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The Cozamin project is a polymetallic (copper, silver, lead, zinc) mine located 3.8 km north-northwest of Zacatecas City in the mineral-rich state of Zacatecas, Mexico. Capstone completed exploration, development and initial production at 350,000 tonnes per year ("tpy") on time and under budget, with commercial production commencing in September 2007.

Within 12 months of initial production, Capstone expanded production by 120% to 750,000 tpy at a cost of US$13 million. All capital expenditures were funded from cash flow generated by the mine.Capstone completed a third expansion of the Cozamin mine in late 2008, with production increasing from the rate of 2,200 tonnes per day ("tpd") or 750,000 tpy to 3,000 tpd or approximately 1 million tpy, a 36% increase.

Cozamin is currently operating at 3,000-3,500 tpd. The exploration budget for 2010 is US$3 million.

Mexico's geopolitically stable environment and membership in NAFTA provides a secure operating environment for the Cozamin mine. The location of the Cozamin mine also benefits from its proximity to Zacatecas City. The area has excellent logistics, roads, power, and water access available at the mine site. In addition, the city provides an environment for the employees of the Cozamin mine to live and raise their families in an area with excellent educational and medical facilities. Zacatecas has a strong mining tradition, dating back hundreds of years, providing the Cozamin mine with a community both knowledgeable and skilled in mining.

Ownership

Capstone has a 100% interest in the Cozamin mine through its subsidiary Capstone Gold S.A. de C.V. A 3% Net Smelter Royalty is paid to Grupo Bacis on metals produced from the claims purchased from Grupo Bacis in early 2004. Capstone Gold purchased 3 additional claims from Golden Minerals in 2009 which have a variable royalty based on metal price and total production levels,

Mine Description

The Cozamin mine is an underground mine with a surface milling facility. The underground area of the mine is accessed by either a shaft from surface, or one of two ramps from surface down to the lower workings.

Mining of the Mala Noche vein is by either long hole stoping, or cut and fill mining. When the vein is wider (4-10 meters) long hole stoping is used and when very wide (20-30m) an Avoca style of long hole mining is used. Levels are excavated every 20 vertical meters, and then long hole drills are used to connect between levels. Blasting of a stope normally occurs after an area is completely prepared (60 meters high by 250 meters long) and is done in sections. This bulk mining method is relatively inexpensive, but also can result in more dilution (waste material) if the vein varies over the vertical distance.

Cut and fill mining is normally used in areas where the vein is less than 4 meters wide, or where the vein is very sinuous. Mining is done in 2.5-3.0 meter lifts along strike, with material blasted and excavated, and then the area partially filled (leaving enough height for equipment to restart the cycle). This method is more expensive but allows better control of dilution, especially at narrower widths.

Mined ore is brought to surface through either the shaft or the production ramp (currently 60% via the shaft). The ore is trucked to the crusher and either fed directly to the primary crusher feed bin or to the crusher stockpile.

Ore is processed through a three stage crushing plant to produce a 9.5 millimeter product size which is stored in the fine ore (24 hour storage capacity) bins ahead of the grinding circuit.

Material fed to the grinding circuit is reduced in size to 55% minus 200 mesh and then sent to flotation. The flotation steps involve flotation of lead and copper first, followed by zinc. All products go through multiple stages of upgrading (or cleaning) in the flotation circuit ending with a silver-rich copper concentrate, a silver-rich lead concentrate and a zinc concentrate.

All concentrates are thickened and filter before storage at site. Concentrate is trucked by 3rd party contractors to the port of Manzanillo for export to world markets. The Cozamin mine has entered into sales contracts for the three different concentrates through to the end of 2011.

Exploration

Excellent possibilities exist for finding additional mineralization at Cozamin because the Mala Noche vein has only been partially exploited and not systematically explored to depth or along strike. Capstone's deepest holes in the Mala Noche vein indicated that the copper-silver phase of mineralization extends to greater depths than the current mineral resources.

The current mineral resources are divided between the San Roberto mine area and the San Rafael area. These mineral resources are contained within a 1.5 km strike length of the 5.5 km long Mala Noche vein that the company controls.

2010 Cozamin Mineral Resources and Mineral Reserves

Surface and underground exploration program to target new mineralized zones
- Potential along strike and down dip of existing resources and historic mines.
- Potential in parallel structures.

Capstone Mining - Mineral Reserves Estimates as of December 31, 2009

Mineral Reserves								Contained Metal*
	Category	000s	Cu	Zn	Pb	Ag	Au	Cu	Zn	Pb	Ag	Au
		Tonnes	%	%	%	g/t	g/t	m lbs	m lbs	m lbs	000s ozs	000s ozs
Cozamin
Copper Deposit	Proven	1,610	2.16	1.01	0.52	76.0	0.06	77	36	19	3,951	3
	Probable	5,932	1.62	1.57	0.30	59.0	0.11	211	205	40	11,255	21
	Total	7,542	1.73	1.45	0.35	63.0	0.10	288	241	58	15,207	24

Zinc Deposit	Proven	-	-	-	-	-	-	-	-	-	-	-
	Probable	1,865	0.25	3.12	0.43	37.0	0.47	10	128	18	2,233	28
	Total	1,865	0.25	3.12	0.43	37.0	0.47	10	128	18	2,233	28

Cozamin	Proven	1,610	2.16	1.01	0.52	76.0	0.06	77	36	19	3,951	3
Sub-total	Probable	7,797	1.29	1.94	0.33	54.0	0.20	222	333	57	13,488	49
	Total	9,407	1.44	1.78	0.37	58.0	0.17	298	369	76	17,439	52

*Totals may not add due to rounding

Click HERE for the mineral reserve estimate disclosure for Cozamin including methodology.

Cozamin Mine -- Mineral Resources by Class for All Deposits (at a NSR cut-off of US$35/t)

		Grade					Contained Metal
Class	Tonnes (000's)*	Copper	Zinc	Lead	Silver	Gold	Copper	Zinc	Lead	Silver	Gold
		(%)	(%)	(%)	(g/t)	(g/t)	(millions lbs)	(millions lbs)	(millions lbs)	(000s oz)	(000s oz)
Measured (M)	2,078	2.33	1.14	0.53	84.4	0.07	106.6	52.2	24.5	5,638	4.5
Indicated (I)	8,587	1.40	2.09	0.36	59.0	0.22	264.5	395.1	68.7	16,289	60.5
M & I **	10,665	1.58	1.90	0.40	63.9	0.19	371.1	447.4	93.2	21,928	65.1
Inferred	4,073	0.89	2.22	0.41	43.2	0.33	80.2	199.1	36.4	5,662	43.5

*Rounded to nearest thousand **Totals may not add exactly due to rounding

Click HERE for the mineral resources estimate for Cozamin including methodology.

The current resource/reserve are contained in 1.5 km of strike while Capstone controls 5.5 km of strike of the Mala Noche vein system.