Capstone Mining Corp.
TSX : CS

Capstone Mining Corp.

November 14, 2007 20:26 ET

Capstone Mining Year-End and Fourth Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 14, 2007) - Capstone Mining Corp. ("Capstone") (TSX:CS) announces its financial results for the year and quarter ending August 31, 2007 including production and sales for the Cozamin mine located in Zacatecas State, Mexico. All dollar amounts are stated in U.S. dollars unless otherwise indicated.

Overview and Highlights

For the year ended August 31, 2007, Capstone's earnings before future income tax allowance were $25.2 million or $0.31 per share ($0.30 per share diluted), and earnings after future income tax allowance were $22.7 million or $0.28 per share ($0.27 per share diluted), compared to a loss of $2.6 million or $0.04 loss per share ($0.04 loss per share diluted) in fiscal 2006.

- For the fourth quarter of fiscal 2007, earnings before future income tax allowance were $10.7 million or $0.13 per share. Earnings after future income tax allowance were $8.2 million or $0.10 per share.

- Revenue for fiscal 2007 was $55.3 million. The average realized price for sales of copper, zinc, lead and silver in fiscal 2007 was $3.20/lb, $1.60/lb, $0.96/lb and $10.76/oz respectively.

- At year end, Capstone had working capital of $52.9 million including $36 million in cash and no bank debt, compared with working capital of $20.6 million and a cash balance of $20.6 million in the previous year.

- Copper cash costs for fiscal 2007 were $0.54/lb of copper (net of by-product credits and including smelter, refining, transportation and all site costs). Copper cash costs for Q4 were $0.63/lb.

- Total costs (the aggregate of cash costs, royalty, depletion and amortization and accretion) for fiscal 2007 were $0.87/lb.

- During the year, Capstone issued 679,080 shares to Grupo Bacis to complete its option to purchase the Cozamin Mine, giving Capstone a 100% ownership interest subject to a 3% Net Smelter Royalty paid to Grupo Bacis.

- Capstone sold its silver during the year to Silverstone Resources Corp. ("Silverstone"), whereby Capstone received $44 million ($20 million in cash and $24 million in Silverstone shares) plus the lesser of $4.00 per ounce of silver and the prevailing market price upon delivery in exchange for selling the next 10 years of silver production from the Cozamin mine. Fair market value of the Silverstone shares today is $57 million.

- Mineral reserves at year end for Cozamin were increased by 65% to 3.7 million tonnes, boosting recoverable copper from 93 million pounds in 2006 to 173 million pounds in 2007. Recoverable zinc increased from 24 million pounds to 48.5 million pounds, recoverable lead increased from 1.6 million pounds to 2 million pounds and recoverable silver increased from 4 million ounces to 7.3 million ounces.



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Year ended Year ended
August 31, 2007 August 31, 2006
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Revenue $55.3M $Nil
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Copper $37.7M $Nil
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Zinc $8.0M $Nil
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Lead $2.7M $Nil
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Silver $6.9M $Nil
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Operating profit $28.0M $Nil
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Earnings (before tax) $25.2M ($2.6M)
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EPS - basic (before tax) $0.31 ($0.04)
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Earnings (after tax) $22.7M ($2.6M)
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EPS - basic $0.28 ($0.04)
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Cozamin Mine

Fiscal 2007 Production and Sales Highlights

- Capstone produced the following metals during the year.

- 13.9 million pounds of copper

- 6.8 million pounds of zinc

- 3 million pounds of lead

- 747,000 ounces of silver

- Concentrate sales for the year were dry metric tonnes ("DMT"), containing;

- 11.8 million pounds of copper

- 5 million pounds of zinc

- 2.8 million pounds of lead

- 641,000 ounces of silver

Concentrate inventory at August 31, 2007 was 8,150 DMT (containing 2.6 million pounds of copper, 2.0 million pounds of zinc and 0.4 million pounds of lead).

2007 Production Results and 2008 Forecast

The forecasted copper, zinc, lead and silver production for fiscal 2007 was estimated to be 13 - 14 million pounds of copper, 8 million pounds of zinc, 3.5 million pounds of lead and 700,000 ounces of silver.

