Capstone Mining Corp. TSX: CS

Capstone Reports Record Copper Production for 2008 and Increases Forecast in 2009

Production of 74.1 million pounds of Copper in Concentrates

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 4, 2009) - Capstone Mining Corp. (TSX:CS) today reported that its Minto and Cozamin mines had produced 74.1 million pounds of copper in concentrates in 2008. Capstone further reported achieving commercial production, effective January 1, 2009, of the most recent expansions at its Cozamin mine in Mexico and Minto Mine in Canada. With commissioning essentially complete at year-end for both the Cozamin and Minto mines, Capstone is now focused on fully realizing the benefits of the expanded production levels at its mines for the full year, and is forecasting production of 95 million to 105 million pounds of copper contained in concentrates in 2009 at a total cash cost(x) of approximately US$1.00 per pound.

"Capstone's two high grade copper mines both successfully completed their expansions by the end of 2008, increasing combined throughput by 140% since the Cozamin and Minto mines were originally commissioned in mid-2006 and mid-2007, respectively," said Darren Pylot, Vice Chairman & CEO of Capstone. "With the expansions complete, we are now focused on fully optimizing the output and production costs of both operations, with the objective of maximizing profitability. Cash flow from our operations is further enhanced by a robust forward sales program, where we have 104 million pounds of copper forward sold at an average price of US$2.52 per pound."

"In addition to its production activities, Capstone is completing major resource updates for both of its mines and its high grade Kutcho copper project; conducting the required work to support its Phase IV expansion at the Minto Mine based on increased resources and throughput; evaluating opportunities to redesign the Kutcho copper project as a robust, low cost operation; and continuing its highly successful exploration emphasis," said Stephen Quin, President & COO. "We aim to continue our organic growth, which has already seen two successful expansions at each of our mines in a short period of time, supported by strong resource increases, as well as look at external growth opportunities, backed by low cost production and a robust hedge book."

2008 Production Metrics

The table below sets out Capstone's production for the fourth quarter and its fiscal year ending December 31, 2008. Copper production for the year totalled 74.1 million pounds of copper in concentrates, with an estimated 71.3 million pounds payable, with significant by-products of gold, silver, lead and zinc. Operational data for the individual mines is summarized below.

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                                   Fourth Quarter 2008   Full Year 2008 (3)
                                     Cozamin     Minto    Cozamin     Minto
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Production
(contained in concentrates)
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- Copper (000's lbs)                   7,016    15,518     26,372    47,687
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- Gold (oz) (1)                          N/A     8,651        N/A    30,758
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- Silver (oz)                        300,079    89,620  1,299,260   259,824
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- Lead (000's lbs)                     1,591       N/A      6,442       N/A
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- Zinc (000's lbs)                     2,782       N/A      9,710       N/A
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Sales
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- Copper sales (000's lbs)             6,635     6,328     26,054    37,737
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- Gold sales (oz's)                      N/A     2,990        N/A    23,012
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- Silver sales (oz's)                289,520    24,609  1,184,950   157,366
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- Lead sales (000's lbs)               1,373       N/A      5,515       N/A
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- Zinc sales (000's lbs)               1,977       N/A      7,499       N/A
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Mining
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- Waste (tonnes)                         N/A 1,304,363        N/A 8,370,800
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- Ore (tonnes)                       224,824   679,001    825,909 1,158,520
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- Total material mined (tonnes)      224,824 1,983,364    825,909 9,529,320
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Milling
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- Tonnes processed                   222,326   227,550    833,176   809,426
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- Tonnes processed per calendar day    2,417     2,473      2,283     2,218
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- Copper grade (%)                      1.58      3.33       1.63      2.91
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- Gold grade (g/t) (2)                   N/A      1.64        N/A      1.14
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- Silver grade (g/t)                    60.0      14.6       65.3      11.8
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- Lead grade (%)                        0.49       N/A       0.55       N/A
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- Zinc grade (%)                        1.04       N/A       1.31       N/A
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Recoveries
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- Copper (%)                            90.4      92.9       88.3      91.9
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- Gold (%) (1)                           N/A      72.0        N/A      77.9
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- Silver (%)                            70.0      83.8       74.2      84.6
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- Lead (%)                              66.7       N/A       63.7       N/A
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- Zinc (%)                              54.7       N/A       40.3       N/A
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Copper Concentrate
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- Dry tonnes produced                 12,906    16,739     53,293    53,148
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- Copper grade (%)                      24.7      42.1       22.4      40.7
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- Gold grade (g/t) (1)                   N/A      16.0        N/A      16.5
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- Silver grade (g/t)                     537       167        572       152
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Lead Concentrate
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- Dry tonnes produced                  1,157       N/A      4,705       N/A
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- Lead grade (%)                        62.4       N/A       62.1       N/A
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- Silver grade (g/t)                   1,898       N/A      1,801       N/A
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Zinc Concentrate
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- Dry tonnes produced                  2,695       N/A     10,610       N/A
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- Zinc grade (%)                        46.8       N/A       41.5       N/A
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- Silver grade (g/t)                     N/A       N/A        N/A       N/A
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(1) Gold is not assayed on site at Minto, resulting in a significant lag in
    receiving this data.
(2) Gold grades for ore mined at Minto are estimated from the reserve block
    model, whereas copper and silver grades are based on blasthole assays.
(3) 2008 totals may not match the totals from individual quarters due to
    rounding and post-quarter adjustments.

