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2006-03-02 13:33 ET - News Release
Shares issued 57,667,245
CS Close 2006-03-02 C$ 1.71
Mr. Chris Tomanik reports
CAPSTONE ANNOUNCES RESULTS OF FEASIBILITY STUDY, COZAMIN COPPER-SILVER-ZINC PROJECT, ZACATECAS, MEXICO
Capstone Mining Corp. is providing the results of the feasibility study for the Cozamin copper-silver-zinc project located in Zacatecas state, Mexico. The feasibility study was prepared by independent qualified person Robert Rodger, PEng, of RJR Mineral Services at Surrey, B.C., with the participation of other qualified persons. In the opinion of the study writer and Capstone, the results confirm both a technically feasible and economically viable copper-silver-zinc mining operation at Cozamin.
The initial planned mill throughput rate will be 350,000 tonnes per year with average grades of 2.16 per cent copper, 76 grams per tonne silver and 1 per cent zinc.
Estimated average annual production is 16 million pounds of copper, 700,000 ounces of silver and four million pounds of zinc.
Production is expected to begin early in the third quarter of 2006 based on construction completed to date.
Resource and reserve data included in the feasibility study are up to Dec. 23, 2005. Since then, Capstone has drilled an additional 25 underground holes, which will be included in an updated resource estimate in 2006.
The Mala Noche vein system remains open along strike and down dip.
Project economics
Using the base case assumptions of a copper price of $1.25 per pound, a silver price of $6.25 per ounce, a zinc price of 50 cents per pound and a lead price of 38 cents per pound, and a discount rate of 5 per cent, the project has an estimated NPV (net present value) of $17.9-million (U.S.) and an estimated pretax IRR (internal rate of return) of 43 per cent. Due to the relative short time to production, a range case is presented using metal prices that range from current prices down to base case metal prices in year five. Using a discount rate of 5 per cent, the project has an estimated NPV of $43.4-million (U.S.) and an estimated pretax IRR of 226 per cent.
TABLE 1
CASH FLOW SUMMARY AND SENSITIVITY
ANALYSIS
Base Range case
case (i)
Metal prices
Copper
(U.S. dollars/
pound) 1.25 2.00 to 1.25
Zinc
(U.S. dollars/
pound) 0.50 0.85 to 0.50
Lead
(U.S. dollars/
pound) 0.38 0.50 to 0.38
Silver
(U.S. dollars/
troy ounce) 6.25 8.90 to 6.25
Capital costs
(in millions) $10 $10
Working capital
(in millions) $1.7 $1.7
Operating costs/
tonne $32.80 $32.80
IRR (pretax) 43.0% 226.0%
NPV at 5%
(pretax, in
millions) $17.9 $43.4
Net cash flow
(pretax, in
millions) $24.2 $53.3
(i) Copper prices of $2.20 per pound,
$2 per pound, $1.75 per pound and $1.50
per pound assumed for 2006, 2007, 2008
and 2009, and $1.25 per pound assumed
for 2010 and thereafter.
(i) Silver prices of $8.90 per ounce,
$8 per ounce, $7.50 per ounce and $7
per ounce assumed for 2006, 2007, 2008
and 2009, and $6.25 per ounce assumed
for 2010 and thereafter.
(i) Zinc prices of $1 per pound, 80
cents per pound, 70 cents per pound and
60 cents per pound assumed for 2006,
2007, 2008 and 2009, and 50 cents per
pound assumed for 2010 and thereafter.
(i) Lead prices of 64 cents per pound,
55 cents per pound, 50 cents per pound
and 44 cents per pound assumed for 2006,
2007, 2008 and 2009, and 38 cents per
pound assumed for 2010 and thereafter.
Capital costs
Total continuing capital expenditures for the project are estimated as follows (in millions of United States dollars):
Mine $4.075
Mill, surface facilities 2.439
EPC, owner costs 2.160
Contingency (15%) 1.279
Total $9.953
Operating costs
An operating cost summary is estimated in the table below. Pretax average site operating costs for Cozamin are estimated to be 42 cents per pound of copper produced (net of byproduct credits) using the base case metal prices over the life of mine and total cash costs, including transportation, ocean freight, smelting and refining charges, estimated to be 80 cents per pound.
(In U.S. dollars per ton milled)
Mine $14.18
Mill 15.54
Site admin and overhead 3.08
Total $32.80
Reserves and resources
TABLE 2: MINERAL RESERVES
Reserve Size Grade
category (tonnes) Cu Zn Pb Ag
(%) (%) (%) (g/t)
Proven 153,411 1.43 1.84 0.82 87.80
Probable 2,106,589 2.21 0.93 0.54 75.10
--------- ---- ---- ---- -----
Total 2,260,000 2.16 0.99 0.56 76.00
Note 1: The cut-off grade used to esti-
mate the mineral reserve above was 1.25
per cent copper.
Note 2: The mineral reserves were esti-
mated after allowing for the following
factors: dilution and loading loss of
13 per cent, and pillar loss of 5 per
cent.
Note 3: Ore densities were estimated at
2.9 tonnes per cubic metres.
Note 4: The effective date of the
mineral reserve estimate described above
is Dec. 23, 2005.
