77.7 79.1 82.9 86.5 87.0 85.8 82.4 81.0 72.5 45.0 32.4
Mining Cost ($/t milled) 31.04 30.62 26.40 25.23 25.07 25.09 24.83 27.21 26.86 26.66 29.04 23.62
Milling Cost ($/t milled) 10.56 10.96 9.82 9.30 9.28 11.40 11.40 11.40 11.40 12.36 12.25 12.25
G&A Cost ($/t milled) 7.79 6.92 7.10 6.37 6.32 6.31 6.31 6.31 6.31 6.72 6.32 6.32
C1 Costs4 ($/lb payable Cu) 0.75 0.90 0.96 0.89 0.60 0.58 0.75 1.11 1.16 1.71 2.64 -0.57
Sustaining CAPEX (M$) 20.1 26.8 21.9 32.8 29.0 16.3 8.4 4.2 2.9 1.5 0.5 0.3
AISC4 ($/lb payable Cu) 1.50 1.84 1.74 1.67 1.11 0.87 0.95 1.26 1.31 1.87 3.35 5.94
NOTES:
1. Internal analysis supports Capstone’s decision to proceed with a PFS to assess the use of underground paste backfill to increase the mineral extraction ratio of 74% assumed in this
updated LOMP. This study is targeted for completion in Q4 2020.
2. Cozamin’s LOMP has been updated based on the Mineral Reserves as of April 30, 2020. Operating and Capital costs assume an exchange rate of MXN$21 per USD$1. C1 Costs4
and AISC4 assume by-product pricing of Ag = $22.00/oz, Pb = $0.90/lb and Zn = $1.00lb.
3. 2020E figures are for 12 months and are a combination of actual results and estimates for the remainder of the year.
4. This is an alternative performance measure; please see "Alternative Performance Measures" at the end of this release. C1 Costs and AISC are net of by-products.
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TAILINGS MANAGEMENT
Due to increased tailings storage requirements of the updated LOMP, Cozamin intends to convert from the current
slurry tailings facility that has been safely operated for over 15 years to a filtered (dry stack) tailings facility.
Preliminary design of two filtered tailings storage facility options has been completed, and feasibility-level
engineering in support of permitting of these two options is in progress. It is expected that this conversion to filtered
tailings will significantly decrease the mine’s socio-environmental, geotechnical and water supply risks, while
decreasing water consumption and make-up water costs.
SHORT-TERM OPPORTUNITIES
Cozamin is advancing several initiatives with the potential to extend mine life, increase safety standards and
improve operational efficiencies. The following short-term opportunities are not included in this updated LOMP or
the Mineral Reserve estimate as of April 30, 2020.
Underground Paste Backfill
Cozamin’s updated LOMP assumes a mineral extraction ratio of 74% from the MNFWZ, leaving 3.5 million tonnes
of Indicated Mineral Resources grading 1.89% copper and 42 g/t silver in pillars (see Table 4) for geotechnical
stability. Internal analysis supports Capstone’s decision to proceed with a PFS to assess the potential for using
underground paste backfill to increase this mineral extraction ratio. This study is targeted for completion in Q4
2020. A potential advantage to both capital and operating expenditures of paste backfill is the use of up to 60% of
the tailings produced by the mine, rather than mining or purchasing aggregate. The use of filtered tailings for paste
backfill reduces the mine’s surface tailings management costs and socio-environmental risk. Figure 1 below
illustrates the design location of Indicated Mineral Resources locked up in pillars in Vein 20.
TABLE 4 – MNFWZ Pillars Excluded from Mineral Reserve Estimate as of April 30, 2020
Classification Tonnes
(kt)
Copper
(%)
Silver
(g/t)
Zinc
(%)
Lead
(%)
Copper
Metal
(kt)
Silver
Metal
(koz)
Zinc
Metal
(kt)
Lead
Metal
(kt)
Measured Resources
in MNFWZ Pillars - - - - - - - - -
Indicated Resources
in MNFWZ Pillars 3,503 1.89 42 0.24 0.02 66 4,726 8 1
Total Measured and
Indicated Resources
in MNFWZ Pillars
3,503 1.89 42 0.24 0.02 66 4,726 8 1
Inferred Resources in
MNFWZ Pillars - - - - - - - - -
NOTES: Refer to Table 1 for details of Mineral Reserve estimate and Table 5 for details of Mineral Resource estimate. Material in MNFWZ
pillars is included in the Indicated Mineral Resource in Table 5 but is not included in the updated LOMP.
