Capstone Reports 2011 Prefeasibility Study for Kutcho Copper-Zinc Project, BC

By Capstone Mining Corp., PRNE
Wednesday, February 23, 2011

IRR 27%, NPV $155 Million at a 10% Discount Rate and a 3.4 Year Payback (After Tax)

VANCOUVER, February 24, 2011 - Capstone Mining Corp. ("Capstone") (CS: TSX) today announced that its
wholly owned subsidiary, Kutcho Copper Corp., reports the results of the
Prefeasibility Study ("2011 PFS") completed by JDS Energy & Mining Inc.
("JDS") on the Company's Kutcho Project located in north-western BC. By
incorporating exploration drill results from 2008 and 2010 the 2011 PFS
successfully converted much of the Main deposit and the Esso deposit mineral
resources into a National Instrument 43-101 ("NI 43-101") reserve. The 2011
PFS exhibits a 27% IRR (after tax) and a $155 million NPV (after tax) at a
10% discount rate. Therefore, Capstone is proceeding with permitting and
further engaging stakeholders in consultations regarding development.


The 2011 PFS increases the level of accuracy achieved by the 2010
Preliminary Economic Assessment ("2010 PEA") regarding capital and operating
expenditures and better quantifies the project's key economic indicators. It
also identified several opportunities for optimization and further economic
improvement. The following lists some highlights of the 2011 PFS (with all
amounts in Canadian dollars unless otherwise stated):

    - NI 43-101 reserve of 10.4 million tonnes with an average grade of 2.01%
      copper, 3.19% zinc, 34.61 grams per tonne ("g/t") silver and 0.37g/t

    - Net Present Value (after tax) at a 10% discount rate is $155 million at
      US$2.75/lb of copper.

    - IRR (after tax) is 27%, with a payback period of 3.4 years.

    - Total cash costs of US$0.75 per pound of payable copper*, net of
      by-product credits and including selling costs.

    - A 12 year mine life.

    - Pre-production capital costs of $187.3 million that includes a 10%

    - Average throughput of 2,500 tonnes per day over the full production
      period producing separate copper and zinc concentrates, with by-product
      gold and silver reporting to the copper concentrate.

    - Average annual production during the full production period of 34.7
      million pounds of copper, 54.5 million pounds of zinc, 4,664 ounces of
      gold and 671,800 ounces of silver in concentrates.

    - A small environmental footprint as a result of minimal open pit mining
      (4% of the total production), and utilization of tailings and waste for
      underground backfill, as well as an encapsulated paste fill arrangement
      for any tailings and waste that are stored on surface.

    - Continued exploration potential at the Sumac deposit in the immediate
      vicinity of the proposed mine.

    - Considerable regional exploration potential including more than 13km of
      known strike length of the Main-Sumac-Esso productive VMS horizon.

    - Recommends commencing with the Environmental Permitting and First
      Nations discussions.

* This is a non-GAAP performance measure and readers should refer to
Non-GAAP Performance Measures note at the end of this news release for
further details.

"Given the scarcity of North American high-grade copper deposits,
Capstone is pleased that the robust economics of the Kutcho Project support
advancing to the feasibility stage and potentially into production," said
Darren Pylot, CEO of Capstone. "The pre-feasibility study has confirmed that
the Kutcho Project has the potential to be a long term, sustainable
operation, capital has increased compared to the 2010 PEA due in part to
market conditions and in part due to modifications in the scope of work
associated with environmental due diligence. All other aspects such as
operating expenditures, metallurgical performance and mine reserves are
within expectations. The high grade and low costs associated with the Kutcho
Project would complement our existing North American production from our
Cozamin and Minto mines."

Kutcho Prefeasibility Study Summary

Changed Approach

The 2011 PFS supersedes and replaces prior development studies, which
should no longer be relied upon. The principle changes from prior studies
include increased accuracy of capital costs, operating costs, copper
recovery, mill power consumption (by optimizing the grinding circuit), unit
power costs, 2010 exploration results at Esso, and utilization of a
paste-fill tailings disposal system that is considered to be an improvement
over the long term implications of the previous dry stack scenario.

