Minto

Overview

The Minto Mine is a copper-gold mine that commenced commercial production in October 2007. owned 100% by Minto Explorations Ltd., a wholly owned subsidiary of Capstone Mining Corp.

A predecessor of Capstone acquired Minto Explorations and all other project interests, including a partially constructed but dormant construction site, in June 2005. Within two years from acquisition, the mineral resources were redrilled to mineral reserve standards, a bankable feasibility study was completed, project financing arranged, a new mine built and commercial production reached. Since then, the mine has been expanded twice, increasing throughput by more than 100%, and nine new deposits have been discovered in six years.

The Minto Mine is an open pit mining operation with conventional crushing, grinding, and flotation to produce copper concentrates with significant gold and silver credits. Concentrates are exported via the Port of Skagway, Alaska, to smelters in Asia for treatment and sale. In March 2011, the results of an independent pre-feasibility study for the Phase V expansion of the Minto copper-gold mine were released which incorporated the results of some earlier exploration success, extending the mine life to 2020.

Location

Minto mine is located 240 kilometres north of Whitehorse in central Yukon, Canada. The Mine is accessible via the Klondike Highway to the Minto Landing on the east side of the Yukon River. At the Minto Landing, the mine operates a barge across the river in the summer months and constructs an ice bridge for accessibility during the winter months.

Mining Process

The Minto mine uses conventional open pit mining techniques and equipment for all of its ore and waste extraction. Blast holes are drilled out in accordance to issued designs. Explosives are loaded into blast holes and the rock is blasted to manageable rock sizes. Shovels are used to load haul trucks that will transport the rock to its intended destination. Ore is hauled directly to the crusher feeding the mill or to temporary stockpiles according to the graded characteristics of the ore. Waste rock is transported to waste rock storage piles.

The ore is fed into the primary crusher and the Semi-Autogenous Grinding (SAG) mill where it is crushed and grind to reduce particle size. The ore is enters a number of flotation circuits where copper, gold and silver minerals are separated out from other minerals. The concentrated ore is thickened and de-watered using thickeners and filters. The concentrate is moved to the concentrated storage shed where it is loaded onto trucks and transported off site.

Production and Processing

In 2011 the Minto Mine produced 37.1 million pounds of copper in concentrates. Current capacity is 3,600 tonnes per day and additional deposits are scheduled for development to extend the mine life.

In order to assess the possible opportunity for larger scale open pits and their potential impact on future permitting requirements, a preliminary study was conducted where an optimistic copper price and lower operating costs were used to understand potential pit limits. Although the large scale pits provide the potential for more tonnage through the mill (due to the lower operating costs and higher copper prices assumed), they do so at a reduced copper grades and also would require significant increases in waste dump capacities, as well as tailings storage requirements. It should be noted that this large open pit scenario is preliminary in nature and only serves as a rough indication of potential pit size. This option will be more fully explored in the Phase VI PFS, scheduled for completion in early 2012.

Minto Explorations will be seeking amendments to its current operating permits from the Yukon government in order to increase production and expand mining operations into the newly identified ore deposits (Phase IV and V).

The process facility built at the Minto Mine utilizes a conventional circuit comprised of a crusher, SAG and ball mills for grinding, and flotation to produce concentrates that are filtered and stockpiled in a storage facility for later shipping to the port of Skagway, Alaska, for export overseas. A filtered tailings system is being used to mitigate reclamation costs by allowing dry stacking of tailings.

The Minto concentrator initiated production in May 2007 with a design daily production rate of 1,563 tonnes per day. Since this time, Minto has expanded its operations significantly with the discovery of eight copper deposits within five years. A Phase II mill expansion was completed in 2008 increasing throughput to 2,400 tonnes per day. The plant throughput was subsequently increased to 3,200 tonnes per operating day in 2009 through improvements the process plant.

Subsequently, the Mine's resources and reserves have increased, extending the mine life to 2020.

