Capstone Mining to Purchase Pinto Valley Copper Mine

VANCOUVER, April 28, 2013 /CNW/ - Capstone Mining Corp. ("Capstone") (TSX: CS) today announced that it has entered into a definitive agreement with BHP Copper Inc., a subsidiary of BHP Billiton Ltd. ("BHP Billiton"), to purchase BHP Billiton's wholly-owned Pinto Valley copper mining operation and the associated San Manuel Arizona Railroad Company ("SMARRCO") in Arizona, USA for US$650 million.

The Pinto Valley Mine is located in the Globe-Miami mining district in Arizona, approximately 125 kilometres east of Phoenix. It is projected to produce 130 - 150 million pounds of copper in concentrate and approximately 10 million pounds of copper cathode annually, along with by-product molybdenum and silver, at an estimated cash cost of approximately $1.80 per pound, net of by-product credits, for the first five years of production.

"Pinto Valley represents a unique opportunity to acquire a mid-sized producing copper mine in a well-established and low-risk mining jurisdiction with a significant mineral resource," said Darren Pylot, President and CEO of Capstone. "This acquisition gives Capstone our third producing mine with a long mine life and is consistent with Capstone's strategy of building an intermediate copper producer focused in the Americas."

"The purchase price and financing structure allows us to maintain our financial flexibility, retaining approximately $135 million in cash," continued Mr. Pylot. "The retained cash, combined with the immediate cash flow and low on-going capital requirements expected from Pinto Valley and our current operations, provides us with the necessary financial resources to continue to fund our development projects."

"During our extensive due diligence process we were very impressed with the world-class operations and the solid workforce and management team that are in place at Pinto Valley.  We are looking forward to the Pinto Valley employees joining Capstone as we jointly prepare to realize the full value of the Pinto Valley asset well into the future," concluded Mr. Pylot.

Investment Highlights

• Immediately transforms Capstone into an intermediate copper producer.
• Annual production from Pinto Valley of 130 - 150 million pounds of copper provides immediate >160% increase in Capstone's copper production.
• First five year estimated cash cost of $1.80 per pound (net of by-product credits).
• Further asset diversification into Arizona, USA, one of the world's most favorable mining jurisdictions and aligned with Capstone's existing assets.
• Work underway aimed at upgrading the 1 billion tonne Measured and Indicated ("M&I") Mineral Resource to extend operations beyond the current reserve life reported by BHP Billiton.
• Maintained and managed to BHP Billiton's world-class standards.
• All necessary established infrastructure, permits and skilled workforce in place.

Transaction Overview

The purchase price is being paid in cash and is subject to customary adjustments. The purchase price will be satisfied from Capstone's existing $200 million Senior Secured Revolving Credit Facility ($176 million available) and from a new 2.5-year, $200 million Senior Secured Reducing Revolving Credit Facility, that are respectively committed and underwritten by The Bank of Nova Scotia, and cash on hand. The new facility will include customary covenants and closing conditions, including closing of the Pinto Valley acquisition, and will bear interest at market rates. The acquisition agreement is not conditional upon financing.

Under the terms of the agreement, Capstone is committed to maintaining Pinto Valley's existing environmental standards and will provide financial assurances reasonably necessary to obtain regulatory approvals for the transfer of the applicable permits. BHP Billiton employees working at Pinto Valley and SMARRCO will become employees of Capstone as part of the transaction.

The purchase agreement includes typical closing conditions, including regulatory approvals. Closing of the transaction is expected to occur in the third quarter of 2013. There can be no assurances the acquisition or the financing will close.

Operational Highlights

The Pinto Valley Mine successfully restarted operations on schedule in December 2012 at a capital cost of $194 million (including approximately $60 million for a new mining fleet), which will be fully funded by BHP Billiton. The restart is progressing well, and is on schedule to achieve a run-rate of over 50,000 tonnes per day by the end of 2013.

The mine is projected to employ approximately 650 employees and has all necessary established infrastructure. Key contracts will be in place at closing of the transaction for water, power and access to markets, and a Transitional Services Agreement will be executed with BHP Billiton to provide various administrative services through a defined transition period.