Geology & Mineralization

The Kutcho property contains three known Kuroko-type volcanogenic massive
sulphide ("VMS") deposits as well as numerous other indications of
mineralization that demonstrate exploration potential. The three known
deposits are aligned in a westerly plunging linear trend, from east to west,
they are called the "Main", "Sumac", and "Esso" deposits. The largest of the
three, the Main deposit, comes to surface near the eastern end of this trend,
whereas the Esso deposit occurs at depths about 400-600m below surface at the
western or down plunge end of the trend (as it is currently known). The Sumac
deposit lies between the Main and Esso deposits both laterally and
vertically, but has seen only cursory drilling. The mineralized trend is open
down plunge and along strike, but is poorly explored, indicating exploration
opportunities for the future. The current mine design includes a main haulage
ramp that passes in close proximity to the Sumac deposit on the hanging wall
side and can easily be adapted to provide an exploration platform from which
to better conduct exploration drilling for Sumac.

Mineral Resources

The mineral resources for the Kutcho Project were estimated by Garth
, P.Geo., an independent Qualified Person as defined by NI 43-101 and
were reported in a news release dated December 6, 2010 but are summarized
below for convenience. Readers should review that news release for additional
information, including the contribution of each deposit to the overall
mineral resource, the mineral resource estimates at different cut-off grades,
the parameters used in the estimate and the required NI 43-101 disclosure.

Kutcho Project - Mineral Resource Estimate at a 1.5% Copper Cut-Off for
All Deposits (1)

        Class     Tonnes (000's)          Grade
                                 Copper  Zinc  Gold   Silver
                                    (%)   (%)  (g/t)   (g/t)

    Measured (M)      5,421       2.15  2.86   0.34    31.4
    Indicated (I)     5,859       2.24  3.67   0.45    41.6
    M & I            11,280       2.19  3.28   0.39    36.7
    Inferred          1,090       1.74  2.04   0.35    30.7

Table Continued Below

        Class                   Contained Metal
                     Copper       Zinc      Gold     Silver
                  (millions lb) (millions (000s oz) (000s oz)
    Measured (M)      256.6       341.8       59       5,482
    Indicated (I)     289.2       473.5       84       7,831
    M & I             545.8       815.3      143      13,313
    Inferred           41.9        49.1       12       1,077

(1) Numbers may not total due to rounding


Metallurgical test work was carried out at the pre-feasibility level to
investigate the metallurgical response of Kutcho ore and to develop the
process flow sheet and design criteria. The test program was aimed at
developing a conventional Cu-Zn flowsheet comprising comminution and
sequential flotation circuits. Tests were conducted on samples from the Main
and Esso deposits that are representative of an expected mill feed from the
proposed underground operation. The mineralogy of the Kutcho VMS deposits is
fine grained and requires a relatively fine primary grind followed by a
regrind. The process outlined in the flow sheet obtained reasonable
recoveries and concentrate grades by first producing a copper concentrate,
and then a zinc concentrate.

Comminution tests showed that the ore has low level of hardness and
abrasiveness with a Bond Rod Mill Work Index of 8.9 kWh/t, Bond Ball Mill
Work Index of 12.2 kWh/t and abrasion index of 0.16 g. Target primary grind
is a P80 of 75 microns.

The test work utilized core that was stored in Nitrogen to minimize the
risk of oxidation. Based on the results of this test work, the 2011 PFS uses
the following parameters.

Kutcho Project - Metallurgical Recoveries used in 2011 PFS (Life of
Mine Average)

    Metal   Recovery   Copper Concentrate   Zinc Concentrate
                            Grade               Grade

    Copper    85.6%         28.7%                0.8%
    Zinc      82.9%          5.4%               57.2%
    Gold      43.0%         2.65 g/t
    Silver    66.1%          380 g/t

As discussed in the opportunities section below, there is potential to
improve metallurgical performance. It should also be noted that the number of
metallurgical employees in mill operations were increased in the
prefeasibility study to pursue opportunities in mineral processing, the
optimization of which could add significant value during production.

Mine Plan

The mining resource is summarized by deposit and mining method in the
table below. The Main and Esso deposits vary in dip from 30-70 degrees and in
width from 3-20m. The Main deposit essentially outcrops on surface and
extends to depth of approximately 250m below surface, while the Esso deposit
lies approximately 1,500 m to the west and extends to a depth of 400-600m
below surface.

