Capstone Copper Annual Report 2017

FY2017 Annual Report · Capstone Copper

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ANNUAL INFORMATION FORM
For the year ended December 31, 2017

March 19, 2018

Table of Contents

Cautionary Statement Regarding Forward-Looking Information .......................................................................................3

Compliance with NI 43-101 ..............................................................................................................................................5

1 – CORPORATE STRUCTURE .......................................................................................................................................... 10

1.1
1.2

Name, Address and Incorporation ................................................................................................................. 10
Intercorporate Relationships ......................................................................................................................... 10

2 – GENERAL DEVELOPMENT OF THE BUSINESS ............................................................................................................. 11

2.1

Three Year History ......................................................................................................................................... 11

3 – DESCRIPTION OF THE BUSINESS ............................................................................................................................... 13

3.1
3.2
3.3

General .......................................................................................................................................................... 13
Material Mineral Properties .......................................................................................................................... 18
Other Properties ............................................................................................................................................ 51

4 – RISK FACTORS .......................................................................................................................................................... 55

5 – DIVIDENDS AND DISTRIBUTIONS ............................................................................................................................. 65

6 – DESCRIPTION OF CAPITAL STRUCTURE ..................................................................................................................... 65

6.1

General Description of Capital Structure ........................................................................................................ 65

7 – MARKET FOR SECURITIES ......................................................................................................................................... 66

8 – DIRECTORS AND OFFICERS ....................................................................................................................................... 67

8.1
8.2

Name and Occupation ................................................................................................................................... 67
Conflicts of Interest........................................................................................................................................ 69

9 – AUDIT COMMITTEE INFORMATION .......................................................................................................................... 70

9.1
9.2
9.3
9.4
9.5

Audit Committee Terms of Reference ............................................................................................................ 70
Composition of the Audit Committee and Relevant Education and Experience ............................................. 70
Audit Committee Oversight ........................................................................................................................... 70
Pre-Approval Policies and Procedures............................................................................................................ 71
External Auditors Service Fees (By Category) ................................................................................................. 71

10 – LEGAL PROCEEDINGS AND REGULATORY ACTIONS ................................................................................................ 71

11 – INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ............................................................. 71

12 – TRANSFER AGENT AND REGISTRAR ........................................................................................................................ 72

13 – MATERIAL CONTRACTS .......................................................................................................................................... 72

14 – INTERESTS OF EXPERTS .......................................................................................................................................... 72

14.1
14.2

Names of Experts ........................................................................................................................................... 72
Interests of Experts ........................................................................................................................................ 73

15 – ADDITIONAL INFORMATION .................................................................................................................................. 73

SCHEDULE A ................................................................................................................................................................... A

IN THIS ANNUAL INFORMATION FORM, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE “COMPANY” OR
“CAPSTONE” REFERS TO CAPSTONE MINING CORP. AND ITS SUBSIDIARIES. ALL INFORMATION CONTAINED HEREIN
IS AS OF DECEMBER 31, 2017, UNLESS OTHERWISE STATED.

Cautionary Statement Regarding Forward-Looking Information

This Annual Information Form, and the documents incorporated by reference herein, 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
does not intend, and does not assume any obligation, to update these forward-looking statements, except as
required under applicable securities legislation.

Forward-looking statements relate to future events or future performance and reflect our expectations or beliefs
regarding future events. Forward-looking statements include, but are not limited to, statements with respect to
the estimation of Mineral Resources and Mineral Reserves, the realization of Mineral Reserve estimates, the
timing and amount of estimated future production, costs of production, the timing and possible outcome of legal
proceedings and regulatory actions, and capital expenditures, the success of our mining operations, environmental
risks, unanticipated reclamation expenses and title disputes. In certain cases, forward-looking statements can be
identified by the use of words such as “plans”, “expects”, “budget”, “scheduled”, “estimates”, “forecasts”,
“intends”, “anticipates”, “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 that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements expressed or implied by the forward-
looking statements. Such factors include, amongst others, risks related to:

counterparty risks associated with sales of our metals;

foreign currency exchange rate fluctuations;
changes in general economic conditions;

inherent hazards associated with mining operations;
future prices of copper and other metals;
compliance with financial covenants;
surety bonding;

•
•
•
•
• our ability to raise capital;
• uncertainties related to proposed transaction for the sale of Minto Explorations Ltd.
• Capstone’s ability to acquire properties for growth;
•
• use of financial derivative instruments and associated counterparty risks;
•
•
• accuracy of Mineral Resource and Mineral Reserve estimates;
• operating in foreign jurisdictions with risk of changes to governmental regulation;
•
•
•
•
•
• aboriginal title claims and rights to consultation and accommodation;
•
• uncertainties and risks related to the potential development of the Santo Domingo Project;
•
increased operating and capital costs;
•
challenges to title to our mineral properties;
• dependence on key management personnel;

compliance with governmental regulations;
reliance on approvals, licences and permits from governmental authorities;
impact of climatic conditions on our Pinto Valley, Cozamin and Minto operations;
changes in climate change regulatory regime;
compliance with environmental laws and regulations;

land reclamation and mine closure obligations;

corruption and bribery;
limitations inherent in our insurance coverage;
labour relations;
increasing energy prices;
competition in the mining industry;
risks associated with joint venture partners;

• potential conflicts of interest involving our directors and officers;
•
•
•
•
•
•
• our ability to integrate new acquisitions into our operations;
•
•
•

cybersecurity threats;
reputational risk; and
legal proceedings.

For a more detailed discussion of these factors and other risks, see “Risk Factors” beginning on page 55.

Although we have attempted to identify important factors that could cause our actual results, performance
or achievements to differ materially from those described in our forward-looking statements, there may be other
factors that cause our results, performance or achievements not to be as anticipated, estimated or intended.
There can be no assurance that our forward-looking statements will prove to be accurate, as our actual
results, performance or achievements could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on our forward-looking statements.

Currency

We report our financial results and prepare our financial statements in United States dollars. All currency amounts
in this Annual Information Form are expressed in United States dollars, unless otherwise indicated. References
to “C$” are to Canadian dollars, references to “MX$” are to Mexican pesos and references to “CLP” are to Chilean
pesos.
The United States dollar exchange rates for our principal operating currencies are as follows:

Canadian dollar (C$)1
Average
High
Low

As at December 31,
2016
1.3248
1.4589
1.2544
2016
18.6845
20.9395
17.2005
1 Information on US$ to C$ exchange rates obtained from Bank of Canada daily noon exchange rates.
2 Information on US$ to MX$ exchange rates obtained from Bank of Mexico.

Mexican peso (MX$)2
Average
High
Low

2017
1.2986
1.3743
1.2128
2017
18.9104
21.9076
17.4937

2015
1.2785
1.3990
1.1728
2015
15.8671
17.3897
14.5235

Conversion Table

In this Annual Information Form, metric units are used with respect to Capstone’s mineral properties, unless
otherwise indicated. Conversion rates from imperial measures to metric units and from metric units to
imperial measures are provided in the table set out below.

Imperial Measure = Metric Unit

2.47 acres
3.28 feet
0.62 miles
0.032 ounces (troy)
1.102 tons (short)
0.029 ounces (troy)/ton

1 hectare

1 metre

1 kilometre

1 gram

1 tonne

Metric Unit
0.4047 hectares

Imperial Measure
1 acre

0.3048 metres

1.609 kilometres

1 foot

1 mile

31.1 grams

1 ounce (troy)

0.907 tonnes

1 ton

1 gram/tonne

34.28 grams/tonne

1 ounce (troy)/ton

Compliance with NI 43-101

As required by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), Capstone
has filed technical reports detailing the technical information related to its material mineral properties discussed
herein. For the purposes of NI 43-101, Capstone’s material mineral properties as of December 31, 2017 are the
Pinto Valley Mine, the Cozamin Mine, and the Minto Mine. Unless otherwise indicated, Capstone has prepared
the technical information in this Annual Information Form (“Technical Information”) based on information
contained in the technical reports, news releases and other public filings (collectively, the “Disclosure
Documents”) available under Capstone’s profile on SEDAR at www.sedar.com. Each Disclosure Document was
prepared by, or under the supervision of, or approved by a Qualified Person as defined in NI 43-101. For readers
to fully understand the information in this Annual Information Form, they should read the Disclosure Documents
in their entirety, including all qualifications, assumptions and exclusions that relate to the Technical Information
set out in this Annual Information Form which qualifies the Technical Information. The Disclosure Documents
are each intended to be read as a whole, and sections should not be read or relied upon out of context. Readers
are advised that Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
The Technical Information is subject to the assumptions and qualifications contained in the Disclosure
Documents.

Classification of Mineral Reserves and Mineral Resources

In this Annual Information Form and as required by NI 43-101, the definitions of Proven and Probable Mineral
Reserves and Measured, Indicated and Inferred Mineral Resources are those used by Canadian provincial
securities regulatory authorities and conform to the definitions utilized by the Canadian Institute of Mining,
Metallurgy and Petroleum (“CIM”) in the “CIM Definition Standards for Mineral Resources and Mineral Reserves”
adopted on August 20, 2000, as amended (“CIM Standards”). Readers should note that the CIM standards as
adopted by the CIM on November 27, 2010 were the relevant standards in effect at the time of the preparation
of certain technical reports, including technical reports in respect of the Minto Mine and the Santo Domingo
Project, and should refer to the 2010 CIM standards when reviewing those reports. The CIM Standards were
updated in 2014 at the request of the CIM Standing Committee on Mineral Reserve and Mineral Resource
Definitions. Our Pinto Valley and Cozamin NI 43-101 Technical Reports were written in accordance with these
updated CIM Standards.

Cautionary Note to US Investors Concerning Estimates of Mineral Reserves and Mineral Resources

The disclosure in this Annual Information Form uses Mineral Resource and Mineral Reserve classification terms
that comply with reporting standards in Canada, and, unless otherwise indicated, all Mineral Resource and
Mineral Reserve estimates included in this Annual Information Form have been prepared in accordance with NI
43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for
all public disclosure an issuer makes of scientific and technical information concerning mineral projects. These
standards differ significantly from the disclosure requirements of the SEC set forth in Industry Guide 7.
Consequently, Mineral Resource and Mineral Reserve information contained in this Annual Information Form is
not comparable to similar information that would generally be disclosed by US companies in accordance with
the rules of the SEC.

In particular, the SEC’s Industry Guide 7 applies different standards in order to classify mineralization as a
Reserve. As a result, the definitions of Proven and Probable Reserves used in NI 43-101 differ from the definitions
in Industry Guide 7. Under SEC standards, mineralization cannot be classified as a “Reserve” unless the
determination has been made that the mineralization could be economically and legally produced or extracted
at the time the Reserve determination is made. Accordingly, Mineral Reserve estimates contained in this Annual
Information Form may not qualify as “Reserves” under SEC standards.

In addition, this Annual Information Form uses the terms “Measured Mineral Resources”, “Indicated Mineral
Resources” and “Inferred Mineral Resources” to comply with the reporting standards in Canada. The SEC’s

Industry Guide 7 does not recognize Mineral Resources and US companies are generally not permitted to disclose
Mineral Resources in documents they file with the SEC. Investors are cautioned not to assume that any part or
all of the mineral deposits in these categories will ever be converted into SEC defined mineral “Reserves.”
Further, “inferred Mineral Resources” have a great amount of uncertainty as to their existence and as to whether
they can be mined legally or economically. Therefore, investors are also cautioned not to assume that all or any
part of an inferred Mineral Resource exists. In accordance with Canadian rules, estimates of “inferred Mineral
Resources” cannot form the basis of feasibility or other economic studies, except in rare cases. In addition,
disclosure of “contained ounces” in a Mineral Resource estimate is permitted disclosure under NI 43-101
provided that the grade or quality and the quantity of each category is stated; however, the SEC normally only
permits issuers to report mineralization that does not constitute “Reserves” by SEC standards as in place tonnage
and grade without reference to unit measures. For the above reasons, information contained in this Annual
Information Form containing descriptions of our Mineral Resource and Mineral Reserve estimates is not
comparable to similar information made public by US companies subject to the reporting and disclosure
requirements of the SEC.

GLOSSARY OF TECHNICAL TERMS

In this Annual Information Form, the following technical terms are defined:

Alteration

Anomaly

Assay

Biotite

silver.

chemical and mineralogical changes in rock mass resulting from the passage of fluids.

a deviation from uniformity. In the search for minerals, it is an area in which higher or lower
than background concentrations of minerals or expected values of various survey data may be
found.

an analysis of the contents of metals in mineralized rocks.

gold.

a magnesium-iron mica widely distributed in igneous rocks.

Brownfield Project

a project located near an operating mine.

Chlorite

CIM

the general term for hydrated silicates of aluminum, iron and magnesium.