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FIGURE 1 – MNFWZ Vein 20 Resource with Updated LOMP Stopes and Pillars
NOTE: View looking north-northeast at 15°. Indicated Mineral Resources are shown in green. Inferred Mineral Resources are shown in light
blue. Mineral Reserves are shown in red. Pillars left unmined in the updated LOMP, comprising Indicated Mineral Resources, are illustrated in
black.
Stope Dilution
Stope dilution in the deeper areas of the NW end of the MNFWZ have been high compared to other longhole open
stope mines, driven by narrow veins and local geotechnical conditions. As mining progresses away from this area,
an initiative is underway to reduce dilution site-wide through improved engineering, planning, long-hole drill control
and optimized explosives design guided by a team of consultants and site experts.
Truckless Headings
An initiative is underway to redesign the upper areas of Cozamin Reserves to ore pass use, increasing safety and
efficiency, while increasing air quality, thereby decreasing ventilation requirements in these areas.
Further Resource to Reserve Conversion (MNFWZ)
The Indicated Mineral resource in the MNFWZ copper-silver zones exclusive of the pillars and the Mineral
Reserves totals 7,248 kt of 1.74% copper, 39 g/t silver and 0.57% zinc, containing 278 million pounds of copper,
9.2 million ounces of silver and 92 million pounds of zinc remaining. Additionally, the Indicated Mineral Resource in
the MNFWZ zinc-lead-silver zones exclusive of the pillars and the Mineral Reserves totals 3,704 kt of 0.21%
copper, 36 g/t silver, 3.12% zinc and 1.48% lead, containing 17 million pounds of copper, 4.3 million ounces of
silver, 255 million pounds of zinc, and 121 million pounds of lead remaining. In addition to the pillar extraction
study, Capstone intends to initiate work to evaluate alternative mining techniques capable of lower costs and
decreased dilution to determine if further mineral resources can be converted to mineral reserves.
MINERAL RESOURCE ESTIMATE
Table 5 presents the Mineral Resource estimate for all zones as of April 30, 2020. Estimated Measured and
Indicated (“M+I”) Resources have increased by 60% relative to December 31, 2019. Contained copper, silver, zinc
and lead have increased by 83%, 74%, 58% and 92%, respectively, relative to December 31, 2019. Mineral
Resource estimates do not account for mining loss and dilution.
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Capstone previously announced a total M+I Mineral Resource as of April 30, 2020 of 26,458 kt on June 11, 2020.
The current Mineral Resource estimate is an increase of 3.8% from this previous estimate. This change is the
result of an updated net smelter return (“NSR”) formula adopted for the cut-off applied, that includes long-term
metals prices in line with current industry norms, updated recovery curves, royalties and other operational
considerations.
TABLE 5 – Mineral Resource Estimate as of April 30, 2020 at a US$50/t NSR Cut -Off
Classification Tonnes
(kt)
Copper
(%)
Silver
(g/t)
Zinc
(%)
Lead
(%)
Copper
Metal
(kt)
Silver
Metal
(koz)
Zinc
Metal
(kt)
Lead
Metal
(kt)
Measured (M) 409 1.23 53 1.23 0.40 5 699 5 2
Indicated (I) 27,050 1.57 44 1.14 0.31 425 38,509 309 85
Total M + I 27,459 1.57 44 1.14 0.32 430 39,209 314 87
Inferred 16,558 0.64 36 2.26 0.61 106 18,983 375 101
NOTES: Mineral Resources are classified according to CIM (2014) definitions, estimated following CIM (2019) guidelines and have an
effective date of April 30, 2020. Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral
Reserves do not have demonstrated economic viability. The independent Qualified Person for the estimates is Mr. Garth D. Kirkham, P.