A small starter pit will be pre-stripped in Year 1 and will provide ore
in Year 1 while the underground mine is being developed. Two underground
mining methods are proposed: mechanized cut & fill ("MCF") for the shallow
dipping mineralization, and sublevel long-hole ("LH") stoping with paste
backfill for those blocks amenable to bulk mining. The initial pre-production
development period is estimated to be 18 months. During the first year, mine
production from the Main deposit ramps up to 2,500tpd. Production from the
Esso deposit commences in Year 3 and continues into Year 8. The Main deposit
is the sole source of mill feed from Years 9 to the end of mine life in Year

Kutcho Project - Mining Reserve used in 2011 PFS

    Mining Area   Tonnes   Classification  Cu %  Zn %  Ag g/t  Au g/t

    Main         8,106,267     Probable    1.92  2.51   28.02   0.31
    Esso         2,334,894     Probable    2.32  5.53   57.48   0.59
    Total       10,441,161     Probable    2.01  3.19   34.61   0.37

As noted in the table, all materials in the mine plan are considered to
be a reserve. Mineral Reserves are considered to have economic viability that
account for mineability, selectivity, mining loss and dilution. This mine
plan does not include resource estimates that include inferred mineral
resources since they are considered to be too speculative geologically to
have economic considerations applied to them that would enable them to be
categorized as mineral reserves. There is also no certainty that these
inferred mineral resources will be converted to measured and indicated
categories through further drilling, or into mineral reserves, once economic
considerations are applied.

Production Summary

Life of mine production is summarized below.

      Parameter       Unit    Total             Production Year
                                           1       2       3       4

    Mill Feed          Kt  10,441.2      912.5   912.5   912.5   912.5
    Copper              %      2.01%      1.94%   2.13%   2.01%   2.02%
    Zinc                %      3.19%      1.92%   2.62%   2.91%   3.71%
    Gold              g/t      0.37       0.30    0.32    0.44    0.47
    Silver            g/t     34.61      26.41   31.00   42.34   47.19
    Cu Con
     Produced         dmt   628,115     52,531  57,520  54,324  61,260
    Zinc Con
     Produced         dmt   485,679     22,833  31,060  39,092  49,791
    Copper in Cu
     Con            M lbs     396.5       32.1    35.1    35.0    36.2
    Gold in Cu Con     oz    53,495      3,727   4,089   5,574   5,989
    Silver in Cu
     Con             K oz     7,679        335     392     918   1,062
    Zinc in Zn
     Con            M lbs     616.7       27.2    37.0    49.8    60.6

Table Continued

    Parameter                          Production Year
                      5      6      7      8      9      10     11     12

    Mill Feed       912.5  912.5  912.5  912.5  912.5  912.5  912.5  403.7
    Copper          2.26%  2.12%  2.06%  1.88%  1.91%  2.07%  1.81%  1.87%
    Zinc            5.30%  4.41%  3.76%  2.64%  3.06%  2.78%  2.43%  2.27%
    Gold             0.45   0.47   0.35   0.36   0.31   0.32   0.27   0.39
    Silver          41.49  46.87  35.22  27.64  29.21  27.97  27.32  30.15
    Cu Con
     Produced      60,401 57,208 55,553 50,805 51,505 55,947 48,748 22,312
    Zinc Con
     Produced      73,092 59,308 50,534 35,502 41,077 37,314 32,587 13,490
    Copper in
     Cu Con          38.0   36.8   35.8   32.7   33.2   36.0   31.4   14.4
    Gold in
     Cu Con         5,724  5,904  4,468  4,490  3,860  4,048  3,433  2,151
    Silver in
     Cu Con           472  1,016    764    599    633    606    592    289
    Zinc in
     Zn Con          98.3   75.6   64.4   45.2   52.3   47.5   41.5   17.2

Waste Management Plan

Following up on work in the 2010 PEA Capstone's further pursued
opportunities to reduce surface disturbance and lessen the environmental
impact of mining and milling activities with further design changes in the
2011 PFS. In addition to good stewardship, this has a significant economic
benefit by potentially decreasing abandonment and restoration costs.

Mineral waste will consist of overburden, waste rock and tailings.
Potentially Acid Generating (PAG) and Non-Acid Generating (NAG) waste rock
will be separated during the course of mining. A portion of waste rock
generated in the underground mine will remain underground as backfill. The
remaining waste rock will be hauled to the surface. The on-surface NAG waste
rock will be used as site construction materials during mine operation and at
mine closure and as underground mine backfill. The on-surface PAG waste rock
will be comingled with the paste tailings in a lined on-land paste tailings
storage facility that will minimize the potential for acid generation and the
mined-out starter pit. The on-land facility will be fully encapsulated at
closure. All remaining waste PAG mine waste and tailing will be utilized as
fill underground, i.e., there is no surface PAG waste dump after mine

A water collection pond will be constructed in order to store water
runoff from the waste management facilities for treatment in a water
treatment plant before discharge to the environment after meeting regulated
water quality criteria.