Canadian Institute of Mining, Metallurgy and Petroleum and the “CIM Standards on Mineral
Resources and Reserves – Definitions and Guidelines” adopted on August 20, 2000 and
amended on November 27, 2010 and May 10, 2014 (unless indicated otherwise in this Annual
Information Form).

copper.

diamond drillholes

holes drilled by a method whereby rock is drilled with a diamond impregnated, hollow drilling
bit which produces a continuous, in situ record of the rock mass intersected in the form of solid
cylinders of rock which are referred to as core.

disseminated

a texture in which minerals occur as scattered particles in the rock.

Dmt

Dmtu

Dyke

Fabric

Fault

Feldspar

Foliation

G or g

Grade

dry metric tonnes.

dry metric tonne unit.

an intrusive tabular body of igneous rock that cuts across the layering or fabric of the host rock.

the spatial arrangement and orientation of rock components, whether crystals or sedimentary
particles, as determined by their sizes, shapes, etc.

a fracture in a rock across which there has been displacement.

iron.

one of a group of rock forming minerals which include microcline, orthoclase, plagioclase and
anorthoclase.

the preferred planar orientation of minerals and mineral aggregates in metamorphic rocks.

gram.

the amount of valuable mineral in each tonne of ore, expressed as ounces per ton or grams per
tonne for precious metal and as a percentage by weight for other metals.

Greenfield Project

a project not located near an operating mine.

g/t

host rock

Hydrothermal

grams per metric tonne.

hectares.

a volume of rock within which mineralization or an ore body occurs.

approximately 63mm diameter drill core.

applied to metamorphic and magmatic emanations high in water content; the processes in
which they are concerned; and the rocks or ore deposits, alteration products, and springs
produces by them.

Igneous

a type of rock that is crystallized from a liquid magma.

GLOSSARY OF TECHNICAL TERMS

Indicated
Mineral
Resource

Inferred
Mineral
Resources

IOCG

Koz

LOM
M

Mafic

Masl

Measured
Mineral
Resource

Mineral Reserve

Mineral Resource

in accordance with CIM Definition Standards, is that part of a Mineral Resource for which
quantity, grade or quality, densities, shape and physical characteristics are estimated with
sufficient confidence to allow the application of Modifying Factors (as defined below) in
sufficient detail to support mine planning and evaluation of the economic viability of the
deposit. Geological evidence is derived from adequately detailed and reliable exploration,
sampling and testing and is sufficient to assume geological and grade or quality continuity
between points of observation. An Indicated Mineral Resource has a lower level of confidence
than that applying to a Measured Mineral Resource and may only be converted to a Probable
Mineral Reserve.

in accordance with CIM Definition Standards, that part of a Mineral Resource for which quantity
and grade or quality are estimated on the basis of limited geological evidence and sampling.
Geological evidence is sufficient to imply but not verify geological and grade or quality
continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to
an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably
expected that the majority of Inferred Mineral Resources could be upgraded to Indicated
Mineral Resources with continued exploration.

iron oxide-copper-gold; a recognized mineral deposit type.

kilo (thousand).

thousands of ounces.

one thousand tonnes.

life of mine.
mega (million).

ferromagnesian minerals and rocks where these minerals are abundant.

metres above sea level.

in accordance with CIM Definition Standards, is that part of a Mineral Resource for which
quantity, grade or quality, densities, shape, and physical characteristics are estimated with
confidence sufficient to allow the application of Modifying Factors to support detailed mine
planning and final evaluation of the economic viability of the deposit. Geological evidence is
derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm
geological and grade or quality continuity between points of observation. A Measured Mineral
Resource has a higher level of confidence than that applying to either an Indicated Mineral
Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or
to a Probable Mineral Reserve.
in accordance with CIM Definition Standards, economically mineable part of a Measured and/or
Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may
occur when the material is mined or extracted and is defined by studies at pre-feasibility or
feasibility level as appropriate that include application of Modifying Factors. Such studies
demonstrate that, at the time of reporting, extraction could reasonably be justified. The
reference point at which Mineral Reserves are defined, usually the point where the ore is
delivered to the processing plant, must be stated. It is important that, in all situations where the
reference point is different, such as for a saleable product, a clarifying statement is included to
ensure that the reader is fully informed as to what is being reported. The public disclosure of a
Mineral Reserve must be demonstrated by a pre-feasibility study or feasibility study.

in accordance with CIM Definition Standards, is a concentration or occurrence of solid material
of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that
there are reasonable prospects for eventual economic extraction. The location, quantity, grade
or quality, continuity and other geological characteristics of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and knowledge, including sampling.
Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred,
Indicated and Measured categories.

GLOSSARY OF TECHNICAL TERMS

Mineralization

significant amounts of mineral(s) that is (are) of economic interest which may be established by
prospecting, trenching and drilling.

Mlb

Modifying Factors

millions of pounds.

molybdenum.

Modifying Factors are considerations used to convert Mineral Resources to Mineral Reserves.
These include, but are not restricted to, mining, processing, metallurgical, infrastructure,
economic, marketing, legal, environmental, social and governmental factors.

magnetic susceptibility.

megatonne (million tonnes).

megawatt (million watts).

NI 43-101

National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

NSR

Ore

approximately 47 millimetre diameter diamond drill core.

net smelter return.

rock that contains one or more minerals or metals, at least one of which has commercial value
and which is estimated to be able to be recovered at a profit.

Outcrop

an exposure of bedrock at the earth’s surface.

PLS

Pyrite

QAQC

lead.

Pregnant Leach Solution is acidic metal-laden water generated from stockpile leaching. Pregnant
Leach Solution is used in the SX/EW process.

a common iron sulphide mineral commonly found in hydrothermal veins and systems and
commonly associated with gold mineralization.

quality assurance/quality control in a mineral exploration and mining context is the combination
of quality assurance, the process or set of processes used to assure data quality, and quality
control, the process of identifying data outside of established tolerance limits.

Qualified Person

has the meaning set out in NI 43-101.

Quartz

SAG

Silica

Tpd

Vein

a common rock forming mineral made up of silicon dioxide.

Semi-Autogenous grinding.

silicon dioxide (SiO2), which occurs in the crystalline forms as quartz, cristobalite, tridymite, as
cryptocrystalline chalcedony, as amorphous opal, and as an essential constituent of the silicate
groups of minerals.

tonnes per day.

a sheet-like body of minerals formed by fracture-filling or replacement of the host rock.

Volcanic

formed by volcanic activity.

WUL

water use licence.

zinc.

1 – CORPORATE STRUCTURE

1.1

Name, Address and Incorporation

Capstone was incorporated pursuant to the Company Act (British Columbia) on July 17, 1987 under the name
330338 BC Ltd. We changed our name to Fire Star Resources Ltd. on April 21, 1989, to International Bancorp Ltd.
on August 17, 1989, and to IBL Equities Ltd. on March 5, 1991. On January 2, 1996, we changed our name to
Serena Resources Ltd. and consolidated our share capital on a 5:1 basis. On May 17, 2001, we changed our name
to Consolidated Serena Resources Ltd. and consolidated our share capital on a 5:1 basis. We changed our name
to Capstone Gold Corp. on March 6, 2003. On January 12, 2005, we amended our Notice of Articles to, amongst
other things, change our authorized capital from 100,000,000 common shares to an unlimited number of
common shares, and to reduce the threshold percentage of votes required to approve a special resolution from
75% to 66⅔%. We changed our name to our current name, Capstone Mining Corp. on February 8, 2006. On
November 24, 2008, Capstone and Sherwood Copper Corporation (“Sherwood”) completed a court-approved
plan of arrangement pursuant to which a Capstone wholly-owned subsidiary acquired all of the issued and
outstanding common shares of Sherwood in exchange for common shares of Capstone, and that subsidiary and
Sherwood amalgamated to form a new corporation named “Capstone Mining North Ltd.” On January 1, 2009,
Capstone and Capstone Mining North Ltd. were amalgamated to form Capstone Mining Corp. On April 30, 2014,
we amended our Articles to modify the means by which notice of meetings of shareholders and other
shareholder information may be delivered to shareholders and increased the quorum requirements for meetings
of shareholders to two persons holding at least 25% of the votes eligible to be cast at the meeting. Capstone is
now governed by the Business Corporations Act (British Columbia).

Capstone’s corporate head office and registered office is located at 2100 – 510 West Georgia Street, Vancouver,
British Columbia, V6B 0M3, Canada.

1.2

Intercorporate Relationships

The following chart describes the intercorporate relationships amongst Capstone’s subsidiaries and the
percentage of voting securities held by Capstone, either directly or indirectly, as at December 31, 2017, and the
jurisdiction of incorporation, formation, continuation or organization of each subsidiary:

2 – GENERAL DEVELOPMENT OF THE BUSINESS

2.1

Three Year History

2018 to date

On February 14, 2018, Capstone entered into a definitive share purchase agreement (the “Agreement”) pursuant
to which it has agreed to sell its subsidiary which owns the Minto Mine to Pembridge Resources plc
(“Pembridge”) (the “Transaction”). Under the terms of the Agreement, Capstone will receive $37.5 million in
cash, subject to working capital adjustments, and common shares representing 9.9% of the issued and
outstanding shares of Pembridge upon completion of the Transaction.

The Transaction is subject to closing conditions, including the requirement for Pembridge to post the required
financial security with respect to the closure bonding requirements at Minto. Capstone has agreed, for a period
of one-year post-closing, to retain one-third (approximately C$24 million) of the existing surety bond if requested
by Pembridge, after which time Capstone will have no further obligation with respect to the closure of the Minto
Mine.

The Transaction is expected to close in the second quarter of 2018.

2017

On April 4, 2017, the precious metal streaming arrangement with Wheaton Precious Metals Corp. for silver
production at the Cozamin mine expired. After this date, the full silver by-product credit was earned by Cozamin.

After starting the year with plans to be put on care and maintenance, Minto extended its mine life through mid-
2021 based on commodity price improvement and a renegotiated gold stream. The decision to extend the mine
life resulted in several mine plan sequencing changes.

On April 19, 2017, Capstone amended its Senior Secured Corporate Revolving Credit Facility ("RCF") to provide
for an extension to April 2021 and a reduction in the credit available under the RCF to $350 million. The
amendment requires an annual $25 million reduction of the credit limit on each anniversary of the facility to
$275 million on April 19, 2020. Capstone repaid a total of $54 million on the RCF in 2017, reducing the
outstanding balance to $274.9 million by the end of the year.

In September, Capstone announced drill results of step-out drilling at our Cozamin mine in Mexico, which
encountered copper grades in excess of 4% immediately adjacent to Endeavour Silver Corp. (“Endeavour”) claims
over larger than average widths than typical Mala Noche Footwall Zone ("MNFWZ"). As a result, we entered into
an agreement with Endeavour allowing both companies to exchange access to certain of each other’s mining
concessions that abut at the southern boundary of Capstone’s Cozamin mine property and continued wide-
spaced testing of the MNFWZ structure on both sides of the Capstone/Endeavour boundary.

Capstone completed the sale of its Kutcho development project to Kutcho Copper Corp. (formerly Desert Star
Resources Ltd.) on December 15, 2017.

The copper price protection program set up in 2016 to assure continued debt repayment through 2017 was
completed on December 31, 2017, resulting in full exposure to the copper price starting January 1, 2018.

2016

In January, the Pinto Valley Mine published the PV3 Pre-Feasibility Study (“PV3 PFS”) extending the mine life by
13 years to 2039, with plans to increase throughput by 8% without major capital investment. Increased mill
efficiencies resulted in new daily, monthly and quarterly throughput records throughout the year.

The Cozamin Mine underwent a reorganization in 2016 with efforts focused on adopting a number of additional
process improvements and training resources aimed at advancing mine development. Mineral Resources and

Reserves at Cozamin were updated to take into account exploration and infill drilling completed during 2016.
Exploration drilling resulted in new Indicated Mineral Resources that replenished 2016 mine production,
however there was a net reduction of Measured and Indicated Mineral Resources totaling 2,487 kt averaging
1.18% Cu. This was due to changes in the Indicated classification boundary and further removal of Measured
Mineral Resources contained in pillar material deemed to be not potentially economically extractable. The
updated Mineral Reserves for the San Roberto and MNFWZ were reduced by 2,059 kt (including 2016 mine
production), which accounts for a 29% decrease in tonnage and 18% contained copper versus the year-end 2015
Reserves. This represents a less than 15% reduction to Cozamin’s NPV, as the reduction was related to low-grade
material in the MNFWZ and material in San Roberto that was scheduled in the last year of the mine plan. In
addition, the San Rafael zone resource, previously modelled in 2009, was updated in anticipation of an
investigation into the viability of blending zinc-rich San Rafael ore with material mined from San Roberto and the
MNFWZ.

After starting out the year with plans to temporarily suspend underground operations at Minto, successful
efforts to lower costs extended underground mining into July 2017. After completing mining at Minto North in
September, another stage of surface mining in the Area 2 pit was approved to extend surface operations and
milling through 2017. During the year an engineering change occurred whereby the Area 2 Underground Mineral
Reserves were updated taking into account changes to the block model. With recent copper price improvements,
work is underway to extend operations beyond the completion of the Area 2 underground and open pit.

