Capstone Presents a Robust Cobalt Production Option to the Santo Domingo 2019 Technical Report With a 2020 Preliminary Economic Assessment
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February 19, 2020
Capstone Presents a Robust Cobalt Production Option to the Santo Domingo 2019
Technical Report With a 2020 Preliminary Economic Assessment
(All amounts in US$ unless otherwise specified and reflect 100% of the project)
Vancouver, British Columbia - Capstone Mining Corp. ("Capstone" or the “Company”) (TSX:CS) releases
positive updates on its Santo Domingo copper-iron-gold project ("Santo Domingo" or the "Project") in Region III,
Chile. Updates to the Feasibility Study-level Technical Report, published on January 3, 20191 (“2019 Technical
Report” or “Base Case”) includes a higher level of CAPEX/OPEX certainty, additional key permits and the
development in Section 24 of a Preliminary Economic Assessment with respect to cobalt production (“2020 PEA
Opportunity”). The 2020 PEA Opportunity contains pricing updates to the economic model for the Base Case and a
potential investment decision for producing battery-grade cobalt sulfate. Santo Domingo is owned 70% by
Capstone and 30% by Korea Resources Corporation ("KORES").
“The 2020 PEA Opportunity for cobalt adds significantly to the already robust copper-iron-gold Base Case. We are
very excited as it aligns perfectly with our vision for growth in assets that can deliver strong cash flows in all price
environments,” said Darren Pylot, President and CEO of Capstone.
Opportunity to Build a Low Cost, Vertically Integrated Cobalt Business in Chile
• 2020 PEA Opportunity outlines potential for a copper -iron-gold mine with battery-grade cobalt sulfate
production, resulting in a net present value at an 8% discount rate (“NPV8%“) of $1.66 billion after tax.
• Base Case copper-iron-gold project has a NPV8% of $1.03 billion.
• Incremental construction costs for a cobalt refining complex of $0.67 billion, for a combined $2.18 billion,
timed to begin two years after construction begins for the copper-iron-gold plant.
• Production of an average of 10.4 million pounds of cobalt per annum in the form of 22,600 tonnes per annum
(“tpa”) battery-grade cobalt sulfate, at incremental operating costs of $3.70 per pound of cobalt production
costs and incremental C1 cash costs2 of -$4.11 per pound of cobalt production (including by-product sulfuric
acid produced in the cobalt operation).
Mr. Pylot added, “If Santo Domingo was in operation today, refined production of 4,700 tonnes of cobalt per year
would make Capstone the fourth largest battery-grade cobalt producer outside of China, and the largest in the
Americas. It would also be one of the lowest cost producers in the World. It is exciting to think about what this
refining complex could do to open Chile’s vast potential in cobalt. For financial flexibility, we have structured the
cobalt recovery option as a delayed investment decision, timed to begin approximately two years after construction
begins on the copper-iron-gold concentrator. When a strategic partner is selected, we could look to advance cobalt
production earlier.”
1 See Capstone News Release dated November 26, 2018 titled “Capstone Mining Releases Positive Technical Report and Launches a Strategic
Process for Santo Domingo” and the Technical Report published January 3, 2019 for full details.
2 These are alternative performance measures; please see “Alternative Performance Measures” at the end of this news release.
Suite 2100 – 510 West Georgia Street
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Tel: 604-684-8894 Fax: 604-688-2180
www.capstonemining.com
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SANTO DOMINGO HIGHLIGHTS
Base Case
(no cobalt
processing)
2020 PEA
Opportunity3
(incl. cobalt
processing)
Life of Mine (“LOM”) (years) 18 18
Cobalt production period (years) n/a 3-18
Initial capital cost (US$ billions) $1.51 $2.18
Net Present Value (“NPV”) (after-tax, 8% discount) (US$ billions) $1.03 $1.66
Internal Rate of Return (“IRR”) (after-tax) (%) 21.8% 23.0%
Payback period (after-tax) (years) 2.8 3.5
First Five Years of Full Production
Average annual contained copper (“Cu”) production4 (million pounds) 259 263
Iron concentrate (65% Fe) (“Fe”) (million tonnes) 3.3 3.3
Gold (“Au”) (ounces) 35,000 39,000
C1 cash costs per pound of payable copper produced (by product basis) $0.475 ($0.02)6
Average Annual for LOM
Copper (million pounds)7 137 140
Iron concentrate (65% Fe) (million tonnes) 4.2 4.2
Gold (ounces) 17,000 17,000
Cobalt (“Co”) (million pounds) n/a 10.4
Sulfuric acid (million tonnes) n/a 1.4
C1 cash costs per pound of payable copper produced (by product basis) $0.025 ($1.56)6
Dr. Albert Garcia PE, Vice President of Projects commented, “Our concept for cobalt recovery in the 2020 PEA
Opportunity is based on its association with pyrite which is preferentially concentrated in the flotation process at the
copper cleaners/scavengers as outlined in the 2019 Technical Report, and then further upgraded to a 0.7% cobalt
concentrate. The concentrate is fed through a five-stage process consisting of roasting, leaching, copper
precipitation, cobalt solvent extraction, and crystallization to yield battery-grade cobalt sulfate heptahydrate.
