Capstone Gold Corp.
TSX : CSG

Capstone Gold Corp.

October 21, 2005 09:30 ET

Capstone Gold Corp.: Update on the Cozamin Copper-Silver-Zinc Mine Development in Zacatecas State, Mexico

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 21, 2005) - Capstone Gold Corp. (TSX:CSG) is pleased to report current development progress for its Cozamin copper-silver-zinc project located in Zacatecas State, Mexico.

Highlights

- Extensive metallurgical testing has demonstrated recovery rates for copper are 94%, silver 75%, and zinc 65%.

- Giroux Consulting Ltd. is undertaking a current resource study that is expected within 30 days.

- Underground definition and exploration drilling continue to define additional resources within the San Roberto mine.

- Capstone has completed the required expenditures to earn its 90% interest in the project.

Capstone has completed 18,000 m (37 core holes) of surface exploration and 12,000 m (92 core holes) of underground definition drilling. Assays are pending on the unreported holes CG-05-U63 to U92. To date, a total of 30,000 meters, distributed in 129 core holes, have been drilled within the San Roberto sector. An additional 4,000 m (12 holes) will be drilled in areas with successful exploration intercepts by January 2006.

The San Roberto Mine has been dewatered and rehabilitated down to the previously operated level 9. In the past 8 weeks, 150 m of drifting to the east on level 9 have been completed. In preparation for mining the level 9 east stope area, drifting and sampling in the vein have been initiated. An additional 400 m of drifting planned for level 9 is expected to be completed by February, 2006.

Ramping to the future level 10, 60 m below level 9, has been started with the rehabilitation of a previous ramp and the driving of 140 m of new ramp in the past 8 weeks. By the end of December 2005, this ramp to level 10 is planned to be completed and additional working faces will be established by drifting east and west on level 10. This ramp will also be extended down to level 10.5.

Two points of attack have been established for the main San Ernesto decline ramp from surface. The portal for the ramp has been completed and 80 m of down-ramp have been driven. From underground, 250 m of up-ramp above level 8 have been rehabilitated and 15 m driven. The completion of this surface ramp is planned for the end of January, 2006.

Capstone management anticipates a production decision for the Cozamin mine subsequent to the following:

- Completion of an independent current resource study that is expected within 30 days.

- Completion of any in-house studies, or such other studies by qualified engineering personnel that the Company deems to be appropriate and prudent.

- Completion of financing needed for additional underground development and capital expenditures.

The following constitutes material information required to be disclosed which the Company has compiled in the course of its current preparation of its in-house studies. Readers are cautioned that until the Company has completed its 43-101 resource study and any in-house studies, or such other studies by qualified engineering personnel that the Company deems to be appropriate and prudent, it is premature and speculative to define any production scenario or operating plan. Further, there is a risk that notwithstanding the completion of such studies, a positive production decision may be unsupported.

From April to August 2005, extensive metallurgical tests were completed by Process Research Associates, Inc. of Vancouver, B.C. This work included locked cycle tests which reported metallurgical recoveries of 94% for copper, 75% for silver, and 65% for zinc. A letter of intent, defining treatment and freight charges for Cozamin concentrates, has been negotiated between Capstone and a smelting company subject to the required additional financing and a positive production decision.

On August 29, 2005, Capstone received a conditional acceptance on the Manifesto de Impacto Ambiental ("MIA") which is the required environmental impact assessment document filed with regulatory authorities in Mexico. Final acceptance of the MIA is subject to the acceptance of a risk mitigation plan which will be filed by the end of October, 2005.

A long term lease securing surface land concessions was signed with the local land owners on July 17, 2005, and is in effect until June 2014.

Capstone has completed all the terms under the January 21, 2004 option agreement with Minero Grupo Bacis, S.A., de C.V. ("Bacis") to earn a 90% interest in the Cozamin project, subject to a 1.5% NSR. Specifically, the Company has completed the following:

- Making a cash payment of US$250,000 (paid).

- Spending a minimum US$5 million in exploration and development costs.
(Approximately US$8 million has been spent to date).

- Issuing 3 million common shares of Capstone to Bacis (issued).

- Assuming a debt in the amount of US$1,775,000 payable to Fideicomiso De Fomento Minero ("FIFOMI") payable by December 31, 2005. Capstone has repaid US$1,100,000 with a balance of US$675,000 due on or before December 31, 2005. This amount is subject to an interest rate of Libor plus 6%.

Bacis has the option to maintain a 10% working interest in the project or convert its 10% interest to a 1.5% NSR.

At Capstone's election, six months after commercial production has commenced, the Company is obligated to pay Bacis US$1 million in cash or an equivalent amount of Capstone common shares.

ABOUT CAPSTONE

Capstone is a mineral exploration company focused on the exploration and development of five advanced projects in Mexico. Capstone has approximately 40 million shares outstanding and is well financed with no long term debt. More information is available online at: www.capstonegold.com.

ON BEHALF OF THE BOARD

Darren M. Pylot, President & CEO


Contact Information