TABLE 3: MINERAL RESOURCES
Resource Size Grade
category (tonnes) Cu Zn Pb Ag
(%) (%) (%) (g/t)
Measured 395,000 2.74 1.33 0.53 92.63
Indicated 1,675,000 2.44 1.27 0.60 84.80
--------- ---- ---- ---- -----
Total 2,070,000 2.50 1.28 0.59 86.30
Inferred 1,210,000 2.29 1.02 0.60 79.50
Note 1: The effective date of the mineral
resources estimate described above is
Dec. 23, 2005.
Note 2: The above mineral resources are
inclusive of the mineral reserves quoted
in Table 2.
The feasibility study contains resource estimates previously completed by independent qualified person Gary H. Giroux, PEng, MASc, of Giroux Consultants Ltd. of Vancouver, B.C., included in the technical report dated Oct. 31, 2005, entitled "Technical Report on Initial Resource Estimates (with exploration update) Cozamin Project, Zacatecas State, Mexico" by Peter Christopher & Associates Inc. and Giroux Consultants (filed on SEDAR). The Giroux resource estimate of the mineral resource at Cozamin included 25,000 metres of drilling in 37 surface and 66 underground core holes. Also, 48 underground channel samples were included in the model. Using ordinary kriging, the study identified 3.39 million tonnes of measured and indicated resources grading 1.73 per cent copper, 73.5 g/t silver, 1.36 per cent zinc and 0.67 per cent lead at a 1.5 per cent copper equivalent cut-off. Also, an additional 4.2 million tonnes of inferred resources grading 57.7 g/t silver, 1.5 per cent copper, 1.5 per cent zinc and 0.3 per cent lead at a 1.5 per cent copper equivalent cut-off grade were identified. The model was updated by Capstone to include 23 additional underground drill holes. The updated measured and indicated resource is now 2.07 million tonnes grading 2.5 per cent copper, 86.3 g/t silver, 1.28 per cent zinc and 0.6 per cent lead. The inferred resource is now 1.21 million grading 2.29 per cent copper, 79.5 g/t silver, 1.02 per cent zinc and 0.6 per cent lead. It is within this mineral resource that proven and probable reserves were estimated. Mineral resources which are not mineral reserves do not have demonstrated economic viability.
Mining
Underground mining will be mechanized cut and fill with waste rock used as fill. The production schedule is estimated to deliver a nominal 1,000 tonnes per day (350,000 tonnes per year) from five operating stopes. The average width of the mining zone is 6.4 metres and rock conditions require minimal support.
Production
Based on the designed mine plan, the feasibility study estimates annual average production of 16 million pounds of copper, 700,000 ounces of silver and four million pounds of zinc per year, over an estimated 6.5-year mine life. Metallurgical testing has been successful in producing saleable copper, zinc and lead concentrates using a traditional flotation process. Using locked cycle flotation test results on representative rock-type composites, average recoveries to final concentrate of copper, silver and zinc are estimated to be 94 per cent for copper, 75 per cent for silver, 65 per cent for zinc and 27 per cent for lead. Glencore International AG will be responsible for marketing the mine's entire concentrate production from 2006 to 2008 under a recently signed off-take agreement.
Infrastructure
The Cozamin project is located 3.8 kilometres north of the city of Zacatecas, Zacatecas state, Mexico, and is accessible via paved roads to the project boundary and gravel roads to the mine site. Power is distributed throughout the project via a 13,200-volt line from Zacatecas. The main water supply comes from the mine, combined with recycled water from the tailings area.
Tailings
The upgraded tailings facility plan was designed by Vector Colorado, LLC of Golden, Colo. This plan is designed to store an additional four million tonnes of tailings within the existing facility. The first lift of construction will be a 12-metre lift constructed on a modified centre-line method of construction which will store approximately another 760,000 cubic metres. This first lift will provide four years of containment before another lift will be required. Materials of construction are entirely local colluvial materials available within the local basin. All construction materials have been tested and proven suitable for construction.
Environmental and permitting
On Aug. 29, 2005, Capstone received its conditional approval for the filing of the Manifestacion de Impacto Ambiental (MIA), the Mexican equivalent of an environmental impact assessment statement. This document provides for the authorization for Capstone to begin construction activities. Also, on Feb. 14, 2006, Capstone received approval for the Estudio Justificativo de Cambio de Uso de Suslos (ETJ) study required to expand the operations. The Estudio de Riesgo (ER) study was filed on Dec. 9, 2005, and approval is pending. Following the approval of the ER study, Capstone will apply for the Licencia Unica Ambiental (LAU) which is the operating permit. While unforeseen delays are always possible, Capstone does not foresee any delays or difficulties in obtaining the remaining permits needed to begin the operation within the third quarter of 2006.
Mr. Rodger, PEng, is the qualified person who has reviewed and approved the technical information in this news release on behalf of the company.
Capstone intends to file a National Instrument 43-101 technical report regarding the feasibility study within 45 days. For sampling and assaying information, please refer to the technical report dated Oct. 31, 2005, entitled "Technical Report on Initial Resource Estimates (with exploration update) Cozamin Project, Zacatecas State, Mexico" by Peter Christopher & Associates and Giroux Consultants.