Overall, recoveries for cobalt will be approximately 78%, with additional benefits in the form of increased copper
recovery, sulfuric acid production and energy generation. The flowsheet is simple and uses a series of conventional
technologies that have been previously used in the mining industry.”
3 Increase from Base Case numbers due to updated metal algorithms and not related to the cobalt opportunity. No Inferred Mineral Resources
are included in 2020 PEA Opportunity. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
4 Contained production includes recovery loss.
5 C1 cash costs are net of magnetite iron and gold by-product credits and selling costs. These are alternative performance measures; please
see "Alternative Performance Measures" at the end of this news release.
6 C1 cash costs are net of magnetite iron, cobalt, sulfuric acid, and gold by-product credits and selling costs. These are alternative performance
measures; please see "Alternative Performance Measures" at the end of this news release.
7 After recovery loss.
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BASE CASE – COPPER-IRON-GOLD (“Cu-Fe-Au”) MINE (NO COBALT PROCESSING)
Santo Domingo’s Base Case economics does not include the capital to build the cobalt processing facilities nor any
of the revenues from cobalt recovery. Since the completion of the 2019 Technical Report , there has been
confirmation of certain capital and operating costs with the negotiation of a power purchase agreement (“PPA”),
indicative offers for desalinated water purchase from third parties, firm-fixed-price (lump sum) proposal for the plant
and mine facilities and firm actionable quotes for key process equipment.
• Approximate 18 year mine life with operations expected to commence two years after a final construction
decision.
• Nominal average LOM plant throughput rate of 60,000 tonnes per day (“tpd”) and a maximum throughput
of 65,000 tpd the first five years.
• Initial construction costs are estimated to be $1.51 billion which includes a $197 million contingency on
total costs.
• On a co-product basis, total C1 cash costs8 for LOM is estimated at approximately $1.40 per pound of
payable copper produced and $38.88 per tonne of magnetite iron concentrate produced.
• Sustaining capital over the LOM is estimated to be $378.6 million.
• Total LOM operating costs are estimated to be $5.57 billion.
• The LOM average production is 206,000 dry metric tonnes ("dmt") of copper concentrate per year over a
period of approximately 18 years, at a 29% copper grade. The LOM average production is 4.2 million dmt
of iron concentrate per year over a period of approximately 18 years, at a 65% iron grade.
• Metal price assumptions used for the Base Case were a constant $3.00 per pound of copper, and a
consensus long-term price of $69 per tonne for 62% iron fines, to arrive at an effective $80 per tonne
magnetite iron concentrate at a 65% iron content FOB Santo Domingo port (which incorporates several
value-in-use adjustments to reflect the specific quality of iron-ore expected to be produced by Santo
Domingo), and $1,280 per ounce of gold.
2020 PEA OPPORTUNITY – PHASED COBALT PROCESSING
The 2020 PEA Opportunity considers a conceptual plan to mine and process copper, iron-ore and gold at the onset
of the mine. Subsequent to the decision of building the copper-iron-gold mine, Capstone would undertake as an
alternative, a follow-on phase to initiate engineering and permitting for a cobalt recovery circuit. The 2020 PEA
Opportunity assumes a delay of two years for additional permitting and detailed engineering. During this
development period, the cobalt laden pyrite will be stockpiled as a high-density slurry. Copper, iron and gold are
mined for the 18-year mine life and processed over 18 years, and cobalt is mined for 18 years but processed over
the last 16 years. The initial capital costs, NPV, IRR and payback period shown below is in consideration of the
cobalt circuit as a subsequent and independent investment decision.
