Capstone ups copper reserves by 89% in Mexico

Capstone Mining Corp. [CS-TSX] said Monday December 10 that it has significantly increased reserves by 89% and is planning for a 30% increase in production at its Cozamin Mine in Zacatecas Mexico. Details are contained in an updated technical report that was released on Monday.

However, Capstone shares eased 1.67% or $0.01 to 59 cents following the announcement. The 52-week range is $1.62 and 48 cents.

“The Cozamin Mine continues to be a valuable asset for Capstone and formed the foundation on which we built our company,” said Capstone President and CEO Darren Pylot.

“Since commencing production at 1,000 tonnes-per-day in 2006, Cozamin has demonstrated a remarkable ability to continue to discover and define new reserves,” he said. “Today, more than 12 years and approximately 12 million tonnes later, we announce the next step in the Cozamin evolution.”

The key components are new reserves as well as a significantly increased inferred resource, giving the company the confidence to make additional investment to increase Cozamin’s production profile.

Highlights from the technical report include an 89% increase in proven and probable mineral reserves to 6.2 million tonnes, grading 1.60% copper. Inferred mineral resources have increased to 17 million tonnes at a copper grade of 1.11%, including 9.5 million tonnes at a copper grade of 1.61% in the Mala Noche Footwall Zone (MNFWZ).

This area of the MNFWZ is a shallower and thicker zone of mineralization than the current indicated mineral resources, and the target for a multi-year infill drill program with the goal of converting more resources to reserves.

Other highlights from the technical report include results of the materials handling study. They show an approximate 30% increase in the expected throughput to 3,780 tonnes per day by the end of 2020, with an estimated investment of less than $5 million. The anticipated result is an increase in annual production to between 40 and 45 million pounds of copper.

Cozamin’s mill throughput is currently constrained by the mine’s ability to deliver ore to surface.  The materials handling study identified congestion on the main haulage ramp as the main production bottleneck and compared several alternative solutions to sustainably raise production to match the nameplate mill capacity.

For an investment of less than $5 million, Cozamin will be able to transform its haulage network from a two-way single ramp to a one-way ramp loop by connecting an existing main ramp to a planned ramp with a short drift.

The future one-way haulage loop (including the previously mentioned planned ramp) is expected to be completed by the end of 2020 and raise production by approximately 30% from current rates.

Capstone recently announced reductions to its organizational structure, including changes to its senior executive team. It also eliminated 35% of positions from its head office in Vancouver and said it expects to reduce annual and corporate general and administrative expenses by approximately US$5 million per year.

The company has two producing copper mines – the Pinto Valley Mine in Arizona, and the Cozamin Mine in Mexico. Capstone recently terminated a deal to sell its Minto Mine in the Canadian Yukon to Pembridge Resources Plc. [PERE-LON]. Capstone said at the time it would immediately put the mine on care and maintenance while it waits for copper and equity markets to improve.

In a November 26, 2018 press release, the company said it was mulling strategic options for is Santo Domingo iron-oxide-copper-gold project in Chile, including the sale of a portion of its 70% project interest.

The announcement comes after Capstone released an updated technical report for the Santo Domingo Project, which is owned 30% by Korea Resources Corp. The updated technical report forsees an initial construction cost of $1.51 billion, and average annual copper production of 134 million pounds over an 18-year life span (including an average of 259 million pounds of copper output in the first five years). During the 18-year period, the mine is also expected to produce 4.2 million tonnes of iron (annually), and 17,000 ounces of gold.

Santo Domingo is located 50 km southwest of Codelco’s El Salvador copper mine and 130 km northeast of Copiaco, near the town of Diego de Almagro, in Region 111. The project plan includes the development of two open pit mines.