Cozamin

Overview

The Cozamin mine 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 2006.

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")
Feb/12	Updated Mineral Resource for MNFWZ
Mar/13	Updated Mineral Resource for MNFWZ

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 and the Mala Noche Main Vein in 2012 with a program of approximately 32,000 metres and budget of US$6.5 million. The Company anticipates re-estimating the Footwall Zone mineral resource when a crititcal mass of new drill data is attained.

Resources and Reserves

2011 Cozamin Mineral Resources and Mineral Reserves

Cozamin Mine - Mineral Reserves Estimates** as of December 31, 2011

MINERAL RESERVES									CONTAINED METAL**
	Category	000's Tonnes	Cu %	Zn %	Pb %	Ag g/t	Au g/t	Fe %	Cu M lbs	Zn M lbs	Pb M lbs	Ag M ozs	Au k ozs	Fe Mt

MNV/San Roberto (Mala Noche Vein)	Proven	899	1.88	0.91	0.65	75.52	-	-	37	18	13	2	-	-
	Probable	5,352	1.49	1.58	0.30	57.10	-	-	176	187	35	10	-	-
	Sub-total	6,251	1.55	1.49	0.35	59.75	-	-	213	205	48	12	-	-

MNFWZ (Mala Noche Footwall Zone)	Proven	375	1.81	0.27	0.02	33.11	-	-	15	2	0	0	-	-
	Probable	1,896	1.99	0.34	0.02	32.53	-	-	83	14	1	2	-	-
	Sub-total	2,271	1.96	0.33	0.02	32.62	-	-	98	16	1	2	-	-

Copper Zones Sub-total	Proven	1,274	1.86	0.72	0.46	63.03	-	-	52	20	13	3	-	-
	Probable	7,248	1.62	1.25	0.23	50.67	-	-	259	201	36	12	-	-
	Total	8,522	1.66	1.18	0.26	52.52	-	-	311	221	49	14	-	-

San Rafael Zinc Deposit	Probable	1,416	0.27	3.23	0.43	41.63	-	-	8	101	13	2	-	-

Total Cozamin Diluted Reserve		9,938	1.46*	1.47*	0.29*	50.97*	-	-	320	322	62	16	-	-

**Totals may not add due to rounding. Metal price assumption (in USD) used to calculate the $40 NSR COG for all Deposits are Cu=$2.50/lb Zn=$0.80/lb Pb=$0.85/lb and Ag=$20.00/oz. All mineral estimates exclusive of dilution and recovery factors. See Technical Reports filed under Capstone's profile on SEDAR for further information.

*Grade corrected from December 31, 2011 AIF. No change to contained metal.

Click HERE for the mineral reserve estimate disclosure for Cozamin including methodology (see page 26).

Cozamin Mine - Mineral Resources by Class for All Copper Deposits as at December 31, 2011 at a US$35 NSR COG

MINERAL RESOURCES -- Inclusive of Mineral Reserves									CONTAINED METAL*
	Category	000's Tonnes	Cu %	Zn %	Pb %	Ag g/t	Au g/t	Fe %	Cu M lbs	Zn M lbs	Pb M lbs	Ag M ozs	Au k ozs	Fe Mt

MNV/San Roberto (Mala Noche Vein)	Measured	1,462	1.95	1.06	0.55	78.3	-	-	63	34	18	4	-	-
	Indicated	7,734	1.40	1.68	0.37	58.1	-	-	238	287	63	15	-	-
	M&I	9,196	1.49	1.58	0.40	61.4	-	-	301	321	80	18	-	-
	Inferred	4,785	1.03	1.57	0.31	45.9	-	-	109	165	33	7	-	-

MNFWZ (Mala Noche Footwall Zone)	Measured	340	1.98	0.30	0.02	37.1	-	-	15	2	0	0	-	-
	Indicated	1,877	2.12	0.36	0.02	35.4	-	-	88	15	1	2	-	-
	M&I	2,217	2.10	0.35	0.02	35.6	-	-	103	17	1	3	-	-
	Inferred	3,574	1.86	0.24	0.03	38.6	-	-	147	19	2	4	-	-

Copper Zones Sub-total	Measured	1,802	1.96	0.92	0.45	70.5	-	-	78	37	18	4	-	-
	Indicated	9,611	1.54	1.42	0.30	53.7	-	-	326	302	64	17	-	-
	M&I	11,413	1.61	1.34	0.32	56.4	-	-	404	338	81	21	-	-
	Inferred	8,359	1.39	1.00	0.19	42.8	-	-	256	184	35	12	-	-

San Rafael Zinc Deposit	Measured	0	0	0	0	0	-	-	0	0	0	0	-	-
	Indicated	2,619	0.27	3.09	0.42	40.6	-	-	15	178	24	3	-	-
	M&I	2,619	0.27	3.09	0.42	40.6	-	-	15	178	24	3	-	-
	Inferred	1,744	0.14	3.01	0.63	32.7	-	-	5	116	24	2	-	-

Cozamin Total	Measured	1,802	1.96	0.92	0.45	70.5	-	-	78	37	18	4	-	-
	Indicated	12,230	1.27	1.78	0.33	50.9	-	-	342	480	88	20	-	-
	M&I	14,032	1.37	1.67	0.34	53.6	-	-	419	516	105	24	-	-
	Inferred	10,103	1.17	1.35	0.27	41.0	-	-	261	300	59	14	-	-

*Totals may not add due to rounding. Metal price assumption (in USD) used to calculate the $35 NSR COG for all Deposits are Cu=$2.50/lb Zn=$0.80/lb Pb=$0.85/lb and Ag=$20.00/oz. Processing recoveries used to calculate the $35 NSR COG for MNFWZ Resource are Cu=92%; Zn=69%; Ag=72%. Processing recoveries used to calculate the $35 NSR COG for the San Roberto Resource are Cu=92%; Zn=69%; Ag=62%. Processing recoveries used to calculate the $35 NSR COG for the San Raphael Resource are Cu=5%; Zn=24%; Ag=28%. M&I = Measured & Indicated. See Technical Reports filed under Capstone's profile on SEDAR for further information.

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.

All technical information contained on this page has been reviewed and approved by Brad Mercer, P.Geol., Vice President, Exploration; and John Sagman BASc. P.Eng. PMP, Vice President of Technical Services for Capstone Mining Corp. who are the "qualified persons" as defined in National Instrument 43-101 of the Canadian Securities Administrators.