The San Manuel Arizona Railroad Company (“SMARRCO”) was placed on care and maintenance, resulting in a
move to a modular truck transport system to haul concentrate from the Pinto Valley Mine to domestic customers
and to the port of Guaymas, Mexico for export.

With a focus on covenant compliance and debt repayment, Capstone fixed prices on sales of copper concentrate
open to quotational period adjustments as at the end December 2015 as well as on sales of copper concentrate
shipped during the first quarter of 2016 in addition to hedging second quarter sales. Strong operating
performance and cost control, combined with certainty around copper revenue, ensured covenant compliance
throughout the year and provided the ability to repay $20 million on the RCF early in the fourth quarter. In
November, a price protection program was set up to further protect sale prices of copper, predominantly over
the first half of 2017 to assure continued debt repayment.

Exploration activities undertaken in 2016 included brownfield exploration at the Cozamin Mine in Mexico and
greenfield exploration, primarily in Chile focused at advancing the Project Providencia, a Sociedad Química y
Minera Chile S.A. (“SQM”) project in which we had an option to earn into. Activities at Providencia included
mapping, soil geochemistry, trenching, geophysics and drilling.

2015

Pinto Valley continued to focus on reliability enhancement related to mill stability at the targeted throughput
level of 52,000 tpd, steadily improving throughout the year to set daily, monthly and quarterly average
throughput records under Capstone ownership in Q4. Work continued throughout the year to implement the
PV2 Pre-Feasibility Study (“PV2 PFS”) expansion plan at the Pinto Valley Mine, which extended the mine life to
2026. Work also continued throughout the year to scope various expansion options for the PV3 PFS.

At the Cozamin Mine, the Mineral Resources and Reserves at the MNFWZ were updated to take into account
exploration and infill drilling completed during 2014 and 2015 in this zone. The Mineral Reserves update
replenished the material mined during 2015 and further extended mine life by approximately three months, at
an average grade well above the average Reserve grade.

At the Minto Mine, the Yukon Water Board issued the Water Use Licence on August 5, 2015, which completed
the final stage of permitting for all of the Mineral Reserves identified in the July 2012 Phase VI Pre-Feasibility
Study. Stripping of the Minto North deposit began immediately, with first ore release in December 2015.

In January 2015 we announced a RCF for up to $500 million. This facility amended our existing senior secured
corporate revolving term facility and allowed us to repay and cancel our senior secured reducing revolving credit
facility. The RCF was established with a four year term and requires certain interest coverage and leverage ratios.

On July 7, 2015, Capstone received approval for the Environmental Impact Assessment (“EIA”), covering the
Santo Domingo project as outlined in the 2014 Feasibility Study. Using a disciplined stage-gate approach for
advancing the project, we determined that, as a result of the negative outlook for iron prices in July 2015 that
we should assess a phased approach, focusing on preparing a Feasibility Study to advance the copper portion of
the project first, with the option to add iron facilities should the outlook for that market improve. As copper
prices continued to deteriorate over the summer, we announced the suspension of most work on the Santo
Domingo project in September 2015 and significantly downsized the Santiago and Diego de Almagro offices in
Chile. The project and completion of the Feasibility Study for the phased approach is on hold with optionality
maintained for future development when conditions improve.

In May 2015 Capstone entered into zero-cost collars for 36,000 tonnes of copper production between then and
September 30, 2015 at a minimum of $2.60 and a maximum of $3.10 per pound of copper.

Exploration activities undertaken in 2015 included brownfield exploration at the Cozamin Mine in Mexico and
greenfield exploration, primarily in Chile at Project Providencia, a SQM project in which we have an option to
earn into. A drilling and trenching program at Providencia focused on soil geochemistry and led to the discovery
of two copper-gold prospects that Capstone is still actively exploring.

3 – DESCRIPTION OF THE BUSINESS

3.1

General

Capstone is a Canadian base metals mining company, focused on copper in politically safe, mining friendly
jurisdictions in the Americas. We have grown through a combination of exploration, development and
acquisition of mineral properties and currently operate three producing copper mines: Pinto Valley in the US,
Cozamin in Mexico and Minto in Canada. We have one development project: Santo Domingo in Chile, as well as
a portfolio of exploration properties.

Our principal product is copper, with zinc, lead, molybdenum, silver and gold produced and sold as by-products.
We are focused on profitability, a growing production profile and operating in a safe and responsible manner.
Our operating and growth strategy has two tiers. The first is to maintain our financial and operating flexibility
through all points of the commodity cycle. The second is to pursue the organic growth potential of our
development project and extension of our existing mines. Capstone’s material mineral properties consist of:

• Pinto Valley Mine, an open-pit, copper mine located in Arizona, US;
• Cozamin Mine, an underground, polymetallic mine located in the State of Zacatecas, Mexico; and
• Minto Mine, an open-pit and underground copper mine located in the Whitehorse Mining District,

Yukon, Canada.

On February 14, 2018, Capstone entered into a definitive share purchase agreement pursuant to which it agreed
to sell its subsidiary which owns the Minto Mine to Pembridge.

Capstone also owns 70% of the large-scale copper-iron Santo Domingo development project in Chile and in
addition to ongoing exploration at the Cozamin Mine aimed at increasing mine life and throughput, we have a
portfolio of early-stage, base metals exploration projects with the potential to add to production over the longer
term. This exploration is focused in mining friendly jurisdictions, with preference given to areas where a team is
in place and the permitting process is well understood. Capstone is actively pursuing additional exploration
opportunities through earn-in and joint venture models.

Principal Products and Operations

Capstone’s principal product is copper (in concentrate as well as copper cathode), with zinc, lead, molybdenum,
silver and gold produced as by-product. The following table summarizes Capstone’s production for 2016 and 2017:

Operating Statistics

Production (contained metal and cathode) 1

Copper (tonnes)
Zinc (tonnes)
Lead (tonnes)
Molybdenum (tonnes)
Silver (000s ounces)
Gold (ounces) 2

Mining - Open Pit

Waste (000s tonnes)
Ore (000s tonnes)
Total (000s tonnes)

Mining – Underground
Ore (000s tonnes)

Milling

Milled (000s tonnes)
Tonnes per day
Copper grade (%)
Zinc grade (%)
Lead grade (%)
Molybdenum grade (%)
Silver grade (g/t)
Gold grade (g/t)

Recoveries

Copper (%)
Zinc (%)
Lead (%)
Silver (%)
Gold (%)

Concentrate Production

Copper (dmt)
Copper (%)
Silver (g/t)
Gold (g/

Zinc (dmt)

Zinc (%)
Lead (dmt)

Lead (%)
Silver (g/t)
Molybdenum (dmt)

Pinto Valley
2017

2016

Cozamin

Minto

2017

2016

2017

2016

57,331
-
-
32
316
3,687

26,165
20,605
46,770

68,850
-
-
83
377
1,944

19,507
23,435
42,942

16,732
4,232
50
-
1,000
-

-
-
-

14,307
4,193
130
-
1,001
-

16,332
-
-
-
171
25,205

31,426
-
-
-
355
39,506

-
-
-

7,890
941
8,831

5,585
1,506
7,091

912

996

328

246

19,655
53,849
0.323
-
-
0.01
*
*

89.2
-
-
*
*

196,583
28.2
-
-
-
-
-
-
-
64

20,565
56,189
0.373
-
-
0.01
*
*

87.6
-
-
*
*

234,702
28.5
-
-
-
-
-
-
-
174

912
2,499

1.91
0.71
0.07
-
43.4
-

96.1
65.5
8.0
78.7
-

61,473
27.2
502
-
8,919
47.5
81
61.7
2,996
-

1,001
2,736

1.51
0.66
0.07
-
43.0
-

94.8
63.0
18.7
72.4
-

53,744
26.6
566
-
8,866
47.3
222
58.4
3,155
-

1,439
3,943

1.37
-
-
-
4.8
0.79

82.6
-
-
77.6
59.3

37,372
43.7
142
18.0
-
-
-
-
-
-

1,491
4,074

2.21
-
-
-
8.0
1.23

95.2
-
-
87.8
67.0

70,348
44.7
157
17.5
-
-
-
-
-
-

1 Adjustments based on final settlements will be made in future periods.
2 Pinto Valley gold production reaches payable levels from time to time. Any payable gold production will be reported in the period revenue is received.

At Minto, final gold production is not available since assaying is conducted off-site, but is estimated above.

3 Grade and recoveries were estimated based on concentrate production.
* Silver and gold have not been estimated in the Pinto Valley resource model. Only recovered silver and payable gold is reported for this mine.

During the year ended December 31, 2017, we generated gross revenue of $595.5 million primarily from
the sale of 87,917 tonnes of payable copper.

The following table summarizes the gross sales revenue for 2017 and 2016:

Gross Revenue by Metal

20171

20161

$ millions
554.6
10.6
0.2
0.1
17.5
12.6
595.5

Copper
Zinc
Lead
Molybdenum
Silver2
Gold2
Total3,4
1 The current and subsequent periods may include final settlement quantity and/or price adjustments from prior shipments.
2 Gold and silver revenue include non-cash amounts for deferred revenue amortization related to the precious metal stream sales.
3 Treatment and selling costs of $13.9 million (Q4 2016 – $18.5 million) are deducted from gross revenue of $166.8 million (Q4 2016 - $181.5 million)
for revenue of $152.8 million for the fourth quarter of 2017 (Q4 2016 - $163.0 million) as per the Consolidated Statements of Income (loss)
4 Treatment and selling costs of $53.6 million (2016 - $67.8 million) are deducted from gross revenue of $595.5 million (2016 - $597.2 million) for
revenue of $541.9 million in 2017 (2016 - $529.4 million) as per the Consolidated Statements of Income (loss)

$ millions
551.9
7.1
0.2
1.2
14.3
22.5
597.2

%
93.1
1.8
0.0
0.0
2.9
2.1
100

%
92.4
1.2
0.0
0.2
2.4
3.8
100

Pinto Valley production is primarily copper concentrate with a small amount of copper cathode produced from
run-of-mine leaching and SX/EW production and molybdenum as a by-product. Historically the mine has also
recovered silver as a by-product, though it is not estimated in the block model and is not included in the Mineral
Resource or Mineral Reserve estimate. In 2017, approximately 30% of the copper concentrate production was
delivered to domestic smelting facilities with the balance being exported to Asia. The copper cathode is sold
domestically through a competitive tendering process. A modular truck transport system is used to haul the
concentrate from the Pinto Valley Mine to domestic customers and to the port of Guaymas for export.

Cozamin concentrate production is primarily copper with lesser amounts of by-product zinc and lead concentrate
and significant by-product silver. The copper concentrate is delivered under an agreement to a major trading
company in Manzanillo, Mexico. Depending on market conditions the copper concentrate is sold under annual
or multi-year agreement. Similarly, zinc and lead concentrate are sold under annual tenders and delivered to
Manzanillo, as and when produced.

Minto produces a high-grade copper concentrate which is sold by open annual tender. Due to its location and
climate, logistics for the movement of concentrate are seasonal. Shipments by truck from the mine to the port
of Skagway, Alaska, are typically undertaken between January and March and then between July and October.
In the intervening periods, concentrate production is stored in a protective environment at site.

Precious Metals Streams

In 2008, we sold all our gold and silver production from Minto over the life of mine to Silverstone Resources
(“Silverstone”) in consideration for an upfront payment of $37.5M and a further payment of the lesser of $300
per ounce of gold and $3.90 per ounce of silver (subject to a 1% inflationary adjustment after three years and
each year thereafter) and the prevailing market price for each ounce delivered. Silverstone was acquired by Silver
Wheaton Corp. (“Silver Wheaton”), now named Wheaton Precious Metals Corp. (“WPM”), in 2009. If production
from the Minto exceeds 30,000 ounces of gold per year, WPM will be entitled to purchase only 50% of the
amount in excess of that threshold. We have recorded the proceeds received as deferred revenue and recognize
this amount as an adjustment to revenue as the ounces are delivered.

On October 13, 2017, 6.8 million common shares valued at $7.5 million were issued to WPM to modify the Minto
precious metal purchase agreement such that Capstone receives increased gold revenues if copper prices are
lower than $2.50/pound.

Under an April 2007 agreement we sold the Cozamin Mine’s silver production over a 10-year period to a company
subsequently acquired by Silver Wheaton. This stream expired on April 4, 2017 after which the full value of the
silver produced at Cozamin accrues to the benefit of Capstone.

