Capstone Mining Corp.
TSX : CS

Capstone Mining Corp.

February 21, 2007 10:27 ET

Capstone Reaches Agreement in Principle to Sell Cozamin Silver Production to Silverstone Resources

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Feb. 21, 2007) - Capstone Mining Corp. ("Capstone") (TSX:CS) is pleased to announce that is has reached an agreement in principle with Silverstone Resources Corp. ("Silverstone"), whereby Capstone will sell over the next 10 years, all of its silver production from the Cozamin mine in Mexico to Silverstone. In consideration Silverstone will pay an upfront payment of US$44 million, comprised of US$20 million in cash and issuing 19,350,000 Silverstone special warrants (the "Special Warrants"), plus a deferred payment upon delivery of the silver equal to the lesser of (a) US$4.00 (subject to a consumer price adjustment after three years) and (b) the then prevailing market price per ounce of silver as quoted on the London Bullion Market Association.

Capstone has agreed to deliver a minimum of 10 million ounces of silver to Silverstone over a 10 year period. The Cozamin copper, zinc, lead and silver mine is expected to produce approximately 1.2 million ounces of silver per year. This represents approximately 20% of total revenue at current metal prices. In addition, Cozamin will produce an average of 30 million pounds of copper, 8.5 million pounds of zinc and 3 million pounds of lead annually. If at the end of the 10 year period, Capstone has not delivered the agreed 10 million ounces, then it has agreed to pay to Silverstone US$1.00 per ounce of silver not delivered. Capstone will have a right of first refusal for any base metal by-product of Silverstone's over the next 2 years.

Each Special Warrant may be exercised into a common share of Silverstone for no additional consideration at any time provided that: (a) the common shares issued pursuant to such exercise would not result in Capstone owning, together with any other common shares under its ownership, control or direction, 20% or more of the issued and outstanding common shares after immediately giving effect to such issuance; or (b) the shareholders of Silverstone other than Capstone pass a resolution at a meeting of Silverstone's shareholders approving any exercise that would result in Capstone owning 20% or more of the issued and outstanding common shares of Silverstone.

Darren M. Pylot, Chairman of the Board of Capstone comments, "This is an excellent deal for Capstone since we will realize the value of the silver production through our investment in Silverstone and pay for the US$15 million current expansion of the Cozamin mine."

Closing of the transaction is subject to Silverstone completing the required financing, Board approvals, execution of definitive agreements, and receipt of all regulatory approvals, third-party consents and acceptance by the Toronto Stock Exchange. It is expected that the closing of this transaction will occur on or before March 28, 2007.

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 80.8 million shares outstanding and is well financed with no bank debt. More information is available online at: www.capstonemining.com.

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