Environmental Considerations

The Kutcho Project is not permitted for development or production. In
order to re-initiate the permitting process, the 2011 PFS will be utilized as
the basis to re-engage the regulators and stakeholders, including the First

Capital Cost

Direct capital costs are estimated at $139.3 million, including $17.9
of off-site infrastructure. Indirect capital costs of $34.1 million
plus a 10% contingency of $13.9 million bringing the initial capital cost to
a total of $187.3 million. The direct capital includes savings generated by
the purchase of a used processing facility that consists of new and used
fixed plant components based on current market conditions. All underground
mobile equipment is new.

Operating Costs

Total operating costs, including capital leases carried as an operating
expense, are estimated in the 2011 PFS as C$66.15 per tonne of ore processed,
broken down as follows:

Kutcho Project - Operating Costs used in 2011 PFS

    Activity/Item  Unit Cost

    Mining           $30.21
    Processing       $18.44
    Administration   $10.37
    Capital Leases    $4.21
    Royalties         $2.92
    Total            $66.15

Economic Analysis

The economic assessment in the PFS utilizes mineralized zones that have
the economic considerations applied to them which enable them to be
categorized as mineral reserves, and there is sufficient certainty that this
economic assessment will be realized. There are no inferred mineral resources
utilized in the mine Life of Mine Plan ("LOMP").

The Canadian US$ exchange rate is held constant at a value of $C1.09
equals $US1.00, which is consistent with the three year trailing average
correlation between the C$/US$ exchange rate and the US$ copper price. The
results of the economic analysis are summarized below:

Kutcho Project - Summary of Economic Analysis

            Item                                       Unit     Base Case

    Copper Price                                     US$/lb         $2.75
    Zinc Price                                       US$/lb         $0.95
    Gold price                                       US$/oz        $1,000
    Silver price                                     US$/oz        $16.50
    Exchange rate                                    C$:US$   $1.09:$1.00
    Unit Mining Costs                              $/t milled      $30.21
    Unit Milling Costs                             $/t milled      $18.44
    Unit G&A and Site Services                     $/t milled      $10.37
    Unit Capital Lease Costs                       $/t milled       $4.21
    Unit Total Operating Costs                     $/t milled      $63.23
    Unit Total Operating Costs*                    $/t milled      $66.15
     (including royalties)
    Total Cash Costs*                               US$/lb Cu       $0.75
     (after Zn, Au, Ag credits and offsite costs)
    Total Initial Capital                              C$M         $187.3
    NPV10% Pre Tax                                     C$M           $244
    NPV10% After Tax                                   C$M           $155
    IRR Pre Tax                                         %              32%
    IRR After Tax                                       %              27%
    Payback Period (After Tax)                        Years           3.4

* This is a non-GAAP performance measure and readers should refer to
Non-GAAP Performance Measures note at the end of this news release for
further details.

Risks & Opportunities:

There has been significant progress mitigating the principle risk
regarding metallurgical parameters indicated in the 2010 PEA. A comprehensive
metallurgical testing program was completed for the 2011 PFS. The 2011 PFS
has also increased manpower assumptions for ongoing metallurgical work during
the operating phase.

As with all mine development projects, there are a number of risks and
opportunities that can affect the successful outcome of the Kutcho project:

    1. Variation between the predicted and actual deposit shapes, potentially
       leading to higher dilution, modifications in the mining method or
       requiring additional definition drilling.

    2. Weaker underground rock masses may increase ground support

    3. Reduction in metallurgical recoveries due to the complex nature of the

    4. Power consumption of major process equipment units may be higher than
       indicated by the test work completed to date.

    5. Ability to attain necessary permits in a timely manner.

    6. Capital and operating cost increases due to equipment and labour
       shortages and increased consumable prices.

    7. Decreased metal prices and / or detrimental exchange rates.

The four greatest opportunities to enhance the economics of the project,
at Base Case metal prices, have been quantified below:

    1. Mine Design, enhance haulage route design and decrease operating
       expenditures by utilization of OEM supplied used equipment.

    2. Improved zinc separation from copper concentrate, copper recovery and
       reagent usage. A 3.5% increase in copper recovery from 85.6% to 89.1%
       increases the NPV10% by $17 million to $172 million and the IRR is
       increased to 29% from 27%.

    3. Alternate LNG sources other than Vancouver could have a significant
       beneficial impact on operating costs.

    4. The Sumac deposit has the potential to yield further mineral resources
       in zones parallel to or along strike of the known mineral resources.