• Approximate 18-year mine life with operations expected to commence two years after a final construction
decision. Cobalt plant construction beginning in the first year of full production (2 year period) with cobalt
production from years 3 to 18.
• Nominal average LOM plant throughput rate of 60,000 tonnes per day (“tpd”) and a maximu m throughput
of 65,000 tpd for the first five years.
• Initial capital costs are estimated to be $2.18 billion, $1.51 billion related to the copper-iron-gold open pit
mine and processing facility and $665 million related to the additional cobalt plant. This includes a
contingency of $197 million on total costs for the copper-iron-gold mine and a contingency of $133 million
for the cobalt opportunity, resulting in a total contingency of $330 million.
• The infrastructure design which includes a PPA and indicative price for desalinated water purchase.
8 These are alternative performance measures; please see “Alternative Performance Measures” at the end of this news release.
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• On a co-product basis, total C1 cash costs9 for LOM is estimated at approximately $1.02 per pound of
payable copper equivalent (“CuEq”) produced, $27.07 per tonne of magnetite iron concentrate equivalent
produced.
• Sustaining capital over the LOM is estimated to be $442.9 million.
• Total LOM operating costs are estimated to be $6.18 billion.
• The LOM average production is 209,000 dmt of copper concentrate per year over a period of
approximately 18 years, at a 29% copper grade. The LOM average production is 4.1 million dmt of iron
concentrate per year over a period of approximately 18 years, at a 65% iron grade.
• Commodity price assumptions used for the 2020 PEA Opportunity were a constant $3.00 per pound of
copper, and a consensus long-term price of $69 per tonne for 62% iron fines, to arrive at an effective $80
per tonne magnetite iron concentrate at a 65% iron content FOB Santo Domingo port (which incorporates
several value-in-use adjustments to reflect the specific quality of iron-ore expected to be produced by
Santo Domingo including low alumina content), $20 per pound of cobalt, $70 per tonne CIF Mejillones for
sulfuric acid and $1,280 per ounce of gold.
Figure 1. Quick Payback for the Base Case and 2020 PEA Opportunity, Even in a Lower Commodity Price
Environment
Refer to the Additional Price Sensitivities section below for additional price sensitivities.
9 These are alternative performance measures; please see “Alternative Performance Measures” at the end of this news release. C1 cash costs
per pound of copper on a co-product basis includes the value of iron and cobalt production as copper equivalent production using relative
values based on pricing used the 2020 PEA Opportunity. C1 cash costs per tonne of iron on a co-product basis includes the value of copper
and cobalt production as iron equivalent production using relative values based on pricing used in the 2020 PEA Opportunity.
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After Tax Cumulative Free Cash Flow Inclusive of Capital Expenditure – Sensitivity Analysis
(US$ million) Year 5 Year 10 End of Mine Life
Base Case: Cu-Fe-Au Mine
Base Case pricing $855 $1,774 $3,250
Base Case pricing +10% $1,210 $2,347 $4,129
Base Case pricing -10% $496 $1,197 $2,363
2020 PEA Opportunity: Phased Cobalt Recovery
PEA Opportunity pricing $957 $2,792 $5,293
PEA Opportunity pricing +10% $1,403 $3,587 $6,579
PEA Opportunity pricing -10% $504 $1,984 $3,988
Project Valuation Metrics – Price Sensitivities
NPV (after-tax,
8% discount)
(US$ billions)
IRR (after-tax)
(%)
Payback
period (after-
tax) (years)
Base Case: Cu-Fe-AuMine
Base Case pricing $1.03 21.8% 2.8
Base Case pricing +10% $1.43 26.4% 2.3
Base Case pricing -10% $0.63 16.8% 3.4
2020 PEA Opportunity: Phased Cobalt Recovery
PEA Opportunity pricing $1.66 23.0% 3.5
PEA Opportunity pricing +10% $2.21 27.4% 3.1
PEA Opportunity pricing -10% $1.10 18.4% 4.0
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Summary of Results
Base Case
