SCOTIA REPORT OUT TODAY ON CAPSTONE 3.30 target price.....Company Profile Capstone Mining Corp. (Capstone) is a copper-focused mining company with three operating mines in North America: Pinto Valley in Arizona, United States, Cozamin in Mexico, and Minto in Canada. Capstone also has two development projects: 75% interest in the large copper-iron-gold Santo Domingo project in Chile, and 100% interest in the Kutcho copper project located in British Columbia. Business Mix (Based on revenues unless otherwise noted) Copper 91%, zinc 3%, silver 3%, moly 2%, other metals 1% (based on 2015E) Comparable Companies (TSX unless otherwise noted) LUN, HBM, TKO, III, NSU Recent Update Text as of 13JAN15 . Q4/14 total copper production of 23.1kt was 8% less than our estimate owing to lower than expected and planned throughput at Pinto Valley (PV) and head grades across the three operations. . Average mill throughput at PV of 47,385 tpd was 5% below our estimate (-4% plan) and was the greatest contributor to the miss of our production estimates. We have lowered our forecast average throughput at the operation to 50,750 tpd in 2015 from the targeted 52,500 tpd rate. . 2015 operating and capital guidance is to be provided next week (January 19-23, 2015). As grade profiles are expected to be lower YOY at each of the operations, we estimate 2015 production to be 89.3kt; 13.6% lower than the 103.3kt achieved in 2014. . We maintain our SO rating on the view that within the coming months the market will shift valuation focus to 2016 metrics. For 2016, we estimate production (and cash flow) to increase significantly (19% YOY) to 107kt as grades at PV return to 0.38% copper and the high grade Minto North pit is exploited. . Even at spot metal prices today, we believe CS remains well below its total debt and interest coverage covenants. While additional capital would likely be required IF discretionary capex was not managed, we believe the balance can easily support the necessary additional debt. . Maintain our Sector Outperform rating and $3.30 target price. Mark Turner, MBA, P.Eng. (Scotia Capital Inc. - Canada) mark.turner@scotiabank.com / (416) 863-7484