Competitive Conditions

Our business is to produce and sell copper. Prices are determined by world markets over which we have no
influence or control. Our competitive position is primarily determined by our costs compared to other producers
throughout the world and our ability to maintain our financial integrity through metal price cycles. Costs are
governed to a large extent by the grade, nature and location of our Mineral Reserves as well as by input costs
and operating and management skills. In contrast with diversified mining companies, we focus on copper
production, development and exploration, and are therefore subject to unique competitive advantages and
disadvantages related to the price of copper and to a lesser extent, the price of our metal by-products. If copper
prices increase, we will be in a relatively stronger competitive position than diversified mining companies that
produce, develop and explore for other minerals in addition to copper. Conversely, if copper prices decrease, we
will be at a competitive disadvantage to diversified mining companies.

The mining industry is competitive, particularly in the acquisition of additional Mineral Reserves and Resources
in all phases of operation, and we compete with many companies possessing similar or greater financial and
technical resources.

Metal Prices

The Company’s financial flexibility is highly dependent on the prevailing prices for the commodities it produces.
While the Company’s strategy is to remain unhedged, circumstances may arise where increased certainty of cash
flows is considered more important to long term value creation than providing investors short term exposure to
the volatility of metal prices. In these circumstances, the Company may elect to fix prices within a contractual
quotational period or to lock in future prices through the variety of financial derivative instruments available.

Changes to Contracts

A portion of our Pinto Valley Mine employees are members of six unions and are governed by one collective
agreement. The collective agreement expired in June 2014 and negotiations have been ongoing since that time.

Environmental Protection

Capstone’s operations (Pinto Valley, Cozamin and Minto) and development project (Santo Domingo) are subject
to the national and local laws and regulations in respect of the construction, operating standards and the
eventual abandonment and restoration costs applicable to each location. Since the Cozamin Mine and certain
areas of the Minto Mine are relatively small tonnage, high-grade operations, the overall financial impact of the
environmental protection requirements is minor relative to our overall financial performance. Each operation is
subject to a reclamation and closure cost obligations review at year-end to assess the abandonment and
restoration cost for the operation at that point. Any changes from the previous period are reflected in the
balance sheet and could flow through the earnings statement. While the financial obligations will increase as
disturbance increases, given the relatively modest amounts involved, such impacts are likely to be relatively
minor from a capital and earnings perspective in the near term. Pinto Valley Mine has a long history of operations
in an established mining district of Arizona. As such, there are significant reclamation liabilities. These were
reviewed with regulators in 2013 at the time of the acquisition by Capstone and were also the subject of a
detailed third-party assessment commissioned by the Company in 2015 and have been updated to reflect the
current mine life.

Capstone received approval of the Environmental Impact Assessment for the Santo Domingo project in 2015,
which includes approval for the mine, related infrastructure, copper and iron processing facilities, the
development of a greenfield port and iron concentrate and seawater supply pipelines.

In May 2016, Pinto Valley submitted a formal Mine Plan of Operations in support of the PV3 mine plan to the US
Forest Service, marking the first step of the permitting process, required under the National Environmental Policy
Act (“NEPA”). The NEPA process was initiated in January 2017 after publishing a Notice of Intent to conduct an
Environmental Impact Statement (“EIS”). Several agency workshops and facility tours have been held in addition
to public scoping and baseline data being exchanged. The Forest Service is currently preparing resource reports
and narrative for the draft EIS, and the project is on track for a Record of Decision in 2019.

Our assets are in mature and stable mining jurisdictions. The environmental protection requirements are not
expected to be a significant impediment to carrying on our business or costs.

Employees

As of December 31, 2017, Capstone had 1,209 employees and 646 contractors.

Our workforce at Minto and Cozamin is not unionized. There are approximately 393 hourly employees at the
Pinto Valley Mine a portion of whom are members of six unions, and whom are all governed by one collective
bargaining agreement negotiated by the United Steelworkers Union. The collective bargaining agreement at the
Pinto Valley Mine expired in June 2014 and negotiations have been ongoing since that time.

Foreign Operations

Two of Capstone’s material properties are in foreign jurisdictions, being the Pinto Valley Mine (US), and the
Cozamin Mine (Mexico). We also have interests in exploration projects.

Foreign operations accounted for approximately 79% of our 2017 revenue and represented approximately 70%
of our assets as at December 31, 2017.

Reorganization

In 2015, Capstone restructured its Mexican group of companies to enhance Capstone’s ability to operate
effectively and efficiently. The restructuring formed new labour service companies, namely, San Roberto HR
Company, S.A. de C.V., Geoexploraciones La Bufa, S.A. de C.V. and Servicios de Vigilancia San Roberto, and
transferred a 99% interest in two existing service companies (Capstone Mining S.A. de C.V. and Capstone Services
S.A. de C.V.) from Capstone Gold S.A. de C.V. to San Roberto HR Company, S.A. Capstone Mexico Mining Corp.
maintains its 1% interest in the two existing services companies and has a nominal interest in the new service
companies.

Social and Environmental Policies

Capstone places great emphasis on providing a safe and secure working environment for all our employees and
contractors as we recognize the importance of operating in a sustainable manner.

There was a fatality at the Cozamin mine in October 2016. A miner was struck by a piece of equipment while
working underground. As part of company-wide safety program and response to this incident, we shared
investigation results with our other mine sites and enhanced how we measure health and safety performance
by adding additional leading indicators to our monitoring program. There was a subsequent fatality at the
Cozamin mine in March 2018. An electrical technician was injured while working on an underground voltage
regulator. He was transported immediately to a hospital where he later passed away.

Our Values and Ethics – Code of Conduct (“Code of Conduct”) is our Company policy that sets out the standards
which guide the conduct of our business and the behaviour of our employees, officers and our Board of Directors.
The Code of Conduct is reviewed annually by the Board. All employees, officers and directors are required to
annually certify their understanding of and adherence to the Code of Conduct. Our Code of Conduct, amongst
other things, sets out standards in areas relating to:

• Promotion and provision of a work environment in which individuals are treated with respect, provided

with equal opportunity and is free of all forms of discrimination;

• Zero tolerance policy relating to use of prohibited substances;
• Ethical business conduct and legal compliance, including without limitation prohibition against

accepting or offering bribes;

• Commitment to health and safety in our business operations, and the identification, elimination or

control of workplace hazards;

• Commitment to maintain and improve sound environmental practices in all our activities.

Capstone’s commitment to sustainable performance is defined in our Integrated Environment, Health, Safety
and Sustainability (“EHS&S”) Policy. The Technical, Health, Environmental, Safety and Sustainability (“THES&S”)
Committee of the Board has oversight of the EHS&S Policy. Annual corporate objectives for sustainable
performance and improvement are approved by the Board and are linked to the objectives and compensation
for employees at all levels of the organization. We measure our performance against these objectives. The Chief
Operating Officer is accountable for ensuring our operations comply with sustainability requirements.

Capstone publishes an annual sustainability report, based on version G4 of the Global Reporting Initiative
Guidelines, to communicate performance in health and safety, environmental, and social aspects that are most
material to the business and Capstone’s stakeholders. Capstone is implementing internal standards based on
industry best practice to ensure continual improvement in key areas including health and safety, tailings
management, energy management and stakeholder engagement.

3.2

Material Mineral Properties

Pinto Valley Mine (US)

Capstone, through Pinto Valley Mining Corp., owns 100% of the Pinto Valley Mine, located in the Globe-Miami
district in Gila County, Arizona, approximately 130 km east of Phoenix in the southern United States. Pinto
Valley’s primary product is copper concentrate and we also produce copper cathode and by-product
molybdenum and silver.

The Pinto Valley Mine is the subject of a report titled “Pinto Valley Mine Life Extension – Phase 3 (PV3) Pre-
Feasibility Study” dated February 23, 2016 with an effective date of January 1, 2016. This technical report was
compiled by Capstone Mining Corp, and authored by Gregg Bush, P.Eng., Capstone Mining Corp.; Tony J. Freiman,
PE, Amec Foster Wheeler Environment & Infrastructure, Inc.; Corolla Hoag, CPG, SME-RM, SRK Consulting (U.S.),
Inc.; Garth Kirkham, P.Geo., Kirkham Geosystems Ltd.; Kenneth W. Major, P.Eng., KWM Consulting Inc.; and John
Marek, PE, SME-RM, Independent Mining Consultants, Inc., each a Qualified Person as defined by NI 43-101. The
description of the Pinto Valley Mine in this document is based on assumptions, qualifications and procedures
which are set out in the PV3 PFS. Reference should be made to the full text of this report, which is available in
its entirety on SEDAR at www.sedar.com under Capstone’s profile. The scientific and technical information below
which is not contained in these reports has been reviewed and approved by Claydon Craig, P.Eng.,
Superintendent of Mine Technical Services at our Pinto Valley mine and a Qualified Person under NI 43-101.

Project Description and Location

The property is located at the west end of the Globe-Miami mining district, approximately 130 km east of Phoenix
and 10 km west of the town of Miami, in Gila County, Arizona, at 33°23’32”N and 100°58’15”W. The Pinto Valley
property consists of approximately 5,130 ha of contiguous claims. These comprise 69 patented lode mining
claims, 53 patented mill sites, 451 unpatented lode mining claims and mill sites, and seven parcels of fee (private)
land.

Capstone acquired the Pinto Valley Mine and associated railroad operations on October 11, 2013 for a cost of
US$650M. A 2% NSR applies to 26 of the unpatented mining claims that are not in the current mine plan.

Pinto Valley is an open pit mine producing copper and molybdenum concentrates. The administration, ore
processing, tailings, waste rock storage, and maintenance facilities are located on the property, in close proximity
to the pit. The processing facility consists of three crushing stages, ball mills, copper flotation stages, a
molybdenum flotation circuit, and associated thickeners for concentrates and tailings. Two previous tailings
dams have been rehabilitated and two tailings dams are currently operational (Figure 1). Pinto Valley also has an
SX/EW facility that processes pregnant leach solution from low copper grade material that is leached. The SX/EW
accounts for less than 5% of production.

Environmental liabilities at the Pinto Valley Mine relate to the heap leach facility, tailings impoundments and
associated engineered containment infrastructure, waste rock dumps, surface water containment structures, as
well as the removal of all operational infrastructures. A closure strategy and a mined land reclamation plan
detailing methods and costs associated with restoring the site to an acceptable environmental standard were
most recently approved in 2017 and 2016 respectively. Surety Bonds totaling $78.8M have been filed with the
Arizona Department of Environmental Quality (“ADEQ”) and the Arizona State Mine Inspector in accordance with
the mandate of these agencies and associated regulations and policies. These financial security amounts
represent the estimated reclamation cost for the mining operations at the end of the currently permitted mine
plan (2026) on an undiscounted basis. Amounts are reviewed with each significant change in the mine plan or
closure measures.

The Pinto Valley Mine requires 16 permits granted from various state and federal agencies; operations of the
railroad requires five permits mainly from the State of Arizona. Pinto Valley Mine has all the necessary permits
to conduct mining activities with the exception of a consolidation/renewal of existing U.S. Forest Service (“USFS”)
land use authorizations (Plan of Operations). Pinto Valley Mine is presently working with the USFS to develop an
interim and a long-term renewal of its land use authorizations. An interim plan for existing disturbances to forest
land will increase the reclamation bond by approximately $3.35M. For further details on the increase to the
reclamation bond, please refer to page 62. The consolidated Plan of Operation was submitted to the USFS and
deemed complete in 2016. Once approved, the Plan of Operations includes tailings storage on USFS land to
accommodate the PV3 mine plan. As a result, the bonding requirement will likely increase by an estimated $11M.

In conjunction with the expanded PV3 mine footprint, amendments to the current Aquifer Protection Permit will
be needed to reflect the expanded waste rock configuration.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Pinto Valley Mine is accessed from US Highway 60 (“US 60”), then 5 km on paved Forest Road (“FR”) 287.
The site can also be accessed from Tucson, Arizona (160 km to the south) by travelling north on State Route
(“SR”) 77. The mine is 10 km west of Miami, a town of approximately 1,800 residents, and 18 km west of Globe,
the County seat, with approximately 7,500 residents. Because of a long-standing mining tradition in the area,
many local services are in place to supply the mine's needs, with the remaining services coming from the greater
Phoenix area. Medical facilities are available in Miami. Fire, police, public works, transportation, and recreational
facilities are in place and fully functioning.

Pinto Valley Mine’s moderate, semi-arid regional climate allows for year-round operation. The average annual
precipitation is 480 mm. May and June are typically the driest months of the year and may result in local drought
conditions.

Pinto Valley Mine has sufficient surface rights for mining operations, mineral processing facilities and tailings
storage to mine the PV2 pushbacks (2026 mine life). The expanded PV3 PFS mine plan will require permit
amendments. Off-site infrastructure includes the incoming electric power generation and transmission capacity
provided by the Salt River Project, the local highway system provided by state and federal governments, the local
transportation services provided by various contractors, and the telephone and data communications systems.
Tailings are deposited in existing permitted tailings storage facilities. Tailings Dam No. 4 is the primary storage
facility, with Tailings Dam No. 3 used during maintenance activities at Tailings Dam No. 4 (Figure 1). There is an

adequate source of water with potable water coming from four groundwater wells and service water from a
Peak Well system.

and

Basin

transition

The Pinto Valley Mine is located
in east-central Arizona in the
zone
structural
between the Sonoran section of
the
Range
physiographic province to the
the
south-southwest,
Colorado Plateau to the north.
The terrain surrounding the
mine is generally mountainous,
dominated by sharp landforms
and prolific exposures of a
variety of bedrock formations
present in the region. The Pinto
Valley Mine is entirely within
the Pinto Creek watershed,
where local elevations range
from about 900 m to 1,500 m
above mean sea level.