Financial Reporting

There is a difference between metal produced and metal sold due to timing differences between when the material is produced at the mines and when a sale can be recognized under Capstone's revenue recognition policy. Under that policy, in order for a sale to be recognized, the metals have to be sold. Metals produced but not sold are carried as inventory at the cost of production. This timing difference is also affected by the timing and availability of road transport from the mines to the ports, especially to the Port of Skagway (for Minto mine concentrates) due to the freeze-up and breakup of the Yukon River in fall and spring of each year. As a result, Capstone's net income may vary significantly from quarter to quarter based on revenue recognition timing. During 2008, Capstone's mines sold 63.8 million pounds of copper.

2008 year-end financial reporting will also be significantly affected by the completion of the plan of arrangement between Capstone and Sherwood Copper Corporation on November 24, 2008. As a result of accounting requirements, the financial statements will be prepared on the basis of 12 months of the former Sherwood financial statements, but only include Capstone's financial information subsequent to the closing date (or just over one month). Capstone will be reporting its consolidated financial results for the period ending December 31, 2008 after market close on March 30, 2009.

Outlook for 2009

Given the completion of the mill expansions at both Minto and Cozamin by the end of 2008, Capstone expects to realize the full benefits of these expansions in 2009. Overall, Capstone expects to produce 95 million to 105 million pounds of copper in concentrates in 2009 at a total cash cost(x) of approximately US$1.00 per pound, net of by-product credits and selling costs, based on a copper price of US$1.50 per pound for unhedged production, and an exchange rate of C$1.20/US$1.00 and MXP$12.50/US$1.00. Of this production, approximately 60% is projected to come from the Minto Mine and 40% from the Cozamin Mine.

Forecast production for the Cozamin and Minto mines in 2009 is as follows:

                   2009 Production Forecast(y)


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                                   Cozamin       Minto        Total
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Tonnes Milled (millions)               1.0         1.0          2.0
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Copper Grade (%)                       2.0%        3.1%
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Copper Recovery (%)                     91%         93%
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Contained Copper (millions lbs)   35 to 40    60 to 65    95 to 105
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Forecast Total Cash Costs(x)       US$1.00     US$1.00      US$1.00
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(y) All numbers are approximates.

Production Optimization

With both the Minto and Cozamin mines having been in continual construction and expansion mode for the past two to three years, 2009 will be a year of consolidating those gains, with a focus on optimizing the current operations by stressing efficiencies in operations and costs. Capstone will continue its relentless pursuit of value from its current operations by ensuring production is achieved in as a cost efficient and safe manner as possible.

Development Activities

The two principal development opportunities for organic growth within Capstone are the Phase IV expansion at the Minto Mine and advancement of the high grade Kutcho copper project. The Minto Phase IV expansion has two principal objectives: (1) incorporation of new resources discovered and defined in the past three years into reserves, and (2) expansion of the mill throughput to in the range of 4,000 to 5,000 tonnes per day. Discovery and definition of the Area 2, Area 118, Ridgetop and other deposits since 2006 has resulted in a substantial increase in resources, with further increases anticipated based on 2008's successful drill program. Mineral resource updates are in process and are expected to be complete towards the end of Q1/09, and will form the basis of an independent pre-feasibility study targeted for completion in mid-2009. This study will not only focus on increasing reserves and a further mill expansion, but optimizing the operation throughout, and will form the basis for an application to amend the Minto Mine's operating permits to be filed in 2009.

At the high grade Kutcho copper project, the principal emphasis in 2008 was defining the high grade core of the Main deposit, which objective was successfully achieved, based on the excellent drill results obtained and announced in 2008 that expanded and improved continuity of previously identified high grade mineralization. Updated mineral resource estimates for all three deposits at Kutcho (Main, Esso and Sumac) are expected to be completed shortly, and will form the basis for a renewed approach to evaluating options for the development of the Kutcho project. This will include consideration of a smaller, higher grade operation with possible open pit and/or underground extraction of the high cores of the known deposits. Assuming a positive outcome to these evaluations, the objective would then be to advance the project towards completion of a prefeasibility study and application for the required operating permits and licences.

Exploration Activities

The principal exploration focus in 2009 is continued exploration drilling at the Minto Mine, where three years of excellent results and significant resource increases show no sign of slowing. As announced January 26, 2009, a 10,000m, US$3 million, drill program has commenced at the Minto Mine, focused on continuing to expand the known resources at Area 2/Area 118 and Ridgetop deposits, in support of the Phase IV expansion, as well as evaluating the significant high grade discovery made at Copper Keel and testing new targets. Exploration at Cozamin and Kutcho will primarily be focused on furthering Capstone's understanding of the geologic controls on high grade mineralization, laying the groundwork for future exploration programs.

Conference Call

Capstone will host a conference call at 8:00am on March 31 to discuss the results of the December 31 consolidated financial statements. Dial in numbers will be provided closer to the date.