Project Milestones
Jun/05	Capstone predecessor Sherwood acquires the Minto property in Yukon, Canada
Aug/05	Drill program commenced to confirm Minto Main mineral reserves
Oct/05	Drilling confirms high grade copper and gold values at Minto
Feb/06	Development of Minto project begins
Mar/06	Discovery of Area 2 just 300 metres southeast of Minto Main deposit
Apr/06	Pre-stripping of Minto Main copper-gold deposit begins
Jul/06	Feasibility Study shows robust returns on Minto Project and Minto mill construction commences
Oct/06	C$85 million debt package arranged, forward sales complete, concentrate off-take agreement executed
Feb/07	Power Purchase Agreement signed Resource estimate for Area 2 deposit
May/07	First copper-gold concentrates at Minto mine produced
Jul/07	Two new copper-gold systems at Minto identified
Oct/07	Minto mine declares commercial production
Dec/07	Preliminary Feasibility Study for expansion of mine Phase II mill expansion completed ahead of schedule
Mar/08	Phase II commissioning complete, increases throughput from 1,600 to 2,400 tpd
Jun/08	Significant increase in copper-gold resources
Nov/08	In a precious metal transaction, Silverstone (combined with Silverstone Wheaton) provides upfront payment of US$37.5 million for payable gold and silver from Minto Minto connects to electrical grid
Feb/09	Fifth discovery at Minto mine - high grade 'Minto North'
Mar/09	Minto mill reaches Phase III design throughput of 3,200 tpd
May/09	Exceptional copper-gold grades at Minto North - best ever drill intercepts
Jun/09	Significant increase in copper-gold mineral resources reported for Minto
Nov/09	Minto East: sixth high grade Copper-Gold discovery in three years - second in 2009
Dec/09	Preliminary Feasibility study on Phase IV Expansion
Apr/10	Additional high grade Copper-Gold results from Minto East High grade Copper-Gold intercepts from Area 2/118 extension
Jun/10	Mineral Resource estimate for Minto East
Jul/10	Discovery of Wildfire deposit
Aug/10	Announcement of 44% increase in copper contained in undeveloped Measured and Indicated Resources at Minto
Dec/10	Discovery of Inferno
Mar/11	Preliminary Feasibility study on Phase V Expansion
May/11	Updated Mineral Resource estimate adds 219 million pounds of copper in Measured and Indicated Resource
Dec/12	Updated Mineral Resource estimate adds an additional 67 million pounds of copper in the M&I categories
Dec/12	Discovery of Fireweed

Exploration

Aggressive exploration programs conducted by Capstone have met with considerable success, with the 2006 and 2007 exploration drill programs resulting in a 140% gain in copper contained in mineral resources. That success continued in 2008-2009, with conversion of a significant portion of the new mineral resources from the inferred to measured and indicated categories. In 2009 and 2010 three high grade deposits were discovered and a further 44% gain was made in copper mineral resources. Ongoing incremental gains to the mine life have continued with a regular process of drilling, mineral reserve and resource addition, permitting and mine expansion. Capstone's discovery cost per pound of copper has averaged 3 cents per pound of copper at Minto for the additional resources that have been discovered since the project was put into production. The most recent expansion is Phase V and a Phase VI PFS is underway.

In addition to the current mineral; resources and mineral reserves, significant exploration upside still exists on the Minto property. In 2011, a further gain of 286 million pounds of copper in the measured and indicated mineral resource class was made through exploration.

Capstone's 2012 exploration budget at Minto is $4.8 million, and includes more drilling at Fireweed, the most recent high grade discovery, made in 2011.

Resources and Reserves

2010 Minto 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
Minto
Copper Deposit	Proven	7,773	1.56	-	-	5.37	0.63	266	-	-	1,343	158
	Probable	5,094	1.50	-	-	4.91	0.54	169	-	-	804	89
	Total	12,867	1.53	-	-	5.19	0.60	435	-	-	2,146	247

*Totals may not add due to rounding

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

Minto Mine -- Mineral Resources by Class for All Deposits as of Dec 31, 2011

		Grade					Contained Metal
Class	Tonnes (000's)*	Cu	Zn	Pb	Ag	Au	Cu	Zn	Pb	Ag	Au
		(%)	(%)	(%)	(g/t)	(g/t)	(millions lbs)	(millions lbs)	(millions lbs)	(000s oz)	(000s oz)
Measured (M)	14,828	1.35	-	-	4.4	0.53	442	-	-	2,114	254
Indicated (I)	33,103	0.98	-	-	3.4	0.32	714	-	-	3,643	341
M & I **	47,931	1.09	-	-	3.7	0.39	1,156	-	-	5,758	595
Inferred	8,493	0.81	-	-	2.9	0.24	152	-	-	788	65

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

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

HISTORY

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The Minto project has a history of exploration and development dating back to the early 1970's. In the mid-1990's, a feasibility study was completed by prior owners, permits obtained and construction of an open pit mine commenced. During that period, the mill foundations were poured, the ball and SAG mills were purchased and moved to site, a permanent camp constructed and the site connected to a permitted Yukon River crossing via a 29 kilometre production standard access road. Construction was suspended in 1997 after expenditures of approximately $10 million due to depressed copper prices.

Capstone's predecessor, Sherwood Copper, acquired the Minto Project in June 2005 and, in just two years from acquisition, re-drilled the deposit to modern reserve standards, completed a bankable feasibility study, arranged project financing, and built a $100 million open pit copper-gold mine. Commercial production commenced on October 1, 2007. After several new deposit descoveries, the mill was expanded from its initial design throughput of 1,563 tonnes per day ('tpd') to the present throughput of 3,600 tpd.

