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Capstone: Doing it the right way

Capstone Mining is one of those good stories in the mining world that often get overlooked: a company that went out and did what it said it would do and is now reaping the benefits of two steadily producing copper mines that continue to beef up...



Capstone Mining is one of those good stories in the mining world that often get overlooked: a company that went out and did what it said it would do and is now reaping the benefits of two steadily producing copper mines that continue to beef up an impressive balance sheet.

The latest signpost on the company’s successful journey is quarterly results showing it is on-track to meet its production guidance of 80 million lb of copper for 2012.

Leading the charge to that target is its flagship project — the Cozamin copper-silver-lead-zinc mine in Zacatecas, Mexico — which is on track to produce 42 million lb of the forecasted total.

Despite its undeniable wealth, Cozamin has been trending in the opposite direction of the company’s other key asset, its Minto mine in the Yukon. Production at Cozamin over the year so far has declined in each quarter as the mine produced 13 million lb of copper in concentrate in first quarter, 12.1 million lb in second and 11 million lb in the third.

In contrast, Minto has gone from 5.6 million lb up to 11.6 million lb over the same period. Combined, the two mines have turned out 63.1 million lb of copper so far this year.

The slight decline in production at Cozamin comes as the company mills lower copper head grades. They came down to an average of 1.88% from 1.99% due to its transitioning to the outer, lower grade, edges of the mine’s current stopes.

Capstone says head grade at the mine will continue to trend lower in the fourth quarter and will likely average around 1.7% Cu.

Throughput at the mine also fell off slightly, but that was largely due to the fact that the previous quarter had reached an all-time record average rate.

As for Minto, throughput averaged 3,874 t/d, with grades and recoveries above second quarter levels. But grade at the northern mine is also expected to decrease in the fourth quarter to 1.4% Cu. Unlike at Cozamin, however, lower grades at Minto were not expected and are due to an unplanned pushback needed so that the company can improve the stability of the west pit highwall.

Capstone says the pushback remains within its ultimate pit design, so the overall strip ratio is not expected to change.

In contrast to the open pit Minto, Cozamin is an underground mine with a mine life of nine years. The mill is currently processing 3,300 t/d from a copper deposit with measured and indicated resources of 11.4 million tonnes grading 1.61% Cu and 1.34% Zn. Forecasted cash costs at the mine for the year are between $0.95 and $1.05 per lb of copper.

With metrics that impressive it is little wonder that the company continues to invest heavily in the project’s future. With a $6.5 million exploration budget for the year at Cozamin, Capstone is intent on growing its resource base. And with the current resource coming from an area that makes up only 1.5 km in strike within an overall 5.5 km strike length there is plenty of room to get that additional tonnage.

The company has surface and underground targets for new mineralized zones as it says there is good exploration potential both along strike and down dip of its existing resources. There are also parallel structures and splays off the main structure that it will begin testing.

Funding the search for more ore won’t be a problem any time soon as Capstone’s steady operations have helped it build up a balance sheet boasting US$489 million in cash with no long term debt.

On top of the copper, Capstone has produced 12.9 million lb of zinc, 2.4 million lb of lead and 1.3 million oz of silver so far this year. Its final gold production numbers weren’t available because assaying is done off-site, but it estimates it will have roughly 11,815 oz of gold production over the first three quarters.

The success of Cozamin, which sits 3.8 km north-northwest of Zacatecas City, comes after the mine got off to the perfect start. By the time it went into commercial production in September 2007, Capstone had done its exploration, development and initial production of 350,000 t/y on time and under budget.

Production at the mine was expanded by 120% within its first year of operation with all the capital needed for the expansion coming out of cash flows generated by the mine and another expansion in 2008 saw production rise to 1.0 million tonnes per year.

Just a simple example of a company quietly going about its business and getting things done the right way.

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