The Pinto Valley Mine is near
the boundary of areas mapped
as the Interior Chaparral biotic
community and the Arizona
Upland subdivision of Sonoran
Desert scrub biotic community,
with plant species on
the
property characteristic of each
group. Most of the animal
species observed have wide
environmental tolerances and
are present
in both plant
communities on the property.

History

FIGURE 1: PINTO VALLEY INFRASTRUCTURE AND LOCATION OF OPEN PIT

The Globe-Miami district is one of the oldest and most productive mining districts in the United States, with its
first recorded production occurring in 1878. Since that time, more than 15 billion pounds of copper have been
produced in the Globe-Miami mining district. Prior to the construction of Pinto Valley Mine, a chalcocite-enriched
zone of the deposit was mined from 1943 until 1953 as the Castle Dome underground mine.

The Pinto Valley open pit mine and concentrator went into production in 1974. The SX/EW plant began
processing PLS from the leach dumps in 1981. In February 1998, mining and milling operations were suspended
and environmental permits were maintained during the suspension of operations, as were the water and
electrical systems. SX/EW facilities and cathode copper production continued during the suspension of mining
and milling operations.

The mine has had two restarts since the 1998 shutdown. The mine resumed sulphide operations in mid-2007 for
18 months to January 2009 and then went into care and maintenance with only leaching operations continuing.

The second restart began in December 2012 and included extensive rehabilitation of the site and purchase of a
new mining fleet.

Ownership of Pinto Valley has changed numerous times since its inception. At the time of construction and
commissioning, it was owned by Cities Service Company, who had recently merged with Tennessee Corporation.
Occidental Petroleum Corporation acquired Cities Service Company in late 1982 and sold the Miami operations
to Newmont Mining Corporation in 1983. At this time, the company's name was changed to Pinto Valley Copper
Corporation. In 1986, Newmont merged the Pinto Valley Copper assets into Magma Copper Company holdings,
and Pinto Valley Copper became the Pinto Valley Mining Division of Magma Copper Company. In 1995, Broken
Hill Proprietary Company Limited purchased Magma Copper Company. With the merger of Broken Hill
Proprietary Company Limited and Billiton in 2001, the Pinto Valley Mining Division became Pinto Valley
Operations of BHP Copper Inc. (“BHP Copper”). In 2013, Capstone purchased Pinto Valley Operations, now
referred to as Pinto Valley Mine or Pinto Valley.

The pre-2006 Pinto Valley drilling programs comprised a combination of core, rotary, and churn drillholes. Drilling
documentation was limited to BHP Copper internal reports, and there were no listings for vintage data, methods
used, or pre-2010 drilling procedures. Churn holes defined much of the early Castle Dome mineralization, which
has been mined out. Post-Castle Dome holes were drilled on an original spacing of east-west and north-south.
Later, drilling was done to infill the original grid spacing in some areas. Drilling that has occurred since the 1986
block model includes 10 core holes and 3 reverse circulation (“RC”) rotary holes drilled in 1992. From the
beginning of 1996 to April 1997, 67 RC exploration and infill holes were drilled: 48 RC holes drilled in 1996, and
19 RC holes drilled in 1997. The 1997 holes were drilled in the interior pit and through the Gold Gulch and
Continental faults. Seven of the exploration holes were drilled east of the existing pit and laid the ground work
for future plans of an east pit expansion. All drillhole collar locations were surveyed. The majority of the drillholes
are vertical and, therefore, do not have downhole surveys. However, a majority of the inclined holes do have
downhole surveys. From 2006 through 2008, there were drilling campaigns with various purposes, including
delineation, exploration, geotechnical, and resource classification upgrade drilling. These include 39 drillholes in
2007 and 62 drillholes in 2008. Diamond drillhole programs in 2010 focused on exploration, while those in 2011
and 2012 focused on infill drilling for resource classification upgrade in support of restarting operations. Ten
holes were drilled in 2010, 40 holes were drilled in 2011, and 64 holes were drilled in 2012. In 2013 BHP Copper
drilled 12 in-pit infill diamond drillholes totaling 2,853 m, to close the drillhole spacing grid and 64 in-pit RC
drillholes totaling 3,380 m to help characterize the mineralization directly beneath working levels of the mine.

All drillhole logging data, including collar, survey, assay, lithology, alteration, and mineralization data were
entered into an acQuire™ structured-query-language (“SQL”) database system. All sample data were tagged and
tracked using bar codes, which linked all assay information provided by the laboratory to the database, including
the QAQC. The system was secured by BHP Copper using stringent protocols and procedures. Deviations and
discrepancies from sample dispatch reports were reported and investigated.

A number of different companies and laboratories provided assay services to Pinto Valley over the years. Details
of sampling and assaying procedures used during the earlier stages of operation are not readily available.
Procedures used by outside labs that ran assays for some of the later drilling campaigns, such as those performed
by Mountain States for the RC holes and Chemex for the AD holes, are also not readily available. The analytical
procedures were in line with industry standards for total copper analyses, but BHP Copper-specific procedures
were used to determine acid soluble copper concentrations. These involved digestion with 10% sulphuric acid,
followed by placement in a hot bath at 40°C, and read after 40 minutes.

Independent audits of the Pinto Valley assays were conducted in 1992 and 2000. Results indicated the assay
values in the Pinto Valley database have been reliably entered and that total copper assays in the Pinto Valley
database were reproducible and could be considered representative within normally-accepted error limits.

As part of the start-up Feasibility Study done in 2006, a QAQC program was conducted on 101 randomly selected
drillhole assay interval pulp samples and 15 randomly selected drill core assay intervals. Samples were sent to
Skyline Assayers and Laboratories Inc. (“Skyline Labs”) in Tucson, Arizona for total copper and acid-soluble copper
analyses. Skyline Labs was instructed to analyse the samples for acid soluble copper using BHP Copper lab
procedures. Certified reference material standards from the National Institute of Standards and Technology
(“NIST”) were inserted in sequential order for analysis preceding the 15th pulp sample in the analytical run. The
results indicated that historical quality control measures used in the Pinto Valley Mine analytical laboratory were
variable. At times they were extremely good, but at others they were less so, although still acceptable.

BHP Copper undertook surface mapping to provide additional data throughout the identification and selection
phases of the PV2 mine planning project. Two drilling campaigns were conducted on separate occasions to
improve both the geotechnical and geometallurgical knowledge of the deposit. The surface mapping for
geotechnical information focused primarily on the bedding planes, major structures, and overall geological
strength index. Various ore-types were confirmed using surface mapping and by reviewing core logs. Alteration
zones and ore-types were identified in the pit wall and correlated against core samples taken in previous drill
campaigns. Descriptions from the core logs were used to plot the correlation between rock type and alteration
zone. The most important ore types were narrowed down to Ruin granite, quartz monzonite, and diabase. These
ore types are based on relative abundance, gangue mineralogy, copper grade, alteration, and the potential
impact on overall production (recovery, throughput, and consumption of reagents/energy). Capstone relied
extensively on the BHP Copper’s PV2 project data to complete the Capstone PV2 PFS. The data provided by BHP
Copper was reviewed by the QPs in the Capstone PV2 PFS to ensure it was applicable and sufficiently detailed to
form the basis of assumptions in the study. Additional work was conducted where data gaps were found,
including field mapping for pit wall geotechnical analysis, geotechnical drilling for tailings impoundment design
and metallurgical testing to validate previous test results.

Geological Setting

The Globe-Miami mining district of central Arizona includes porphyry copper-molybdenum (“Cu-Mo”) deposits
associated with Paleocene Epoch granodiorite to granite porphyry stocks (65-59 million years ago). Vein deposits
and possible exotic copper deposits are also found within the district.

Precambrian basement rocks throughout southern Arizona and New Mexico largely consist of early Proterozoic
Pinal Schist (~1,700 million years old) intruded by granites correlative with 1,450 Ma two-mica granite batholiths.
At the Pinto Valley Mine this is represented by the Ruin granite (also referred to as the Lost Gulch quartz
monzonite) that hosts the Cu-Mo mineralization. The Late Proterozoic-aged (~1,420-1,150 million years old)
Apache group, comprising conglomerate, limestone, quartzite, and minor basalt units overlying the basement
rocks, was intruded by 1,150 million years old Apache diabase sills of varying thicknesses. These diabase units
are represented at the Pinto Valley Mine as thin dikes and sills, and commonly contain higher copper
concentrations than the surrounding Ruin granite. During the Paleozoic Era, various limestone units were
deposited representing the shallow, marine environment present over much of the southwestern US at the time.

Subduction of the Farallon tectonic plate (80-50 million years ago) off the west coast of the southwestern US
initiated arc magmatism responsible for generating the Cu-Mo-bearing intrusions in the region. Stocks emanating
from the Schultze granite, the source of the mineral-bearing fluids to the Globe-Miami district, were emplaced
at the Pinto Valley Mine between 60-59 million years ago.

Regional Tertiary-Era Basin and Range extension and faulting following cessation of subduction facilitated the
dismemberment, tilting, and exposure of the Cu-Mo deposits. They were preserved through deposition of the
Whitetail conglomerate (Oligocene Epoch) and the Apache Leap tuff (Miocene Epoch). Further extension in the
Pliocene Epoch deposited the Gila conglomerate into basins.

The Pinto Valley Mine deposit is bound by faults that vary in age from the Pre-Cambrian to the Tertiary. These
have controlled the emplacement of the Ruin granite, stocks of the Cu-Mo-bearing Schultze Granite, and
subsequent post-mineralization Basin-and-Range extensional faulting.

Exploration

Capstone is not currently exploring the Pinto Valley Property due to the large resource already identified, of
which 33% are Reserves, resulting in a mine life to 2039. Additional resources could potentially be brought into
the Reserves in the future through operational improvements, cost reductions, and/or increased metals prices.

Mineralization

The primary sulphide minerals encountered at the Pinto Valley Mine are chiefly pyrite and chalcopyrite with
minor amounts of molybdenite. Gold and silver are recovered as by-products. Sphalerite and galena occur locally
in very small amounts. Alteration of silicate minerals of the host rocks to other groups of minerals due to the
presence of hydrothermal fluids associated with the Cu-Mo-bearing intrusive rocks include potassic, argillic,
sericitic, and propylitic alteration suites.

Sulphide minerals generally occur in veins and microfractures and less abundantly as disseminated grains,
predominantly in biotite sites. The ore zone grades outward into a pyritic zone with higher total sulphide content.
Molybdenum distribution generally reflects copper distribution, with higher molybdenum values usually found
in the higher-grade copper zones. Oxide mineralization and a supergene enrichment blanket was developed at
the Pinto Valley Mine, but these areas have since been mined.

Sulphide deposition at Pinto Valley is controlled to some extent by the host rock. The sulphide content decreases
in Precambrian aplite intrusions. Aplite usually contains less than 0.25% copper, whereas adjacent Quartz
Monzonite may have as much as 0.6% copper. The deficiency of copper in aplite is probably due to the absence
of biotite, which makes up about 7% of Quartz Monzonite. Disseminated chalcopyrite shows an affinity for
biotite, where it is disseminated through the biotite or partially replacing it. Additional chalcopyrite is also
present in veins cutting both rock types.

Drilling

Recent drilling incorporated into the August 2017 resource model consists of ten geotechnical holes in 2014, 43
infill RC holes and three geotechnical holes in 2015, four infill RC holes in 2016, and ten infill RC holes in 2017.
An additional seven RC holes and one RC/core hole were completed in late 2017 and will be included in the next
resource update.

Sampling and Analysis

Pinto Valley uses Reverse Circulation (RC) and diamond drillcore samples for Mineral Resources estimates. The
majority of drilling is vertical with spacing commonly between 200ft and 400ft. Capstone employees and
contractors are responsible for all on-site sampling of drill core and drill cuttings. Typical sample intervals are
10’. Drillcore samples are split by core saw and placed in marked bags and shipped to accredited external
laboratories for sample preparation and analysis for copper, acid soluble copper, and molybdenum. A total of
89,767 RC and diamond drillhole samples were used for the August 2017 Mineral Resources estimate.

Sample quality of drillhole samples is monitored through regular insertion of reference material standards,
blanks, and duplicate samples. Certified reference material (CRM) standards are purchased commercially, and in
November 2017 CRM standards were also created from PV material. QAQC procedures include real-time
monitoring of quality control data, thresholds for sample failures and sample batch reanalysis, and regular
monthly reporting. QAQC results demonstrate that drillhole assay values are accurate, repeatable, and free from
cross-contamination.