Geo., FGC., of Kirkham Geosystems Ltd. Mineral Resources are reported using NSR20RES formula: (Cu*$60.535 + Ag*$0.472 + Zn*14.865
+ Pb*$9.147)*(1-Royalty%) based on metal price assumptions (in US$) of Cu = $3.25/lb, Ag = $20.00/oz, Zn = $1.20/lb, Pb = $1.00/lb, metal
recoveries of 95% Cu, 82% Ag, 70% Zn, 48% Pb, confidential current smelter contract terms, transportation costs and royalty agreements
from 1 to 3%, as applicable, are incorporated. An exchange rate of MX$20 per US$1 is assumed. Totals may not sum exactly due to
rounding. The NSR cut-off of US$50/tonne is based on historical mining and milling costs plus general and administrative costs. The Mineral
Resource Estimate encompasses both the MNFWZ and the MNV. Drilling campaigns from 2018 have focused on the MNFWZ and no drilling
has been performed on the MNV since 2017. The Mineral Resource considers underground mining by longhole stoping and mineral
processing by flotation. No dilution is incorporated in the Mineral Resource. All metals are reported as contained. Mineral Resource
estimates do not account for mining loss and dilution. These Mineral Resource estimates include Inferred Mineral Resources considered too
speculative geologically to apply economic considerations for categorization as Mineral Reserves. However, it is reasonably expected that
the majority of Inferred Mineral Resources could be upgraded to Indicated Resources.
NATIONAL INSTRUMENT 43-101
A National Instrument 43-101 ("NI 43-101") Technical Report will be prepared to summarize the Mineral Resource
and Mineral Reserve estimates by the Qualified Persons and will be filed on SEDAR within 45 days of this news
release.
Readers are cautioned that the conclusions, projections and estimates set out in this news release are subject to
important qualifications, assumptions and exclusions, all of which will be detailed in the 2020 Technical Report. To
fully understand the summary information set out above, the 2020 Technical Report that will be filed on SEDAR at
www.sedar.com should be read in its entirety.
QUALIFIED PERSONS
The following Qualified Persons, as defined by 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 2020 Technical Report:
• Gregg Bush, P.Eng. (Non-independent)
• Jenna Hardy, P.Geo., FGC, Nimbus Management Ltd.
• Tucker Jensen, P.Eng., Capstone Mining Corp. (Non-independent)
• Garth Kirkham, P.Geo., FGC, Kirkham Geosystems Ltd.
• Chris Martin, CEng MIMMM, Blue Coast Metallurgy Ltd.
• Vivienne McLennan, P.Geo., Capstone Mining Corp. (Non-independent)
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• Josh Moncrieff, P.Geo., Capstone Mining Corp. (Non-independent)
• Humberto Preciado, PhD, P.E., Wood Environment & Infrastructure Solutions, Inc.
EXPLORATION UPDATE AND NEW 80-HOLE DRILL PROGRAM
Results from five step-out drill holes released today demonstrate the expansion potential to the southeast , both
within and external to the last Mineral Resource estimate. Drill results from Cozamin’s MNFWZ are summarized in
Table 6 below and Figure 2 shows the location of holes S499 and S503 relative to the current Resource. Holes
S499 and S503 intersected high grade polymetallic copper, zinc, lead and silver in a 650- meter step-out from the
outer resource boundary.
“Both Vein 10 and Vein 20 are showing very interesting results in the step-out program targeting an area southeast
of the last Mineral Resource estimate on June 11, 2020,” said Brad Mercer, SVP Exploration and Operations. “The
holes released today point to a potential expansion of silver-lead-zinc resources in Vein 10. I am also excited to
see the continuation of copper mineralization on the down-dip side of an inferred fault that appears to cut off the
current high-grade mineral resource. Interestingly, Vein 20 is present on the other side of this break and is copper
bearing, which gives us great reason to continue drilling along strike and down dip.”
FIGURE 2 – Location of Step-Out Holes S499 and S503 Relative to Current Resource of Vein 10 and Vein 20
NOTE: View looking north.