Cozamin

Overview

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.

Production at Cozamin was quickly expanded by 120% in the first 12 months with all capital expenditures funded from cash flow generated by the mine, and a further expansion in 2008 saw production rise to 1 million tpy. Current throughput is 3,100 tonnes per day (tpd) and exploration work is underway, with the goal to increase the reserves.

Location

The Cozamin mine site is located 3.8 km north-northwest of Zacatecas City in the mineral-rich state of Zacatecas, Mexico. Despite being surrounded by rugged terrain, narrow valleys and mountains, the mine site is very accessible due to existing infrastructure networks in Zacatecas City including road and rail.

Zacatecas State's geopolitically stable environment and Mexico's 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 infrastructure with roads, power, and water access available at the mine site and services available in the surrounding communities. 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.

Mining Process

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 the surface, or one of two ramps from the surface down to the lower workings.

Mining of the Mala Noche vein is by either long hole stoping, or cut and fill mining. Cut and fill mining is utilized to extract veins that are characterized with a shallow dipand/or narrow (less that 4 m). When the vein is wider (4-10 meters) long hole stoping is used that at this time does not require passive fill support. Those areas where the vein is wider than 10 meters generally rely on an Avoca Mining method where development waste rock is utilized as fill that provides passive support to the excavation which minimizes hanging wall dilution. Levels are excavated every 20 vertical meters, whereupon long hole drills are utilized to bore holes between levels which are then loaded with explosives and blasted. Blasting of a stope is sequenced to ensure good fragmentation and productivity in a safe manner. This bulk mining method is relatively inexpensive and highly productive, however, due diligence is required to ensure that dilution is minimized and extraction of the ore is not compromised if the vein has large undulations 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 and increased recovery of the ore.

Mined ore is brought to surface via either a shaft or the two production ramps that are collared from surface (currently 60% via the shaft). The ore is trucked to the crusher and 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.

Project Milestones
Jan/04	Capstone acquires Cozamin Mine near Zacatecas, Mexico
May/04	Confirms high grade copper and silver values
Oct/04	Phase 1 drill results increase grade and tonnage of deposit and underground development begins
Dec/05	Capstone acquires 90% interest in Cozamin
Mar/06	Results of feasibility study reported
Aug/06	Updated mineral resource estimate
Sep/06	Cozamin mine achieves commercial production
Oct/07	Increased mineral resources. Cozamin mill expanded from 1,000tpd to 2,200tpd of throughput
Sep/08	Completes Cozamin expansion from 2,200tpd to 3,000tpd
Feb/09	Updated mineral resource estimate for Cozamin mine
Jun/09	New life-of-mine plan and mineral reserve for Cozamin mine
Sep/09	Additional mineral claims at Cozamin mine
Mar/10	Increased mineral resources estimates for Cozamin
Apr/10	Exploration drilling commences at Cozamin
Sep/10	Announcement of discovery of Mala Noche Footwall Zone
Apr/11	Cozamin Mine receives Clean Industry Certification from Mexico's Federal Attorney for Environmental Protection ("PROFEPA")

Exploration

Excellent possibilities exist for increasing Mineral Reserves and Resources since 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.

Capstone has a surface and underground exploration program underway to target new mineralized zones. We believe there is potential along strike and down dip of existing resources and historic mines and in parallel structures. In 2010 and 2011, Capstone had success in the Mala Noche Footwall Zone (MNFWZ), a splay off the main Mala Noche vein that hosts the current mineral reserves. The MNFWZ potentially provides a near term opportunity to add high grade mineral resources and potential high grade mill feed for the Cozamin operation.

Capstone continues to explore the MNFWZ in 2012 with a program of approximately 32,000 metres and budget of US$6.5 million.

Resources and Reserves

2010 Cozamin Mineral Resources and Mineral Reserves

Capstone Mining - Mineral Reserves Estimates as of December 31, 2010

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	1,183	2.15	0.88	0.58	77.9	0.06	56	23	15	2,964	2
	Probable	5,185	1.66	1.42	0.29	60.4	0.09	190	163	34	10,063	15
	Total	6,368	1.75	1.32	0.35	63.6	0.08	246	186	49	13,027	17

Zinc Deposit	Proven	-	-	-	-	-	-	-	-	-	-	-
	Probable	1,928	0.24	3.04	0.42	36.8	0.45	10	129	18	2,282	28
	Total	1,928	0.24	3.04	0.42	36.8	0.45	10	129	18	2,282	28

Cozamin	Proven	1,183	2.15	0.88	0.58	77.9	0.06	56	23	15	2,964	2
Sub-total	Probable	7,113	1.28	1.86	0.33	54.0	0.19	200	292	52	12,345	43
	Total	8,296	1.40	1.72	0.37	57.4	0.17	256	315	67	15,309	45

*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)	2,035	2.29	0.91	0.48	76.6	-	103	41	21	5,013	-
Indicated (I)	0,334	1.49	1.81	0.31	55.9	-	305	372	64	16,755	-
M & I **	11,369	1.63	1.65	0.34	59.6	-	407	412	86	21,768	-
Inferred	6,897	1.60	1.42	0.24	38.1	-	244	215	36	8,461	-

*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.