Capstone Mining cash flow through the roof eventually:
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Capstone Announces Results of Feasibility Study, Cozamin Copper-Silver-Zinc Project, Zacatecas, Mexico
Thursday March 2, 10:30 am ET
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 2, 2006) - CAPSTONE MINING CORP. ("Capstone") (TSX:CS - News) is pleased to announce the results of the feasibility study for the Cozamin copper-silver-zinc project ("the Project") located in Zacatecas State, Mexico. The feasibility study was prepared by independent qualified person Robert Rodger, P.Eng, RJR Mineral Services, of 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% copper, 76.0 g/t silver and 1.0% zinc.
- Estimated average annual production is 16 million pounds of copper, 700,000 ounces of silver and 4 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 December 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 /lb., a silver price of $6.25 /oz., a zinc price of $0.50 /lb and a lead price of $0.38 /lb., and a discount rate of 5%, the Project has an estimated NPV of US$17.9 million and an estimated pre-tax IRR of 43%. 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 5. Using a discount rate of 5%, the Project has an estimated NPV of US$43.4 million and an estimated pre-tax IRR of 226%.
Table 1: CASH FLOW SUMMARY & SENSITIVITY ANALYSIS----------------------------------------------------------------
BASE CASE RANGE CASE(i)
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METAL PRICES
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Copper (US$/Lb) 1.25 2.00 to 1.25
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Zinc (US$/Lb) 0.50 0.85 to 0.50
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Lead (US$/Lb) 0.38 0.50 to 0.38
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Silver (US$ /Tr. Oz.) 6.25 8.90 to 6.25
----------------------------------------------------------------
----------------------------------------------------------------
Capital Costs $10.0 M. $10.0 M.
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Working Capital $ 1.7 M. $ 1.7 M.
----------------------------------------------------------------
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Operating costs / tonne $32.80 $32.80
----------------------------------------------------------------
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IRR (Pre-tax) 43.0% 226.0%
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NPV @ 5% (Pretax) $17.9 M. $43.4 M.
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NET CASH FLOW (Pretax) $24.2 M. $53.3 M.
----------------------------------------------------------------(i) Copper prices of $2.20/lb, $2.00/lb, $1.75/lb, $1.50/lb
assumed for 2006,2007,2008,2009 and $1.25/lb assumed for
2010 and thereafter.
(i) Silver prices of $8.90/oz, $8.00/oz, $7.50/oz, $7.00/oz
assumed for 2006,2007,2008,2009 and $6.25/oz assumed for
2010 and thereafter.
(i) Zinc prices of $1.00/lb, $0.80/lb, $0.70/lb, $0.60/lb
assumed for 2006,2007,2008,2009 and $0.50/lb assumed for
2010 and thereafter.
(i) Lead prices of $0.64/lb, $0.55/lb, 0.50/lb, $0.44/lb
assumed for 2006,2007,2008,2009 and $0.38/lb assumed for
2010 and thereafter.
CAPITAL COSTS
Total on-going capital expenditures for the Project are estimated as follows:
US$ million
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. Pre-tax average site operating costs for Cozamin are estimated to be $0.42 cents per pound of copper produced (net of by product credits) using the base case metal prices over the life of mine and total cash costs including transportation, ocean freight, smelting and refining charges are estimated to be $0.80 cents per pound.
US$/t milled
Mine: 14.18
Mill: 15.54
Site admin & overhead: 3.08
TOTAL: $32.80RESERVES AND RESOURCESTable 2: MINERAL RESERVES-----------------------------------------------------------------
Reserve Size Grade
-----------------------------------------------------------------
Category M Tonnes Cu (%) Zn (%) Pb (%) Ag (g/t)
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Proven 153,411 1.43 1.84 0.82 87.80
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Probable 2,106,589 2.21 0.93 0.54 75.10
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Total: 2,260,000 2.16 0.99 0.56 76.00
-----------------------------------------------------------------Note 1: The cutoff grade used to estimate the Mineral Reserve above
was 1.25% copper.
Note 2: The Mineral Reserves were estimated after allowing for the
following factors: Dilution & loading loss: 13% Pillar loss: 5%
Note 3: Ore densities were estimated at 2.9 t/m 3
Note 4: The effective date of the Mineral Reserve estimate described
above is December 23, 2005.Table 3: MINERAL RESOURCES-----------------------------------------------------------------
Resource Size Grade
-----------------------------------------------------------------
Category M Tonnes Cu (%) Zn (%) Pb (%) Ag (g/t)
-----------------------------------------------------------------
Measured 395,000 2.74 1.33 0.53 92.63
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Indicated 1,675,000 2.44 1.27 0.60 84.80
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Total: 2,070,000 2.50 1.28 0.59 86.30
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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 December 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, P.Eng., MASc., of Giroux Consultants Ltd., of Vancouver, B.C., included in the technical report dated October 31st, 2005 entitled "Technical Report on Initial Resource Estimates (with exploration update) Cozamin Project, Zacatecas State, Mexico" by Peter Christopher & Associates Inc. and Giroux Consultants Ltd. (filed on www.sedar.com). The Giroux resource estimate of the mineral resource at Cozamin included 25,000 m 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 tons of measured and indicated resources grading 1.73% copper, 73.5 g/t silver, 1.36% zinc and 0.67% lead, at a 1.5% copper equivalent cut-off. Also, an additional 4.2 million tonnes of inferred resources grading 57.7 g/t silver, 1.5% copper, 1.5% zinc and 0.3% lead, at a 1.5% 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 2,070,000 tons grading 2.5% copper, 86.3 g/t silver, 1.28% zinc and 0.6% lead. The inferred resource is now 1,210,000 grading 2.29% copper, 79.5 g/t silver, 1.02% zinc and 0.6% 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 5 operating stopes. The average width of the mining zone is 6.4 m and rock conditions require minimal support.
PRODUCTION
Based on the designed mine plan, the feasibility study estimates annual average production of 16 million lbs of copper, 700,000 oz's of silver and 4 million lbs 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% for copper, 75% for silver, 65% for zinc, and 27% for lead. Glencore International AG will be responsible for marketing the mine's entire concentrate production from 2006-2008 under a recently signed offtake agreement.
INFRASTRUCTURE
The Cozamin Project is located 3.8 km's 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 13,200v 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 Colorado. This plan is designed to store an additional 4 million tonnes of tailings within the existing facility. The first lift of construction will be a 12 m lift constructed on a modified centre line method of construction which will store approximately another 760,000 m3. This first lift will provide 4 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 August 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 February 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 December 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 forsee any delays or difficulties in obtaining the remaining permits needed to begin the operation within the 3rd quarter of 2006.
Robert Rodger, P.Eng 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 October 31st, 2005 entitled "Technical Report on Initial Resource Estimates (with exploration update) Cozamin Project, Zacatecas State, Mexico" by Peter Christopher & Associates Inc. and Giroux Consultants Ltd.
This press release includes certain "Forward-Looking Statements" within the meaning of the US Private Securities Reform Act of 1995. Other than statements of historical fact, all statements are "Forward-Looking Statements" that involve such various known and unknown risks, uncertainties and other factors. There can be no assurance that such statements will prove accurate. Results and future events could differ materially from those anticipated in such statements. Readers of this press release are cautioned not to place undue reliance on these "Forward-Looking Statements". All dollar amounts are in US dollars unless otherwise noted.
Contact:
Chris Tomanik
Capstone Mining Corp.
(604) 684-8894
(604) 688-2180 (FAX)
ctomanik@capstonemining.com
www.capstonemining.com
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Source: Capstone Mining Corp. |