Security of Samples

Only employees and contractors are permitted in the core logging facility when unsampled drillcore is ready to
be cut and prepped RC cuttings and core are awaiting transport. A transmittal form which identifies the batch
number and the corresponding sample number series is emailed to the external laboratory. The samples are
delivered to the external laboratory by a laboratory representative transporting from site to laboratory.

Core and chip samples are stored on-site at a dedicated core storage facility.

Mineral Resource and Mineral Reserve Estimates

The August 2017 Mineral Resource estimate for Pinto Valley mineralization was completed by Pinto Valley’s
Superintendent of Mine Technical Services and Qualified Person, Claydon Craig, P.Eng. The Mineral Resources
were estimated using accepted industry standards conforming to NI 43-101 requirements. Surfaces and solids
were created by Pinto Valley Mine staff for the lithology domains, grade shells, and major faults. Drillhole
samples were composited downhole to 13 m (45 feet) length to match the selective mining unit (“SMU”) bench
height and to reduce the influence of typically narrow, very high-grade samples. The deposit was divided into
seven structural domains to reflect variations in orientation of mineralized grade trends. Within each structural
domain, grade shells were generated at 0.1% total copper (“TCu”) and 0.3% TCu thresholds using Leapfrog
software. The weakly-mineralized granodiorite was interpolated separately from the grade shells. All domains
were considered as hard boundaries during estimation. Ordinary Kriging was applied for most domains, and
Inverse Distance Squared was used for the TCu estimation in granodiorite. To control the influence of high-grade
TCu samples when estimating block grades, a combination of top-cutting and outlier search restriction was
applied, with the resulting contained copper being within 1% of an uncapped model. For molybdenum (“Mo”),
samples grading over 0.04% Mo were projected no further than 45.7 m. The average bulk dry density for ore-
grade mineralized rock, primarily Ruin Granite, is 2.51 t/m3 (12.75 ft3/ton). Although the in-situ bulk dry densities
for all Pinto Valley Mine rock types range between 2.46 t/m3 (13.0 ft3/ton) for Whitetail conglomerate to 2.64
t/m3 (12.1 ft3/ton) for Pinal schist, 12.75 ft3/ton was used. Grade variability is low, with nugget effects of less
than 25% for both copper and molybdenum. The block model grades for copper and molybdenum were
estimated using ordinary kriging into blocks that were 30 m Easting × 30 m Northing × 14 m Elevation (100 ft ×
100 ft × 45 ft) in size. During grade estimation, search orientations were designed to follow the general trend of
the mineralization in each of the structural domains. The estimation plan for most domains involved a single
search pass using a minimum of 2 composites and a maximum of 16 composites, with a maximum of 4 from any
single drillhole. Confidence classification was adjusted relative to the 2015 resource model, to reflect improved
geological understanding of structurally-controlled grade trends. Although this resulted in 3.5% of combined
Measured + Indicated resource tonnage converting to Inferred, these changes fell largely outside of the Reserve
pit design. Therefore, the impact on combined Proven + Probable Reserves was only a 0.2% loss in ore tonnes.

The resource model update was largely completed by April 2017. In August 2017, the molybdenum grade
estimate was updated to reflect a correction of assay records from drillholes drilled prior to 2000. For these
holes, MoS2 values had been considered as Mo. The updated resource estimate reduced average Mo grade by
30%.

The reported Mineral Resources in Table 1 are based on the August 2017 Mineral Resources estimate completed
by Claydon Craig, P.Eng., and reflect the mined topographic surface as at December 31, 2017. Jeremy Vincent,
P.Geo., Manager of Production and Development Geology at Capstone and a Qualified Person as defined by NI
43-101, oversaw the production depletion of the Mineral Resources model. Mineral Resources are reported
above a 0.17% Cu cut-off grade within a reasonable economic prospects pit that use the following parameters:

US$ 3.30/lb Cu, US$ 10.00/lb Mo, 88% Cu recovery, 50% Mo recovery, US$ 1.50/ton mining costs, $1.50/ton G&A
costs, $5.00/ton milling costs, and a pit slope angle of 45°.

TABLE 1: PINTO VALLEY MINERAL RESOURCES AT 0.17% TCU CUTOFF, AT DECEMBER 31, 2017 (METRIC UNITS)

Tonnes (millions)
574
771
1,345
166

Classification
Measured (M)
Indicated (I)
Total M & I
Inferred
NOTE: Claydon Craig, P.Eng., Superintendent of Mine Technical Services at Pinto Valley, is the Qualified Person responsible for the Pinto Valley Mineral
Resources estimate. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. Mineral Resources are presented
inclusive of Mineral Reserves. Mineral Resources are reported as at December 31, 2017 above a 0.17% TCu cut-off grade. The economic assumptions for
the reasonable prospects pit include: US$ 3.30/lb Cu, US$ 10.00/lb Mo, 88% Cu recovery, 50% Mo recovery, US$ 1.50/ton mining costs, US$ 1.50/ton G&A
costs, US$ 5.00/ton milling costs, and a pit slope of 45°. Totals may not tally due to rounding.

Contained Mo (Mt)
0.034
0.039
0.074
0.009

Contained Cu (Mt)
1.90
2.10
4.00
0.39

%Mo
0.006
0.005
0.005
0.005

%Cu
0.33
0.27
0.30
0.23

The Mineral Reserve pit design was developed by John Marek, PE, President of Independent Mining Consultants,
Inc. (“IMC”). Claydon Craig, P.Eng., estimated Mineral Reserves in accordance with industry guidelines by
tabulating the contained measured and indicated (Proven and Probable) material inside of the designed pit. The
schedule utilizes a variable cut-off grade to the mill that fluctuates between 0.17 to 0.18 %TCu, resulting in a
low-grade stockpile that is processed at the end of the mine life. Stockpile material is included in the Reserve.
The final pit design and the Mineral Reserve do not include the low-grade leach dump material in the economic
analysis or Mineral Reserve. The Reserves design was completed at $2.75/lb copper and $12.50/lb molybdenum.
The effective date of the Mineral Reserve is January 1, 2018. Claydon Craig, P.Eng., oversaw the production
depletion of the Mineral Reserves model. To simplify the Mineral Reserve reporting process, the cut-off grade
was changed from the variable 0.17-0.18% Cu to 0.175% Cu. This cut-off closely approximates the reported
Mineral Reserves and will be used going forward.

TABLE 2: PINTO VALLEY MINERALS RESERVES, REMAINING AT DECEMBER 31, 2017 (METRIC UNITS)

Classification
Proven
Probable
Total P+P
NOTE: Claydon Craig, P.Eng., Superintendent of Mine Technical Services at Pinto Valley is the Qualified Person responsible for the Pinto Valley Mineral
Reserves estimate. Economic inputs to the block model were USD$2.75/lb Cu and USD$12.50 Moly. Mineral Reserves are reported above 0.175% Cu cut-
off grade. Summation errors due to rounding.

Contained Mo (Mt)
0.017
0.009
0.026

Contained Cu (Mt)
0.88
0.46
1.34

Tonnes (millions)
267
163
430

%Mo
0.006
0.006
0.006

%Cu
0.33
0.28
0.31

Mining Operations

Run-of-mine ore is crushed through the primary crusher and conveyed to the fine crushing plant for further size
reduction. The fine-crushed ore is fed to a conventional grinding and flotations circuit to produce a bulk copper
concentrate and molybdenum concentrate. The concentrates are thickened and filtered to produce products
suitable for transport. Tailings are thickened and deposited in one of the two active tailings storage facilities
(TSF3 and TSF4). Low-grade mineralization is leached and the pregnant solution is processed through an SX/EW
plant that exists on the property. However, no additional low-grade ore is being placed under leach in accordance
with the mine plan.

The copper concentrates and cathodes produced from Pinto Valley Mine is sold to smelters and traders. The high
quality of the concentrates makes it sought after by both smelters and traders. Pinto Valley has well-established
environmental protocols that adhere to federal and state regulatory requirements and to internal corporate
guidance to reduce impacts to the environment. Pinto Valley is subject to environmental regulations addressing
groundwater, surface water, storm water management; air quality; well installation; water withdrawal from
state aquifers; waste handling and disposal; handling and storage of toxic substances; surface reclamation; and
cultural and biological resources. The Pinto Valley Mine has all the necessary permits to conduct mining activities
through 2026 with the exception of the consolidated Plan of Operations that is currently under review by the

USFS. The consolidated Plan of Operations is a compilation of prior authorizations and encroachments on federal
lands.

The Pinto Valley Mine’s applicable taxes include the following:

• Corporate Taxes – the combined US Federal and Arizona state corporate income tax is calculated at a
blended 36.35% rate applied on taxable income. The Alternative Minimum Tax (“AMT”) is calculated at a
20% rate applied on an adjusted amount of taxable income. A taxpayer pays the higher amount of regular
Federal income tax and the AMT. If AMT is paid, it may generally be used as a credit against regular tax
in future years to the extent regular tax is greater than AMT.

• The Arizona state severance tax on metalliferous minerals is charged at a 2.5% rate on 50% of the

difference between the gross value of production and production costs.

• Gila County property taxes are administered by the Arizona Department of Revenue.

Exploration and Development

We do not currently have any planned exploration activities at the Pinto Valley Mine but from time to time we
do undertake in-pit drilling to better define Mineral Reserves for short-term planning purposes. This data is then
incorporated periodically into the Mineral Resource block model. Our development activities are focused on
execution of the PV3 mine plan.

Cozamin Mine (Mexico)

The Cozamin Mine is the subject of a report titled “Technical Report on the Cozamin Mine, Zacatecas, Mexico”
dated August 5, 2014 with an effective date of July 18, 2014 (the “Cozamin Report”). This technical report was
prepared by Patrick Andrieux, PhD., P.Eng., Itasca Consulting Group, Inc.; Dave Hallman, PE, Tetra Tech, Inc.;
Jenna Hardy, P.Geo., Nimbus Management Ltd.; Mel Lawson, SME-RM, Stantec Consulting International LLC; Ken
Major, P.Eng., KWM Consulting Inc.; Vivienne McLennan, P.Geo., Capstone Mining Corp.; Allan Schappert, SME-
RM, Stantec Consulting International LLC; Ali Shahkar, P.Eng., Lions Gate Geological Consulting Inc.; Robert Sim,
P.Geo., Sim Geological Inc.; Brad Skeeles, P.Eng., Capstone Mining Corp.; and Jeremy Vincent, P.Geo., Capstone
Mining Corp., each a Qualified Person as defined by NI 43-101. Reference should be made to the full text of this
report, which is available in its entirety on SEDAR at www.sedar.com under Capstone’s profile.

All scientific and technical information in this summary relating to any updates to the Cozamin Mine since the
date of the Cozamin Report, other than the mineral resource and Mineral Reserve estimates, has been reviewed
and approved by Qualified Persons who supervised the preparation of updates to elements of the Cozamin
Report. These Qualified Persons include those listed in Interests of Experts in this Annual Information Form.

Project Description and Location

The Cozamin Mine is an operating polymetallic mine with a 3,300 tonne per day capacity, located in the Morelos
Municipality of the Zacatecas Mining District, near the south-eastern boundary of the Sierra Madre Occidental
Physiographic Province in North-central Mexico. The mine and processing facilities are located near coordinates
22° 48’ N latitude and 102° 35’ W longitude on 1:250,000 Zacatecas topographic map sheet (F13-6). Currently,
87 Cozamin-owned concessions cover 4,137 hectares. Capstone acquired the project in January 2004, which is
100% owned by Capstone, subject to a 3% NSR payable to Grupo Bacis S.A. de C.V., a Mexican resource company.
Mineral claims acquired in September 2009 from Minera Largo S de RL de CV, a wholly owned subsidiary of
Golden Minerals Company (“Golden Minerals”), are subject to future cash payments of a NSR of 1.5% on the first
one million tonnes of production and cash payments equivalent to a 3.0% NSR on production in excess of one
million tonnes from the acquired claims. The NSR on production in excess of one million tonnes also escalates
by 0.5% for each $0.50 increment in copper price above $3.00 per pound of copper. In 2014, we acquired 45
additional concessions from Golden Minerals totalling 775 ha that surround the Cozamin Mine’s existing
concessions. A total of 17 of the claims are subject to a finder’s fee to be paid as a 1.0% NSR or Gross Proceeds

Royalty to International Mineral Development and Exploration Inc. pursuant to existing agreements on the
concessions dating back to October 1994 and August 2000.

