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Kutcho - another northwest BC project inches forward

December 19, 2012

Capstone Mining Corp. is advancing the Kutcho project towards a production decision. It is a high grade copper-zinc-gold-silver deposit in the advanced development stage—one of several advanced projects in the region.

The Kutcho property is located approximately 100 kilometres due east of Dease Lake and 330 kilometers north of Smithers. In May 2008, Capstone successfully acquired 100% ownership in Western Keltic and the project is now operated by Kutcho Copper Corp., a wholly-owned subsidiary of Capstone. Prior to the acquisition, Western Keltic had been advancing the project towards completion of a feasibility study by conducting geotechnical and environmental baseline studies, as well as advancing the permitting process for approval of production. Western Keltic had also been actively engaged in discussions with the Talhtan and Kaska First Nations, as well as other local communities to ensure there was broad based support for the development of a mine at Kutcho Creek, while taking into account the concerns of the First Nations and other stakeholders.

The Kutcho Project contains a mineral reserve estimate of 11 million tonnes with an average grade of 2.2% copper, 3.19% zinc with an expected mine life of 12 years and an average throughput of 2,500 tonnes per day producing separate copper and zinc concentrates.

With the 2011 PFS in hand, Kutcho Copper Corp. is proceeding towards submission of an Environmental Assessment Certificate (EAC) Application, currently anticipated at the end of Q2/12 and also commencing discussions with First Nations and other stakeholders.

Direct capital costs are estimated at $139.3 million, including $17.9 million 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. Capstone sees Kutcho going into production in 2016.

Capstone Mining (ticker CS on TSX) has a market cap of $945 M. It is a mid-tier copper producer with two small copper mines, one in the Yukon (Minto) and one in Mexico. It has a very large copper deposit under development in Chile, in partnership with a Korean firm. Capstone aims to grow organically and through acquisitions in politically stable, mining-friendly jurisdictions, with a focus in the Americas.

Commentary

The Kutcho project is small, requiring only $200M in CAPEX. There may be synergies to operate a second mine in the north, as staff from Minto are already in place. The rich copper ore and the high gold credits at Kutcho make it an attractive proposition.

The company seems to have established good working relations with the Tahltan and Kaska First Nations.

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