GEOLOGY

Geological Setting
Property Geology and Lithological Description
Deposit Types

Geological Setting

The Minto Project is located in the Carmacks Copper Belt along the eastern margin of the Yukon-Tanana Composite Terrane, which is comprised of several metamorphic assemblages and batholiths (Figure 1). The north-northwest trending Copper Belt is host to intrusion-related Cu-Au mineralization.

Figure 1: Yukon Geology from Yukon Geologic Survey "Maps Yukon" website (www.geology.gov.yk.ca)

The Minto Property and surrounding area are underlain by plutonic rocks of the Minto Pluton (Early Mesozoic Age) (Figure 2) of the Granite Mountain Batholith that have intruded into the Yukon-Tanana Composite Terrane. They vary in composition from quartz diorite and granodiorite to quartz monzonite. The batholith is unconformably overlain by clastic sedimentary rocks thought to be the Tantalus Formation and andesitic to basaltic volcanic rocks of the Carmacks Group. Both are assigned a Late Cretaceous age. Immediately flanking the Minto Pluton, to the east, is a package of undated mafic volcanic rocks, outcropping on the shores of the Yukon River. The structural relationship between the batholith and the undated mafic volcanics is poorly understood because the contact zone is not exposed.

Figure 2: Regional Geology

Property Geology and Lithological Description

Hypogene copper sulphide mineralization at Minto is hosted within the Minto pluton, which intrudes near the boundary between the Stikinia and Yukon-Tanana terranes, however since the contact is not exposed it is unclear if the pluton stitches the two terrains. The Minto pluton is predominantly of granodiorite composition.

Copper sulphide mineralization is found only in rocks that have a structurally imposed fabric, ranging from a weak foliation through to strongly developed gneissic banding. The primary hypogene sulphide mineralization consists of chalcopyrite, bornite, euhedral chalcocite, and minor pyrite. Texturally, sulphide minerals predominantly occur as disseminations and foliaform stringers along foliation planes in the deformed granodiorite i.e. sulphide stringers tend to follow the foliation planes and textural evidence suggests they postdate the major ductile deformation event. In addition, semi-massive to massive mineralization is also observed; this style of mineralization tends to obliterate the foliation altogether and is interpreted as the coalescing of multiple stringers. However, some massive bornite has been observed as a cement in narrow breccia zones, that are interpreted as late brittle deformation in fold noses. Occasionally, coarse free gold is observed associated with chloritic or epidote lined fractures that cross-cut the sulphide mineralization. The free gold may be due to secondary enrichment during a later hydrothermal process overprinting the main copper sulphide-gold event. Variable amounts of magnetite mineralization are ubiquitously associated with all Sulphide mineral occurrences. However, there is now relationship between the grade of copper, gold or silver mineralization and the amount of magnetite present.

Supergene mineralization occurs where hypogene sulphide zones come near-surface (up-dip extensions), locally beneath an unconformity defined by conglomerate that is mostly locally derived from eroded and sometimes partially weathered and decomposed granodiorite. The primary supergene mineralization consists of chalcocite and trace amounts of malachite and/or azurite. The conglomerate has been dated as late Createcous Age and the supergene alteration is interpreted to be of similar age and thus brought about by the position of a Cretaceous Age position of the water table.

Deposit Types

All of the known deposits on the Minto property have the same style of mineralization and are all considered to be similar deposit types. In all cases, mineralization is associated with primary copper sulphide mineralization (except for supergene enriched zones noted in Ridgetop and Area 118) restricted to sub-parallel foliated horizons within a granodioritic pluton. There are no deposits closely analogous to the Minto deposit on a world-wide basis because there is no consensus as to the origin of the Minto deposit. At various times since its discovery the Minto deposit has been described as an example of Porphyry Copper, Volcanogenic Massive Sulphide (VMS), Redbed Copper, Magnetite Skarn (see discussion by Pearson and Clark, 1979) and Iron Oxide Copper Gold "IOCG"(Minto Explorations Ltd., 2003).

Based on the preceding paragraph it is reasonable to say that the origin of the Minto deposit is enigmatic. Various workers appear to have ascribed different interpretations for the most part based on their empirical observations, the background of the observer, and/or the popular models of the day. The abundance of the high Cu/S mineral bornite in a moderately oxidized magmatic system along with the obvious magnetite association suggests that Minto belongs to one of two recognized deposit types: Magnetite Skarn or Iron Oxide Copper Gold. The lack of a typical calc-silicate skarn mineral assemblage seems to preclude the skarn deposit type, thus appears to leave the IOCG model or alternatively a previously unrecognized deposit type.