In 2017, Capstone entered into an agreement with Endeavour Silver Corp. allowing for the two companies to
exchange access to certain of each other’s mining concessions that abut at the southern boundary of Capstone’s
Cozamin mine property. The agreement provides Capstone with exploration and exploitation rights on the
Endeavour concessions below 2,000 metres above sea level (masl), a depth where copper-rich mineralization
has been historically found and mined by Capstone, and provides Endeavour with exploration and exploitation
rights on the Capstone concessions above 2,000 masl, where more precious-metal dominant mineralization has
historically been mined, in the historic Zacatecas district. The agreement provides for both parties to share
various information on the concession covered by the agreement and to jointly have access to explore for and
exploit mineralization appropriate to each company’s core business; being base metals for Capstone and
precious metals for Endeavour. In certain instances, it also provides for a net smelter returns royalty for the
entity electing not to produce. Additionally, and under certain well-defined circumstances, it provides flexibility
around the 2,000 masl division. The Cozamin property requires payment of mining duties to the Secretaria de
Economía on the mining concessions semi-annually in January and July, plus annual land payments for surface
use. Mining duties totalled US$ 59,520 in 2015, US$ 46,805 in 2016 and US$ 64,167 in 2017.

The Cozamin Mine lies within a regionally mineralized area that has seen extensive historic mining over more
than 475 years. Host rocks surrounding the mineralized vein systems are anomalous in base and precious metals,
providing a detectable halo of elevated metal values that extends a considerable distance beyond the known
workings. Numerous old mine workings, excavations and dumps, and historic tailings are present, both on, and
adjacent to, the Cozamin mine site; some lie on mining lands held by Capstone and others are held by third
parties.

Prior to Capstone’s involvement in the Cozamin Mine, several environmental studies had been carried out by
previous owners. The San Roberto Mine had previously been fully permitted to operate at 750 tpd. Capstone
formally received its operating permit on October 20, 2006. This is known in Mexico as a Licencia Ambiental
Única (“LAU”). A LAU for a throughput expansion to 2,600 tpd was received on March 25, 2008. On January 19,
2009, application was made to modify the LAU to expand throughput to 3,000 tpd, which was granted in May of
that year. In January of 2011, further application was made to increase the permitted throughput from 3,000 tpd
to 4,000 tpd, which was granted in November of 2011. The permit to operate at throughput up to 4,500 tpd
capacity was granted in June 2015.

The Cozamin Mine’s Mineral Resources and Mineral Reserves are situated primarily within a mineralized
vein/fault structure known as the Mala Noche Vein (“MNV”) that strikes east-west and dips to the north. This
structure hosts the copper-rich San Roberto Mine and adjacent to the east, the zinc-rich San Rafael Mine. In
2010, we discovered the MNFWZ, a vein splay off the MNV vein on the footwall side oriented northwest-
southeast. Capstone is currently exploring for extensions to mineralization found at MNV, San Rafael, and
MNFWZ. Figure 2 illustrates the location of project infrastructure and the surface projection of the MNV.

FIGURE 2: COZAMIN INFRASTRUCTURE AND LOCATION OF MINERAL RESOURCES AND RESERVES.

Environmental studies have shown that flotation tailings and some types of waste rock have the potential to
generate acidic drainage. However, the country rocks surrounding the deposit have significant neutralizing
capacity and show relatively low permeability. In addition, construction activities as a part of the expansions
have already reduced identified sources of acidic drainage associated with the historic tailings impoundment as
well as downstream contamination due to tailings spills by previous operators. An environmental management
and monitoring program is currently underway and will be ongoing for the life of mine. Data collected are being
used to define an operational environmental management and monitoring program, which will include
appropriate environmental management and mitigation plans based on the principle of continuous
improvement. These will be reviewed and revised as necessary, on at least an annual basis, with results reported
as required to Mexican regulators.

Other issues of environmental concern relate to potential impacts comparable to those in underground mines
of similar size with flotation tailings impoundments. These include: dust, tailings handling/management, storm
water diversion, combustibles and reagent management/handling, waste management and disposal and noise.
Work to date indicates that environmental impacts are manageable. Cozamin was awarded the Clean Industry
Certification from Mexico’s Federal Attorney for Environmental Protection (Procuraduría Federal de Protección
al Ambiente or PROFEPA) for the fourth time in December 2017 for this management process and best practices
and procedures. This is valid until November 2019.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Cozamin Mine is located 3.6 km to the north-northwest of the city of Zacatecas, the Zacatecas state capital.
The municipality of Zacatecas has a population of approximately 138,000 people. Other communities in the
immediate vicinity of the project include Hacienda Nueva (3 km west), Morelos (5 km northwest) and Veta
Grande (5 km north). The Cozamin Mine operates year-round and is accessible via paved roads to the project
area boundary where good, all-weather roads provide access to the mine and most of the surrounding area. The
mine area falls within the Hacienda Nueva and La Pimienta Ejidos.

The Cozamin Mine has excellent surrounding infrastructure including schools, hospitals, railroads, highways, and
electrical power. The mine has access to a power line and substation that allows Capstone to draw up to 10.5 MW
from the national power grid. Generators (both operating and back-up) on site have a capacity of 2.0 MW. There
is sufficient capacity to store all of the tailings from the processing of identified Mineral Reserves. The Stage 6

lift was completed in 2017 and the Stage 7 lift commenced in Q1 2018. Employees and contractors are sourced
from Zacatecas and other nearby communities with minimal foreign staff at the mine. Sufficient surface rights
have been obtained to conduct all mining operations.

The climate in the region is semi-arid with maximum temperatures of approximately 30°C during the summer
and minimum temperatures in the winter producing freezing conditions and occasional snow. The rainy season
extends from June until September, with average annual precipitation totalling approximately 500 mm. As the
certainty of runoff into the tailings pond cannot be predicted, additional water resources have been secured,
with further water rights undergoing evaluation.

The Cozamin Mine is located in the Western Sierra Madre Physiographic Province near the boundary with the
Mesa Central Province (Central Plateau Province). The Zacatecas area is characterized by rounded northwest
trending mountains with the Sierra Veta Grande to the north and the Sierra de Zacatecas to the south. Elevations
on the property vary from 2,400 m to 2,600 masl. The Zacatecas area is located between forested and sub-
tropical regions to the southwest and desert conditions to the northeast. Vegetation consists of natural grasses,
mesquite or huizache and crasicaule bushes. Standing bodies of water are dammed as most streams are
intermittent.

History

In pre-Hispanic times, the area was inhabited by Huichol people who mined native silver from the oxidized zone
of argentiferous vein deposits in the Zacatecas Mining District. During the Spanish Colonial era production
commenced in 1548 at 3 mines: the Albarrada mine on the Veta Grande system, and the San Bernabe mine and
Los Tajos del Panuco on the Mala Noche Vein system. The initial operations worked only the oxide minerals for
silver and some gold, and later the sulphide-mineral zones were worked for base and precious metals.

From 1972, Consejo de Recursos Minerales worked mines in El Bote, La Purisima and La Valencia zones. A number
of old workings are located throughout the mine area, but accurate records of early production are not available.
Consejo de Recursos Minerales estimated Zacatecas district historic production until 1992 at 750 million ounces
of silver from 20 million tonnes grading over 900 g/t Ag and approximately 2.5 g/t Au. Lead, zinc and copper have
also been recovered but the production and grades were not estimated.

Minera Cozamin was established in 1982 by Jack Zaniewicki who consolidated concession holdings over much of
the Mala Noche Vein and operated the San Roberto Mine and plant at 250 tpd until October 1996. During this
period, Industrias Peñoles S.A. de C.V. (“Peñoles”) undertook exploration in the district but did not buy any
significant concessions. In all, it is estimated that 1.2 million tonnes of ore were mined and processed at the
Cozamin Mine prior to October 1996.

In October 1996, Zaniewicki sold Cozamin to Minera Argenta, a subsidiary of Minera Bacis S.A. de C.V. (“Bacis”).
Bacis expanded the mill to a 750 tpd flotation plant, and processed 250,000 tonnes of ore grading 1.2% Cu, 90
g/t Ag, 0.5 g/t Au, 1.8% Zn and 0.6% Pb from 1997 to the end of 1999, mainly from shallow, oxide zone workings.
Bacis developed resources principally by drifting and raising on the Mala Noche Vein within the San Roberto
(Cozamin) mine. Diamond drilling was only used as an exploration tool to identify areas with mineralization
peripheral to the developed mine workings. In 1999, Bacis closed the mine primarily due to low metal prices and
under-capitalization of the asset. Capstone assumed ownership of the Cozamin Mine in 2004.

Geological Setting

The Zacatecas Mining District covers a belt of epithermal and mesothermal vein deposits that contain silver, gold
and base metals (copper, lead and zinc). The district is in the Southern Sierra Madre Occidental Physiographic
Province near the boundary with the Mesa Central Physiographic Province in north-central Mexico. The
dominant structural features that localize mineralization are of Tertiary Era age, and are interpreted to be related
to the development of a volcanic centre and to northerly trending basin-and-range structures. It occurs in a

structurally complex setting, associated with siliceous subvolcanic and volcanic rocks underlain by sedimentary
and meta-sedimentary rocks. The geologic units in this area include Triassic-aged metamorphic rocks of the
Zacatecas Formation and overlying basic volcanic rocks of the Upper Jurassic-aged or Lower Cretaceous-aged
Chilitos Formation. The Tertiary rocks consists mainly of a red conglomerate unit deposited in the Paleocene
Epoch and/or Eocene Epoch, and overlying rhyolitic tuff and intercalated flows that were deposited from Eocene
to Oligocene Epochs. Some Tertiary Era rhyolite bodies cut the Mesozoic Era and Tertiary Era units and have the
appearance of flow domes.

The host rocks for the MNV are intercalated carbonaceous meta-sedimentary rocks and andesitic volcanic rocks
ranging in age from Triassic to Cretaceous, and Tertiary-aged rhyolite intrusive rocks and flows. Mineralization
in the MNV appears to have been episodic. A polymetallic dominant phase is interpreted as one of the last stages
of mineralization at Cozamin. In general, this polymetallic phase was emplaced into an envelope of pre-existing
vein hosting moderate to strong zinc and lead mineralization and moderate silver mineralization. Thus, the host
lithology to the vein does not appear to have influenced the strength of the polymetallic phase of mineralization
which is typically enveloped by earlier vein material.

Exploration

Cozamin exploration geologists have systematically mapped a total of 1,694 ha throughout the Cozamin Mine
property at scales of 1:1000 or 1:2000 since 2004. Regular surface exploration along the strike of the MNV system
has occurred through channel sampling and chip sampling. Channel samples were cut perpendicular to the strike
of the vein and weighed approximately 2 kg. The results of the surface channel and chip sampling programs have
been used to assist with exploration drillhole planning, but not used for Mineral Resources estimation. In 2015,
150 hectares were remapped at a scale of 1:2000 predominantly in the San Rafael area.

Capstone undertook several geophysical surveys using contractors between 2004 and 2010. A ground magnetic
survey completed by Zonge Engineering and Research Organization (“Zonge”) in 2004 collected total magnetic
field data from 24 north-oriented lines spaced 25 m apart that permitted mapping of the linear east-west
orientation of the Mala Noche system as well as other intrusive features. Also in 2004, Zonge undertook a
resistivity study through measurement of magnetic response using Controlled Source Audio Magnetotellurics
over 8 line-kilometres and Natural Source Audio Magnetotellurics over 16 line-kilometres indicated the presence
of sulphide mineralization below known mineralized extents. These results were used to assist with exploration
drillhole planning. During the summer of 2009 New Sense Geophysics Limited conducted an aeromagnetic survey
over all of the Cozamin Mine concessions. The results revealed a broad magnetic high trending northwest. These
data were later reprocessed in 2013 and used for tracking infrastructure such as power lines and pipe lines and
the general structural and vein trends of the Mala Noche system. In some cases, the data were used as a
secondary tool to help guide exploration and drill planning in new target areas. Between October 2009 and
January 2010 Zonge completed resistivity and ground-induced polarization studies centered over Mala Noche
West, Hacienda Nueva South, Mala Noche North, and Mala Noche East. Identified anomalies were followed up
by drilling, but the results were poor. The presence of sulphide-rich and graphitic sedimentary rocks coupled
with close proximity to populated areas (buried pipes, fences, etc.), likely precluded effective chargeability,
resistivity, or conductivity surveys, and as such we have not explored using geophysical methods since 2010. In
2015, Condor Consulting Ltd. conducted a full review of all previous geophysical surveys and determined the
most likely effective geophysical survey method for future exploration targeting is total field magnetics and
derivative products.

Mineralization

All mineralization at the Cozamin Mine occurs primarily in the Mala Noche fault-vein structure (“MNV”). In the
San Roberto Mine, the MNV strikes west-northwest and the dip varies between 38° to 90° to the north. There is
a clear association of higher copper grades with steeper dips of the Mala Noche fault structure. Where the MNV
is weakly mineralized, it appears that the principal alteration in this fault is quartz-pyrite.