(no cobalt
processing)
2020 PEA
Opportunity
(incl. cobalt
processing)
LOM (years) 18 18
Cobalt production period n/a Years 3-18
Initial capital cost (US$ billions) $1.51 $2.18
NPV (after-tax, 8% discount) (US$ billions) $1.03 $1.66
IRR (after-tax) (%) 21.8% 23.0%
Payback period (after-tax) (years) 2.8 3.5
First Five Years of Full Production
Average annual contained copper production10 (million pounds) 259 263
Iron concentrate (65% Fe) (million tonnes) 3.3 3.3
Average annual gold production (ounces) 35,000 39,000
C1 cash costs per pound of payable copper produced $0.4711 ($0.02)12
Average Annual for LOM
Copper (million pounds)10 137 14013
Copper equivalent9,14 (million pounds) 242 311
Iron concentrate (65% Fe) (million tonnes) 4.2 4.2
Gold (ounces) 17,000 17,000
Cobalt (million pounds) n/a 10.4
Sulfuric acid (million tonnes) n/a 1.4
C1 cash costs per pound of payable copper produced (by product basis) $0.0215 ($1.56)16
C1 cash costs17 (co-product basis)
Copper (per pound of payable copper equivalent produced) $1.40 $1.02
Magnetite iron concentrate (per tonne of iron equivalent production) $38.88 $27.07
Average annual operating expenses (US$ millions) $304 $337
Cumulative free cash flow inclusive of capital (after tax) (US$ billions) $3.3 $5.3
10 After recovery loss.
11 C1 cash costs are net of magnetite iron and gold by-product credits and selling costs. These are alternative performance measures; please
see "Alternative Performance Measures" at the end of this news release.
12 C1 cash costs are net of magnetite iron, cobalt, sulfuric acid, and gold by-product credits and selling costs. These are alternative performance
measures; please see "Alternative Performance Measures" at the end of this news release.
13 Integrated copper production considering contribution of concentrator plant plus the copper recovery from the cobalt circuit as precipitate.
14 Includes the conversion of magnetite iron (and cobalt for the 2020 PEA case) production into copper equivalent units based on relative values
using technical report pricing assumptions.
15 C1 cash costs are net of magnetite iron and gold by-product credits and selling costs. These are alternative performance measures; please see
"Alternative Performance Measures" at the end of this news release.
16 C1 cash costs are net of magnetite iron, cobalt, sulfuric acid, and gold by-product credits and selling costs. These are alternative performance
measures; please see "Alternative Performance Measures" at the end of this news release.
17 Includes gold (and sulfuric acid for the 2020 PEA Opportunity case) as by product credits. These are alternative performance measures;
please see “Alternative Performance Measures” at the end of this news release.
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Base Case
(no cobalt
processing)
2020 PEA
Opportunity
(incl. cobalt
processing)
Life of Mine Summary
Total tonnes milled (million tonnes) 392.3 392.3
Strip ratio (waste to milled tonnes) 3.3:1 3.3:1
Head Grade
Copper (% Cu) 0.30 0.30
Iron (% Fe) 28.16 28.16
Gold (g/t Au) 0.04 0.04
Cobalt (parts per million (“ppm”)) n/a 241
Recovery
Copper18 93.4% 93.5%
Iron mass 19.1% 19.1%
Gold 60.1% 62.1%
Cobalt n/a 78.3%
Commodity Price Assumptions
Copper (per pound) $3.00 $3.00
Magnetite iron concentrate at 65% iron content CFR Santo Domingo port
(per tonne)
$80 $80
Cobalt (per pound) n/a $20
Gold (per ounce) $1,280 $1,280
Sulfuric Acid CIF Mejillones (per tonne) n/a $70
KEY DEVELOPMENTS OVER PAST YEAR
• Received all critical permits to start construction, including approval of the Mine Closure Plan .
• Negotiated Power Purchase Agreement (PPA), quotes for desalinated water supply.
• Additional metallurgical test work improving confidence in metal recoveries and confirming the process
design criteria of 29% copper concentrate and 65% iron concentrate.
• Developing additional optionality for shared infrastructure development.
• Received a firm-fixed-price proposal for the EPC of the processing plant.
• Firm and actionable quotations for major processing equipment.