The following table is a summary of the actual operating statistics for fiscal 2007 and forecast for 2008.



------------------------------------------------------------
Fiscal 2007 Fiscal 2008
(A) (F)
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Total tons mined 484,641 750,000
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Tons of ore milled 461,933 750,000
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Copper grade (%) 1.59 1.8
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Zinc grade (%) 1.47 1.3
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Silver grade (g/t) 71 69
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Lead grade (%) 0.6 0.5
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Copper recovery (%) 86 88
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Zinc recovery (%) 44.9 50
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Silver recovery (%) 73 74
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Lead recovery (%) 52.6 50
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Copper production (million DMT lbs) 13.9 26
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Zinc production (million DMT lbs) 6.8 11.3
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Silver production ('000 ounces) 747 1,100
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Lead production (million DMT lbs) 3.0 4.1
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Note: Silver reports to all concentrates.


Fourth Quarter Production Highlights

Copper

- Copper in concentrate produced during the quarter was 4.9 million pounds of copper, 37% higher than the previous quarter.

- Copper concentrate sales for the quarter were 8,372 dry metric tons ("DMT"), containing 3.9 million pounds of copper, an increase from the 5,947 DMT sold during the previous quarter, containing 2.9 million pounds of copper.

- The average price for sales of copper in the quarter was $3.34/lb.

- Copper concentrate inventory at August 31, 2007 was 5,447 DMT, an increase in inventory from the 3,842 DMT of concentrate on hand at the end of the previous quarter.

- Silver in the copper concentrate produced during the quarter totaled 205,000 ounces, 44% higher than the previous quarter.

Zinc

- Zinc in concentrate produced during the quarter was 2.1 million pounds of zinc, 31% more than the previous quarter.

- Zinc sales for the quarter were 1,977 DMT, containing 1.6 million pounds of zinc, an increase from the 1,949 DMT sold during the previous quarter, containing 1.5 million pounds of zinc.

- The average price for sales of zinc in the quarter was $1.65/lb.

- Zinc concentrate inventory at August 31, 2007 was 2,413 DMT, an increase in inventory from the 1,820 DMT of concentrate on hand at the end of the previous quarter.

- Silver in the zinc concentrate produced during the quarter totaled 10,000 ounces, 67% higher than the previous quarter.

Lead

- Lead in concentrate produced during the quarter was 1.0 million pounds of lead, 67% more than the previous quarter.

- Lead concentrate sales for the quarter were 498 DMT, containing 0.7 million pounds of lead, equal to the 502 DMT sold during the previous quarter, containing 0.7 million pounds of lead.

- The average price for sales of lead in the quarter was $1.48/lb.

- Lead concentrate inventory at August 31, 2007 was 290 DMT, an increase in inventory from the 120 DMT of concentrate on hand at the end of the previous quarter.

- Silver in the lead concentrate produced during the quarter totaled 49,000 ounces, 63% higher than the previous quarter.

Fourth Quarter Production Results

The following table is a summary of the operating statistics for the year by quarter.



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Q1 - 2007 Q2 - 2007 Q3 - 2007 Q4 - 2007
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Total tons mined 90,281 100,620 131,325 162,415
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Tons of ore milled 93,055 95,439 112,277 161,162
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Copper grade (%) 1.50 1.58 1.65 1.60
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Zinc grade (%) 1.80 1.45 1.65 1.25
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Silver grade (g/t) 72 68 71 71
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Lead grade (%) 0.70 0.53 0.60 0.55
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Copper recovery (%) 85.3 84.5 85.7 86.7
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Zinc recovery (%) 49.3 42.6 43.0 43.4
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Silver recovery (%) 74.6 70.0 70.4 71.5
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Lead recovery (%) 60.3 49.0 48.0 50.4
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Copper production (million DMT lbs) 2.7 2.8 3.5 4.9
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Zinc production (million DMT lbs) 1.9 1.2 1.6 2.1
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Silver production ('000 ounces) 161 149 174 263
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Lead production (million DMT lbs) 0.9 0.5 0.6 1.0
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Note: Silver reports to all concentrates.