Local regulatory and community support has been demonstrated for the mine during both prior operations and the recent re-start. Arizona is among the world's most favorable mining jurisdictions with respect to tax, regulation and labour.

Mineral Resources

The Pinto Valley property includes a significant amount of mineralization not included in BHP Billiton's publicly-reported Mineral Reserve estimate. Capstone has completed the following NI 43-101 compliant Mineral Resource estimate for the global identified resource, with a technical report to be filed within 45 days.

Mineral Resource Estimate, February 28, 2013, at a 0.25% COG*

* Totals may not sum exactly due to rounding. This estimate had not been adjusted for the three months of mining from start up to February 28, 2013.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.

The current Pinto Valley plan of operation, based on BHP Billiton's publicly reported reserves, projects a 5-year operation, which is fully permitted with mining presently underway. Capstone believes that considerable potential exists to upgrade the M&I Mineral Resources into reserves, potentially extending the operation meaningfully beyond the current reserve life as reported by BHP Billiton.  A Preliminary Feasibility Study ("PFS") is underway that will target the M&I Mineral Resources for potential conversion to reserves, with expected completion in 2013. The PFS will consider the potential to extend operations within the currently permitted boundaries. In addition, Capstone intends to immediately commission the necessary engineering and economic studies to consider all remaining current mineral resources in preparation for filing the permit applications.

Mineral Resource Estimate Methodology

The mineral resource estimate reported herein was prepared by Kirkham Geosystems Ltd. of Burnaby, BC, Canada. The estimate was completed using commercial mine planning software MineSight® v7.50 using a three dimensional block model (100 ft by 100 ft by 45 ft (vertical) block size). The mineralization was interpreted into distinct domains, modelled as wireframes and used as hard boundaries to constrain estimation. Geostatistical analysis was completed on the 45 ft composite assay data for each of the metals, and variograms were defined for each domain of mineralization. The grades for copper and molybdenum were interpolated into the block model using the ordinary kriging method. Interpolated results are reported in measured, indicated and inferred categories and are based on continuity of the mineralization and sample density. The model was estimated in imperial units and converted to metric units where appropriate for disclosure purposes.

The mineral resources are confined within an optimized Lerchs-Grossman (LG) pit shell to ensure reasonable prospects of economic extraction. The pit shell was generated using a copper price of $3.30/lb, applied to copper equivalent grade, with mining costs (ore and waste) of $1.50/ton, processing costs of $5.00/ton and an overall pit slope of 45°. Copper equivalence (CuEq), used to constrain the pit, was calculated using a ratio of Cu:Mo of 1:3.3, and recoveries of 88% and 50%, respectively. Mr. Kirkham is author of a Technical Report on the Mineral Resource Estimate for the Pinto Valley resource estimate, to be filed within 45 days of this news release. Mr. Kirkham is independent of Capstone and is an "Independent Qualified Person" as defined by NI 43-101. Mr. Kirkham has reviewed and validated the resource information contained in this release.

Advisors

Scotia Capital Inc. is acting as financial advisor to Capstone and its Board of Directors. Capstone's legal counsel is Blake, Cassels & Graydon LLP and Davis, Graham & Stubbs LLP.

Pinto Valley Conference Call and Webcast

Capstone will hold a conference call and webcast on Monday April 29, 2013 at 11:00 am Eastern time (8:00 am Pacific time) for investors and analysts, and at 1:00 pm Eastern time (10:00 am Pacific time) for media.

Investors and Analysts

Media

The conference call replays will be available until May 13, 2013. The investor conference call audio and transcript will be available on Capstone's website within approximately 24 hours of the call at http://capstonemining.com/s/Conference_Calls.asp.

Change to Capstone's Q1 Financial Results Timing and Conference Call

Capstone will move the release of its first quarter financial results to Tuesday, May 7, 2013 after market close, from May 8 as originally scheduled. The conference call will also move by one day to Wednesday, May 8.  The Q1 conference call for investors and analysts will be held at 11:30 am Eastern time (8:30 am Pacific time) on Wednesday, May 8, 2013. Please note the revised date below.