Looking Forward

With the 2011 PFS in hand, Kutcho Copper Corp. can now proceed towards
submission of an Environmental Assessment Certificate (EAC) Application,
currently anticipated in the 3rd Quarter 2011 and also commence discussions
with First Nations and other stakeholders. Detailed engineering could also
continue in order to enhance project economics and further mitigate risk.
Should the permit process, First Nations discussions and detailed engineering
attain corporate objectives in a timely fashion, it is feasible that a
production decision could be made in the 4th Quarter 2011 and assuming a
positive decision this could enable construction to commence in the second
half of 2012.

Technical Report

The full 2011 PFS, prepared as a NI 43-101 compliant Technical Report,
will be filed under Capstone's profile on SEDAR at within 45

Quality Assurance

The technical information in this news release has been prepared in
accordance with Canadian regulatory requirements set out in National
Instrument 43-101 and reviewed by John Sagman, P. Eng, Manager of Projects,
Capstone Mining Corp. The PFS was prepared with input from the following:
Michael Makarenko, P.Eng., JDS Energy & Mining Inc.; Ali Sheykholeslami,
P.Eng., JDS Energy & Mining Inc.; Garth Kirkham, P. Geol., Kirkham Geosystems
Ltd.; Hoe Teh, P.Eng., Hoe Teh Consulting Inc., Daniel Jarratt, P.Eng.,
Allnorth Consultants Ltd, David Archibald, R.P. Bio, Allnorth Consultants
Inc, Carlos Chaparro, P.Eng., EBA, a Tetra Tech Company, Guangwen Zhang,
P.Eng., EBA, a Tetra Tech Company, Frank Palkovits, P.Eng., Mine Paste
Engineering Ltd and Brad Mercer, P. Geol., Capstone Mining Corp. who are
responsible for certain sections of the PFS as detailed in the PFS.

Forward-Looking Statements

This document may contain "forward-looking information" within the
meaning of Canadian securities legislation and "forward-looking statements"
within the meaning of the United States Private Securities Litigation Reform
Act of 1995 (collectively, "forward-looking statements"). These
forward-looking statements are made as of the date of this document and
Capstone Mining Corp. (the "Company") does not intend, and does not assume
any obligation, to update these forward-looking statements.

Forward-looking statements relate to future events or future performance
and reflect Company management's expectations or beliefs regarding future
events and include, but are not limited to, statements with respect to the
estimation of mineral reserves and mineral resources, the realization of
mineral reserve estimates, the timing and amount of estimated future
production, costs of production, capital expenditures, success of mining
operations, environmental risks, unanticipated reclamation expenses, title
disputes or claims and limitations on insurance coverage. In certain cases,
forward-looking statements can be identified by the use of words such as
"plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases or
statements that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved" or the negative of these
terms or comparable terminology. By their very nature forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to actual results of current
exploration activities; changes in project parameters as plans continue to be
refined; future prices of resources; possible variations in ore reserves,
grade or recovery rates; accidents, labour disputes and other risks of the
mining industry; delays in obtaining governmental approvals or financing or
in the completion of development or construction activities; as well as those
factors detailed from time to time in the Company's interim and annual
financial statements and management's discussion and analysis of those
statements, all of which are filed and available for review on SEDAR at Although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be
other factors that cause actions, events or results not to be as anticipated,
estimated or intended. The Company provides no assurance that forward-looking
statements will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.

Accordingly, readers should not place undue reliance on forward-looking

* Non-GAAP Performance Measures

"Total Cash Costs" and "Unit Total Operating Costs" are Non-GAAP
Performance Measures. These performance measures are included because these
statistics are key performance measures that management uses to monitor
performance. Management uses these statistics to assess how the Company is
performing to plan and to assess the overall effectiveness and efficiency of
mining operations. These performance measures do not have a meaning within
GAAP and, therefore, amounts presented may not be comparable to similar data
presented by other mining companies. These performance measures should not be
considered in isolation as a substitute for measures of performance in
accordance with GAAP.

For further information:

About Capstone, please contact:
Darren Pylot, President & CEO or Investor Relations' Jason Howe at
+1-604-684-8894 or +1-866-684-8894 or e-mail Capstone at

For further information: about Capstone, please contact: Darren Pylot, President & CEO or Investor Relations' Jason Howe at +1-604-684-8894 or +1-866-684-8894 or e-mail Capstone at info at .

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