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Capstone Mining Corp.: Capstone Reports Debt Repayments, Funding of Debenture Repurchase and Forward Sales

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 22, 2009) - Capstone Mining Corp. (TSX:CS) today announced that it had repaid portions of its project debt facilities and repurchased the majority of its convertible debentures with a new loan facility. Capstone also provided an update on its forward sales of copper and the reorganization of one of its subsidiaries.

Fourth Quarter Finances

During the fourth quarter ending December 31, 2008, Capstone's wholly owned subsidiary, Capstone Mining North Ltd. (formerly Sherwood Copper Corp.), repaid its C$10 million revolving corporate credit facility with Macquarie Bank Limited ("Macquarie") and made two US$5.5 million principal payment on its project loan facility ("PLF"), reducing the PLF balance to US$29.9 million at year end. The PLF is repayable at a rate of US$5.5 million per calendar quarter, but the January 1 2009 payment was paid early because of the holiday. An additional balance of C$10 million also remains outstanding under the subordinate loan facility ("SLF") that is repayable after the PLF.

During the fourth quarter, provisional pricing adjustments totalling approximately US$34 million were paid out in respect of concentrates settled during the quarter for the Minto and Cozamin mines. These provisional payment adjustments were partially offset by approximately US$14.7 million in proceeds from closing in-the-money copper forward sales. During this period, proceeds of US$37.5 million were received as an advance payment against future gold and silver production from the Minto Mine, as announced November 21, 2008, which proceeds were partially offset by US$3.6 million paid out to settle out-of-the-money forward sales of gold and silver.

Following these transactions, Capstone had a cash balance of approximately US$41.9 million as of December 31, 2008. At the end of the year, Capstone had 21,465 tonnes of concentrate awaiting final settlement; however, final adjustments on the 90% advanced as provisional payments for these concentrates should be subject to more normal levels of adjustments as copper prices have stabilized. Any provisional pricing adjustments related to these concentrates will benefit from closing in-the-money forward copper sales (see below). Also at year end, Capstone held 24.0 million shares and 2.8 million special warrants of Silverstone Resources Corp.

All amounts discussed herein are unaudited; additional details on Capstone's balance sheet and other financial matters will be provided in Capstone's year-end financial statements and management discussion and analysis, when released.

Convertible Debenture Repurchase & Funding

Further to the offer that Capstone mailed on December 23, 2008 for the repurchase of its C$43.6 million in 5% convertible debentures (the "Debentures"), Capstone has delivered Computershare C$39,866,875 to fund the January 22, 2009 purchase of $38,871,000 of Debentures tendered under the offer, plus accrued interest and costs. As a result, the outstanding Capstone Debentures have been reduced from C$43.6 million to C$4.73 million.

Separately, Capstone has completed a US$40 million corporate revolving term credit facility with The Bank of Nova Scotia (the "RT Facility"). Under the terms of the RT Facility, the funds are re-drawable over a three year term, subject to a US$8 million reduction every 6 months commencing on the first anniversary, and it attracts an interest rate of US LIBOR plus 3.5% (adjustable in certain circumstances). US one-month LIBOR rates have averaged between 0.3% and 0.5% so far in 2009.

Forward Sales Balance

As at December 31, 2008, the outstanding balance of copper forward sales held by Capstone and its subsidiaries totalled 104.4 million pounds, with an average price of US$2.52 per pound of copper deliverable, as summarized in the table below.

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Weighted Averages
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 Price Price
Year Tonnes lbs (US$/t) (US$/lb)
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2009 Q1 5,564 12,266,520 5,961.32 2.70
2009 Q2 5,084 11,208,301 5,808.86 2.63
2009 Q3 4,600 10,141,264 5,680.60 2.58
2009 Q4 4,281 9,437,989 5,546.56 2.52
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Total 2009 19,529 43,054,075 5,764.59 2.61

2010 Q1 4,131 9,107,296 5,380.45 2.44
2010 Q2 4,131 9,107,296 5,264.99 2.39
2010 Q3 3,765 8,300,404 5,190.35 2.35
2010 Q4 3,582 7,896,958 5,103.77 2.32
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Total 2010 15,609 34,411,955 5,240.54 2.38

2011 Q1 3,282 7,235,571 4,860.60 2.20
2011 Q2 2,402 5,295,504 5,135.88 2.33
2011 Q3 2,774 6,115,623 5,596.87 2.54
2011 Q4 1,654 3,646,446 5,985.29 2.71
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Total 2011 10,112 22,293,144 5,311.93 2.41

2012 Q1 300 661,387 7,097.50 3.22
2012 Q2 300 661,387 7,097.50 3.22
2012 Q3 300 661,387 7,097.50 3.22
2012 Q4 300 661,387 7,097.50 3.22
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Total 2012 1,200 2,645,547 7,097.50 3.22

2013 Q1 225 496,040 6,875.00 3.12
2013 Q2 225 496,040 6,875.00 3.12
2013 Q3 225 496,040 6,875.00 3.12
2013 Q4 225 496,040 6,875.00 3.12
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Total 2013 900 1,984,160 6,875.00 3.12

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TOTAL 47,350 104,388,881 5,550.05 2.52
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At December 31, 2008, making no allowance for any costs to close out any positions, the mark-to-market value of these forward sales was approximately US$115 million. The mark-to-market value will fluctuate with changes in copper prices and the contango or backwardation applicable at the time.

Capstone has no outstanding precious metals contracts, Sherwood Copper having closed out all its gold and silver forwards prior to completion of the precious metal transaction with Silverstone Resources Corp. (announced November 21, 2008) and prior to the completion of the plan of arrangement between Capstone and Sherwood Copper.

Corporate Structure

Subsequent to the plan of arrangement that was approved by the Supreme Court of British Columbia on November 22, 2008, Capstone Mining Corp. and its wholly owned subsidiary, Capstone Mining North Ltd. (formerly Sherwood Copper Corp.), were amalgamated as one company under the name Capstone Mining Corp. on January 1, 2009. As a result of this amalgamation, Capstone Mining Corp. directly owns 100% of the shares of Minto Explorations Ltd., owner of the high grade Minto copper-gold mine, and 100% of the shares of Kutcho Copper Corp., owner of the high grade Kutcho copper project. This corporate structure provides a simpler ownership structure that should allow tax efficiencies in the future.

Forward-Looking Statements

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

Forward-looking statements relate to future events or future performance and reflect management of the Company's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and 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 [ www.sedar.com ]. 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. There can be 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 statements.

The TSX does not accept any responsibility for the adequacy or accuracy of this press release.