• Excluding port and slurry pipeline, approximately 75% of direct initial capital costs are certain.
BASE CASE and 2020 PEA OPPORTUNITY
The Base Case and the 2020 PEA Opportunity are being completed using engineering and consulting firms
experienced in the Chilean mining industry (Amec Foster Wheeler Ingeniería y Construcción Limitada, a Wood
company, Blue Coast Metallurgy Ltd., BRASS Chile S.A., Knight Piesold S.A., NCL Ingeniería y Constr ucción
Ltda., Aminpro Chile, Sunrise Americas and Roscoe Postle Associates Inc.), with the authors named below in
"Qualified Persons". The report is being compiled by the Wood Group’s Santiago office.
18 Copper recovery is for the copper concentrator only.
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The Base Case and the 2020 PEA Opportunity includes development of two open pit mines using conventional
drilling, blasting, loading with diesel hydraulic shovels, and truck haulage, and a copper -iron concentrator designed
to process a maximum 65,000 tpd to a nominal capacity of 60,000 tpd (throughput is reduced in the latter years as
the ore becomes slightly harder) using Semi-Autogenous Grinding (“SAG”) and ball milling, with conventional
flotation utilizing desalinated water to produce a copper concentrate. Magnetite iron will be recovered from the
copper rougher tailings using Low Intensity Magnetic Separation. The planned infrastructure in both the Base Case
and 2020 PEA Opportunity include a tailings storage facility (“TSF”); an iron concentrate pipeline and a third party
desalinated water supply pipeline; a port-located magnetite iron concentrate filter plant and stockpile; a port-located
copper concentrate storage building; a desalination plant; ship loading facilities; and on-site and off-site
infrastructure and support facilities.
The mine is located 50 kilometres southwest of Codelco's El Salvador copper mine and 130 kilometres north-
northeast of Copiapó, near the town of Diego de Almagro, in Region III, Chile. The elevation at the site is
approximately 1,000 metres above sea level (“masl”) with relatively gentle topographic relief. Access to the
property is one kilometre off the paved highway C-17 from Diego de Almagro to Copiapó. The magnetite filter plant
and stockpile, the copper storage building, the desalination plant and other port infrastructure will be located in
Punta Roca Blanca, 41 kilometres north of Caldera. The name of the proposed port development is Puerto Santo
Domingo.
For the first five years of full operation, Santo Domingo will have an annual average copper production of
approximately 259 million pounds (approximately 117,500 tonnes). The LOM average production is 137 million
pounds of copper (approximately 61,000 tonnes) per year over a period of approximately 18 years. The total LOM
copper production is estimated at 2.4 billion pounds (approximately 1.1 million tonnes).
For the first five years of full operation, the annual average iron-ore concentrate production is estimated to be 3.3
million dmt. Over the LOM, the iron-ore concentrate production will increase to an annual average of 4.2 million
dmt, with a total estimated production of approximately 75.1 million dmt.
MINERAL RESOURCE ESTIMATE
Following is the current Mineral Resource Estimate as at February 13, 2020 prepared by David W. Rennie, P. Eng.,
of Roscoe Postle Associates Inc. ("RPA").
Mineral Resource Estimate as at February 13, 2020
Category Deposit Mt CuEq
(%)
Cu
(%)
Au
(g/t)
Fe
(%)
S
(%)
Co
(ppm)
Measured 66 0.81 0.61 0.081 30.9 2.3 254
Indicated SDS/IN 416 0.49 0.24 0.033 26.4 2.2 239
Estrellita 55 0.40 0.38 0.039 13.7 0.0 125
Sub-Total 471 0.48 0.26 0.034 25.0 1.9 225
Total Measured and Indicated 537 0.52 0.30 0.039 25.7 2.0 229
Inferred SDS/IN 42 0.42 0.18 0.024 25.0 2.4 208
Estrellita 5 0.32 0.31 0.030 12.3 0.0 108
Total Inferred 48 0.41 0.19 0.025 23.6 2.2 197
Mineral Resource Estimate Notes:
1. Mineral Resources are classified according to CIM (2014) definition standards.
2. Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated
economic viability.
3. The Qualified Person for the estimates is Mr. David Rennie, P. Eng., an associate of Roscoe Postle Associates Inc.