Mill Expansion Project

Tons mined and processed were higher in the fourth quarter of fiscal 2007 compared to previous 2007 quarters as expansion start up commenced ahead of schedule in July at the 2200 tpd rate. July and August production rates averaged approximately 94% of design throughput. Capital expenditures were $11 million, with approximately $2 million remaining to be spent on final land payment, underground crusher installation and ramp completion versus $15 million budget.

Labour

There were 11 minor lost time accidents during the year from both operations and construction. The number of personnel at the end of the year was 526, of which approximately 146 were contractors related to the expansion project.

Fourth Quarter Actual Sales Compared to Previous Quarters

Actual sales and costs for the year are tabulated below.



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Fiscal
Q1 (A) Q2 (A) Q3 (A) Q4 (A) 2007
Sales Sales Sales Sales Sales
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Copper (million lbs) 2.9 2.1 2.9 3.9 11.8
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Zinc (million lbs) 1.9 Nil 1.5 1.6 5.0
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Lead (million lbs) Nil 1.4 0.7 0.7 2.8
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Silver ('000 ounces) 120 169 143 209 641
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Copper production costs, net of by
product credits, per lb of copper $(0.04) $(0.02) $0.20 $0.25 $0.12
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Off property costs for transport,
smelting and refining per lb of
copper $0.48 $0.41 $0.41 $0.38 $0.42
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Total cash costs of production per
lb of copper $0.44 $0.39 $0.61 $0.63 $0.54
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Copper production costs in the fourth quarter were $0.05 above plan reflecting the impact of the company having sold all its silver production to Silverstone Resources Corp. at $8.40 per ounce.

Mineral Reserves and Resources

An updated reserve and resource estimate has been completed for the Cozamin mine, as of August 31, 2007. The new reserve and resource estimate increases both the tonnage and contained metal within all of the reserve and resource categories, while maintaining its high grade. The Company completed 5 surface and 70 underground NQ-core drill holes totaling 26,266 metres. Modeling also included channel samples from mined areas.

The exploration drilling program was carried out in 2006/7 to upgrade and expand the mineral resources. The program resulted in an increase of mineable reserves of 65% after allowing for ore production during the year shown below, at a $40 cut-off.



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Classification Tonnes Cu(%) Ag (g/t) Pb(%) Zn(%)
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Proven 1,809,719 2.32 84 0.45 1.17
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Probable 1,915,248 2.42 81 0.34 1.19
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Total 3,724,967 2.37 82 0.40 1.18
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The resources shown below indicate the successful conversion from inferred resources to measured and indicated resources, while maintaining a similar tonnage in the inferred category. Overall resources increased 47% after allowing for mined out tonnage.

The resource and reserve estimation was completed by Cozamin mine staff under the supervision of Michelle Stone and Bob Barnes, Qualified Persons under National Instrument 43-101. The estimates used long term metal prices of $2.25/lb for copper, $1.00/lb for zinc, $0.60/lb for lead and $8.50/oz for silver. A technical report will be filed on www.sedar.com in November 2007.

In addition to the above reserves, the mineral resources which include the reserves are estimated to be:



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Tonnes Million
Resource (1% Cu Cu Ag Zn Pb Au Million lbs(ii) ozs(ii)
Category(i) Cut-off) (%) (g/t) (%) (%)(g/t) Cu Zn Pb Ag
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Measured 2,591,705 2.48 87.11 0.43 1.18 0.03 141.7 24.6 67.4 7.3
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Indicated 2,896,158 2.59 86.37 0.32 1.14 0.04 165.4 20.4 72.8 8.0
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M & Ind. 5,487,863 2.54 86.56 0.37 1.15 0.04 307.1 45.0 140.2 15.3
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Inferred 3,162,838 2.36 80.50 0.18 1.03 0.04 164.6 12.6 71.8 8.2
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Total 8,650,702 2.47 84.35 0.30 1.11 0.04 471.7 57.6 212.0 23.5
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(i) These resources included a non-material update to the resources
released October 15, 2007.
(ii) 1 kilogram equals 2.2 lbs; 31.103 grams equals 1 oz. Troy.