The conference call replay will be available until May 23, 2013. The conference call audio and transcript will be available on Capstone's website within approximately 24 hours of the call at http://capstonemining.com/s/Conference_Calls.asp.

About Capstone Mining Corp.

Capstone Mining Corp. is a Canadian base metals mining company, committed to the responsible development of our assets and the environments in which we operate. We are preferentially focused on copper, with two producing copper mines, the Cozamin copper-silver-zinc-lead mine located in Zacatecas State, Mexico and the Minto copper-gold-silver mine in Yukon, Canada. In addition, Capstone has two development projects, the large scale 70% owned Santo Domingo copper-iron-gold project in Chile in partnership with Korea Resources Corporation and the 100% owned Kutcho copper-zinc-gold-silver project in British Columbia, as well as exploration at properties in Canada, Chile, Mexico and Australia. Using our cash flow and strong balance sheet as a springboard, Capstone aims to grow with continued mineral resource and reserve expansions, exploration, and through acquisitions in politically stable, mining-friendly regions. Our headquarters are in Vancouver, Canada and we are listed on the TSX. Further information is available at www.capstonemining.com.

Cautionary Note Regarding Forward-Looking Information

This document may contain "forward-looking information" within the meaning of Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). These forward-looking statements are made as of the date of this document and Capstone Mining Corp. (the "Company") does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation.

Forward-looking statements relate to future events or future performance and reflect Company management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral resources, the conversion of mineral resources to mineral reserves, the anticipated date of closing of the acquisition of Pinto Valley and the associated financing, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "outlook", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. In this document certain forward-looking statements are identified by words including "scheduled", "guidance", "plan", "planned", "estimated", "projections", "projected" and "expected". By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade or recovery rates; accidents; dependence on key personnel; labour pool constraints; labour disputes; availability of infrastructure required for the development of mining projects; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; and other risks of the mining industry as well as those factors detailed from time to time in the Company's interim and annual financial statements and management's discussion and analysis of those statements, all of which are filed and available for review on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.  Accordingly, readers should not place undue reliance on forward looking statements.

Quality Assurance and NI 43-101 Compliance

The technical information in this news release has been prepared in accordance with Canadian regulatory requirements set out in National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI 43-101") and reviewed by John Wright, P. Eng., Capstone's Business Development Manager, a "Qualified Person" under NI 43-101. The mineral resource estimate reported herein for the Pinto Valley property was prepared by Garth Kirkham, P. Geo, Kirkham Geosystems Ltd., an independent Qualified Person, from information provided by BHP Billiton. BHP Billiton's mineral reserve estimate has been publicly reported in the BHP Billiton 2012 Annual Report.

In addition, Gregg Bush, Senior Vice President and Chief Operating Officer for Capstone Mining Corp. reviewed and approved this news release.

Technical Report

A NI 43-101 compliant Technical Report related to the mineral resources reported herein, will be filed under Capstone's profile on SEDAR at www.sedar.com within 45 days.

Alternative Performance Measure

"Cash Cost per Pound of Copper" is an Alternative Performance Measure. This performance measure is included because this statistic is a key performance measure that management uses to monitor performance. Management uses this statistic to assess how the Company is performing to plan and to assess the overall effectiveness and efficiency of mining operations. This performance measure does not have a meaning within IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. This performance measure should not be considered in isolation as a substitute for measures of performance in accordance with IFRS.

Cautionary Note to United States Investors

This news release contains disclosure that has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Without limiting the foregoing, this news release uses the terms "indicated" and "inferred" resources. U.S. investors are cautioned that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. U.S. investors are cautioned not to assume that all or any part of indicated resources will ever be converted into reserves. U.S. investors should also understand that "inferred resources" have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of "inferred resources" will ever be upgraded to a higher category. Therefore, U.S. investors are also cautioned not to assume that all or any part of inferred resources exist, or that they can be mined legally or economically. Accordingly, information concerning descriptions of mineralization and resources contained in this news release may not be comparable to information made public by U.S. companies subject to the reporting and disclosure requirements of the SEC.

Note:  All amounts in US$.

SOURCE: Capstone Mining Corp.

Cindy Burnett, VP, Investor Relations and Communications
604-637-8157
cburnett@capstonemining.com