The Company has already commenced a program of underground infill drilling to further expand and upgrade the inferred resources. Priority will be on inferred resources within established mining block areas. In addition, the Company plans to undertake both surface and underground drilling in 2008 to explore along strike and down dip of the updated resources.

With the promising results encountered in the 2006/7 drilling program, the company is managing a focused program to further expand the Cozamin mineral reserves.

Financial Results

The information in this news release and the selected financial information contained in the following pages should be read in conjunction with the audited Consolidated Financial Statements and Management Discussion and Analysis for the year ended August 31, 2007, which will be available at Capstone's website at www.capstonemining.com and at www.sedar.com.

The Company's earnings before future income tax accruals for the year ended August 31, 2007 increased to $25.2 million or $0.31 per share compared to a loss of $2.6 million or ($0.04) per share for the year ended August 31, 2006. The Company's net earnings for August 31, 2007 increased to $22.7 million or $0.28 per share, compared to $(2.6) million or $(0.04) per share for August 31, 2006.

The Company reported revenues of $55.3 million (2006 - $Nil). Revenues consisted of copper concentrate sales of $37.7 million, zinc concentrate sales of $8.0 million, lead concentrate sales of $2.7 million and silver in concentrate sales of $6.9 million.

Cost of sales for the year was $14.2 million (2006 - $Nil), treatment and transportation charges were $10.1 million (2006 - $Nil), royalty charges were $1.4 million (2006 - $Nil) and depletion was $1.7 million (2006 - $Nil).

The increased general and administrative expenditures for the year ended August 31, 2007 compared to the year ended August 31, 2006 are due to the Company attaining commercial production as well as professional fees related to the sale of the Company's silver.

A future income tax provision of $2.5 million was recorded in 2007 compared to $Nil in 2006. The increase in the income tax provision is mainly due to the excess of book value of capital assets over tax values.

Glencore International AG purchases the concentrates produced by the Cozamin mine pursuant to the terms of a written contract. The Company has also agreed to terms with Trafigura Beheer B.V. to purchase additional copper concentrates from the expansion pursuant to the terms of a written contract.



Capstone Mining Corp.
Selected Financial Information

Consolidated Balance Sheets
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Aug 31, Aug 31,
2007 2006
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Cash $ 35,988,166 $ 20,614,359
Investment in Silverstone Resources Corp. 28,498,044 -
Property, plant and equipment 44,616,033 31,479,079
Other assets 24,888,492 6,739,335
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Total assets 133,990,735 58,832,773
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Deferred revenue 43,056,390 -
Other liabilities 15,561,814 6,474,770
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Total liabilities 58,618,204 6,474,770
Shareholder's equity 75,372,531 52,358,003
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Total liabilities and shareholders' equity 133,990,735 58,832,773
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Consolidated Statements of Operations
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Aug 31, Aug 31,
2007 2006
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Total revenues $ 55,335,647 $ -
Total cost of sales (27,304,725) -
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Operating profit 28,030,922 -
G&A and other expenses (4,607,226) (2,879,614)
Other items 1,726,946 255,013
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Earnings (loss) before income taxes 25,150,642 (2,624,601)
Future income tax (2,479,593) -
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Earnings (loss) for the year 22,671,049 (2,624,601)
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EPS - Basic 0.28 (0.04)
EPS - Diluted 0.27 (0.04)
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Capstone will host a conference call on Thursday, November 15 at 8:30 a.m. Pacific Time (11:30 AM Eastern Time) to discuss these results. The conference call may be accessed by dialing 1.866.365.1119 in North America or 1.416.849.7329 internationally, please ask for the Capstone Mining Corp. conference call. The conference call will be archived for later playback until November 29, 2007 and can be accessed by dialing 1.866.501.5559 and the passcode is 21253140#.

ABOUT CAPSTONE

Capstone is a Canadian based mining company currently operating the 100% owned Cozamin copper-silver-lead-zinc mine located in Zacatecas State, Mexico. Capstone has approximately 81.8 million shares outstanding and is well financed with no bank debt. More information is available online at: www.capstonemining.com.

Contact Information