The main stage of copper-dominant mineralization at the Cozamin Mine is classified as intermediate
sulphidation, high- temperature epithermal transitioning at depth to more mesothermal-like mineralization. The
copper-dominant stage of mineralization appears to cut across or overprint earlier more clearly epithermal-type
zinc-dominant mineralization. The epithermal veins display well banded quartz veins, sulphide pseudomorphs of
carbonates, open space fillings, and quartz vuggy linings. The higher temperature veins have significantly less
vugs, and the veins can be massive pyrrhotite-pyrite-chalcopyrite.

Pyrite is the dominant vein sulphide and typically comprises approximately 15% of the MNV in the San Roberto
mine. Pyrrhotite commonly occurs as an envelope to, or intermixed with, strong chalcopyrite mineralization.
Chalcopyrite is the only copper sulphide recognized megascopically at the Cozamin Mine. Like pyrrhotite, it is
more common at the intermediate and deeper levels of the mine. It occurs as disseminations, veinlets and
replacement masses. Sphalerite is the dominant economic sulphide in the upper levels in the San Roberto mine.
Most of the sphalerite is marmatitic. It occurs as disseminations and coarse crystalline masses and is commonly
marginal to the chalcopyrite-dominant portion of the vein. Argentiferous (silver-bearing) galena is less common
than sphalerite but is generally associated with it as crystalline replacement masses. Arsenopyrite typically
occurs as minor, microscopic inclusions in pyrite. Argentite is the most common silver mineral. It has been
identified microscopically occurring as inclusions in chalcopyrite and pyrite. Gangue minerals in the MNV consist
of quartz, silica, calcite, chlorite, epidote and minor disseminated sericite. The quartz occurs as coarse grained
druse coarse crystalline masses, and a stockwork of quartz veinlets.

This transition from epithermal zinc dominant mineralization to copper-dominant mesothermal mineralization
is thought to be the result of an evolving, telescoping hydrothermal system that was epithermal in its early stages
and became mesothermal as the hydrothermal migrated upwards. This telescoping hydrothermal system is
closely associated with the district’s largest centre of rhyolite flow domes that may be the upward expression of
a felsic stock.

The dominant mineralized vein on the Cozamin Mine is the MNV. This vein has been traced for 5.5 km on surface
on the property. It strikes approximately east-west and dips on average at 60° to the North. There are at least
18 shafts that provide access to the historical workings at Cozamin. The largest of these is the San Roberto mine
which has a strike length of 1.4 km. The vertical extent of mineralization at San Roberto is over 820 m. Adjacent
to the San Roberto mine is the San Rafael mine, a zinc-rich part of the deposit with the same epithermal
mineralization characteristics as the San Roberto mine. The MNFW zone, a splay off of the footwall side (south
side) the MNV discovered in 2010, is not exposed at surface; however, based on underground and surface drill
definition it strikes in a northwest-southeast orientation over an explored distance of 2.5 km and dips on average
54° to the northeast. Known base metal mineralization here has a maximum vertical extent of approximately
500 m. The MNFW zone comprises up to five veins, two of which are volumetrically significant, in close spatial
association with rhyolite dikes, and locally the veins cross-cut the intrusions themselves. The relative age of the
copper mineralization ranges from contemporaneous, to early post-rhyolite magmatism.

Drilling

In all, 829 diamond drillholes of HQ and/or NQ diameter have been completed from surface and from
underground locations at the Cozamin Mine since April 2004. A total of 14 phases of drilling have targeted
resource definition and expansion along the MNV (San Roberto and San Rafael mines), MNFW zone (since
discovery in 2010), and other exploration targets on our property. This includes an infill program targeting zinc-
rich mineralization in the upper parts of the San Roberto zone, as well as infill drilling in the San Rafael zone.

In 2017, Capstone drilled a total of 32,662 m in 44 angled, HQ diameter, diamond drillholes at the MNFW zone,
10,215 m in 28 angled, HQ diameter, diamond drillholes at the San Rafael zone, 1,945 m in 16 angled, HQ
diameter, diamond drillholes at the San Roberto Zinc zone, and 2,019 m in 3 angled, HQ diameter, diamond
drillholes at a new brownfield target located east of San Rafael. Drillhole collars are located using a total station
TRIMBLE instrument, model S6. Downhole survey readings were recorded using either an Eastman Single Shot,

FLEXIT SensIT or Reflex EZShot instrument. Survey readings are generally taken every 50-150 m for surface holes
and every 50-100 m for underground holes. Survey results were corrected for magnetic declination.

In the core logging facility drillholes are assessed for drilling recovery, which has historically been very good.
Drillholes are then logged for geology, alteration and mineralogy, followed by structural data measurements and
rock quality (RQD) assessment. Next, the drillholes are marked for sampling by the geologist. This is followed by
core photography before the core is sent for cutting.

Sampling and Analysis

We use diamond drillcore samples for Mineral Resources estimates. Diamond drillholes intersecting the MNV
are spaced approximately 60 m along strike and down dip in the San Roberto zone. In 2017, infill drilling closed
the drillhole spacing to approximately 40 m in the San Rafael zone. Mineralization is less continuous in the MNFW
zone than in the MNV, thus drillholes are more closely spaced averaging approximately 45 m along strike and
down dip. Capstone employees are responsible for the all on-site sampling of drill core. The entire vein width is
sampled. Typical sample intervals for drillcore are 0.5 m in the vein and 2 m in the wallrock (waste). Very high-
grade intervals are marked out and sampled separately from lower grade zones. Sample boundaries are based
on mineral proportions and/or texture (e.g. massive versus disseminated). Drillcore samples are split by core saw
and placed in marked bags and shipped to accredited external laboratories for sample preparation and analysis
for copper, lead, zinc, silver, and sometimes gold. There were a total of 54,735 diamond drillhole samples
contained in the database used for the July 2017 Mineral Resources update of the MNV block model. Capstone
employees are responsible for all on-site sampling of drill core.

Sample quality of drillhole samples is monitored through regular insertion of reference material standards,
blanks, and duplicate samples. Certified reference material standards are purchased commercially and are also
created from MNV material. QAQC procedures include real-time monitoring of quality control data, thresholds
for sample failures and sample batch reanalysis, and regular monthly reporting. QAQC results demonstrate that
drillhole assay values are accurate and repeatable. In 2017, an increase in cross contamination over previous
years was observed across all elements, particularly zinc. The impact of these blank failures on ore-waste
classification is considered low. Investigation into the root cause and mitigation is on-going.

The Cozamin Mine collects bulk density measurements from mineralized and non-mineralized intercepts from
each drillhole. All drillcore pieces greater than 10 cm in length within an assay sample length are selected from
the core box and measured using a weight-in-air weight-in-water technique. A review of these data highlighted
widely ranging values, which were reanalysed as a part of a quality control check. The QAQC samples indicated
the bulk density dataset was of sufficient quality for use in Mineral Resource estimation. There are 32,282 bulk
density measurements in the database available to estimate density.

Database validation work comprises a check of 10% of all new records entered into the database as a part of the
Mineral Resource update process. This includes verification of collar, downhole survey, lithology, assay, and bulk
density data. This was completed as a part of the July 2017 Mineral Resource update. Other data checks included
validations of the spatial locations of mineralized drillhole intercepts and the locations of CCS data with respect
to underground mapped geology. Errors were noted and corrected. There were 27 drillholes excluded from the
geological modelling and resource estimation process because either the logged vein intercepts fell outside of
modelled vein structures, the hole twinned another intersection, or they intercepted the vein at a very shallow
angle.

Security of Samples

Only employees of Capstone entities are permitted in the core shack when unsampled drillcore is ready to be
cut. A minimum of 10 samples are placed in a large sack and secured by a tamper proof seal. A transmittal form
is then completed, which identifies the batch number, the serial numbers of the seals and the corresponding
sample number series, and delivered to the sample preparation laboratory by a Cozamin representative.

Drill core containing intercepts of the Mala Noche Vein and Mala Noche Footwall structure is stored in a secured
warehouse near the core shack. Waste hanging wall and footwall drill core is kept in a secure storage facility on
the property and within the mine on Level 8. Access to the warehouse and storage facilities are controlled by the
Mine Geology Department. No person other than the geologists responsible for logging is permitted to handle
the core prior to sampling.

Mineral Resource and Mineral Reserve Estimates

In July 2017, the MNV block model was updated to reflect the infill drilling targeting zinc-rich mineralization in
the San Roberto Zinc and San Rafael zones in late 2016 and 2017. The Mala Noche Footwall zone resource model
remains unchanged since it was last updated in June 2016. Jeremy Vincent, P.Geo., Manager of Production and
Development Geology for Capstone, and a Qualified Person as defined by NI 43-101, is responsible for the
Cozamin Mineral Resource estimates.

All geological modelling was undertaken using the Leapfrog® Geo implicit modelling software. It comprised a
lithological model to assist with exploration targeting and mining planning activities, as well as a mineralization
model defining the mineralized MNV and MNFWZ structures. The veins were defined using logged and
underground-mapped contacts in combination with as US$ NSR 25/t cut-off where mineralization boundaries
were not exclusively defined in a vein structure.

All samples were composited to a 2 m length. This was followed by an exploratory data analysis that showed a
moderate correlation between copper and silver in the San Roberto, San Rafael, and MNFW zones. In the San
Rafael zone, zinc and lead also showed a moderate correlation. The coefficient of variation (“COV”), which
measures the spread of a distribution relative to its mean, was reviewed for each element to help assess the
need for top cutting and to confirm the selected Ordinary Kriging (“OK”) estimation method was appropriate. A
COV of less than 1.5 is desired for OK grade estimation, which was found for copper, silver, and zinc. Minor top
cuts were needed for these elements. Lead had a COV higher than 2 resulting from a longer high-grade tail of
samples. This aligns with underground observations where lead can be found in high-grade patches. As such, a
combination of top cutting and search restrictions were used to limit the influence of the high-grade lead
samples.

The three-dimensional spatial relationships of each element were assessed on the top-cut, composited data was
undertaken using normal-score transformed semi-variograms. Search ellipses were set to vary dynamically
during grade estimation to account for the local variations in strike and dip along the veins. The same variogram
and search parameters were used for copper and silver in all domains to maintain the element correlations.

Grades were estimated into 12 m Easting × 2 m Northing × 10 m Elevation blocks in a sub-blocked model (in the
MNFW zone model the blocks were rotated parallel to the strike of the mineralization). Bulk density samples
were composited to 2.0 m lengths downhole and estimated using inverse distance weighting. Model validation
included visual validation of grades against composited drillhole samples, creation of swath plots along easting,
northing and elevation sections to assess grade smoothing, assessment of element correlations in the blocks, as
well as a global change of support to assess grade smoothing at various cut-off grades. Validation checks showed
the model to be valid with an appropriate amount of grade smoothing.

The June 2016 MNV and MNFW zone resource models were externally reviewed by SRK Consulting. There were
no material issues identified with the geological modelling, estimation, validation, or classification process. The
July 2017 MNV update follows the same methodology employed in the 2016 estimates.

In the San Roberto zone, the geological interpretation was modified slightly and grades were re-estimated. The
San Roberto Zinc zone was broken out from the main San Roberto zone as a separate entity for resource
reporting purposes. Indicated Resources in this zone as at December 31, 2017 total 356 kt with an average grade
of 0.18% Cu and 3.76% Zn above a US$ NSR 35/t cut-off. Zinc-oxide mineralization was identified in this zone
during metallurgical test work. It is estimated to represent on average 18% of the total zinc mineralization in this

zone. The highest concentrations of zinc-oxide mineralization are not spatially associated with the highest zinc
grades however. Additional work is required to determine if this zone has sufficient tonnage and grade to be
economically viable.

In the San Rafael zinc zone, Indicated Resources total 2,209 kt with an average grade of 0.28% Cu and 3.59% Zn
above a US$ 35/t NSR cut-off. Zinc-oxide mineralization is not observed in this zone. The NSR formula used to
report Mineral Resources in the San Roberto Zinc and San Rafael zones assumes a blending scenario of 65% ore
from the San Roberto and MNFW zones and 35% ore from the San Rafael/San Roberto Zinc zones, as well as
recoveries of 80% copper, 70% silver, 73% zinc, and 60% lead, and metal prices of US$ 2.50/lb copper, US$
20.00/oz silver, US$ 1.00/lb zinc, and US$ 0.90/lb lead.

An updated Mineral Resource estimate for the MNFW zone is expected in 2018.

The updated Measured and Indicated Mineral Resources for the copper zones, after 2017 mining activities, total
6,087 kt with an average grade of 1.70% Cu above a US$ 35/t NSR cut-off (Table 3). Mining in 2017 consumed
727 kt of material at an average grade of 2.21% Cu from classified Mineral Resources within the block model. An
additional 37 kt of material was mined from outside of classified Resources, bringing total block model depletion
to 765 kt at an average grade of 2.25% Cu.

Mineral Resources for the San Roberto, San Roberto Zinc, San Rafael, and MNFW zones, after taking into mine
production until December 31, 2017, are summarized in Table 3 above a US$35 per tonne net smelter return
(“NSR”) cut-off. The NSR formula is stated in the table notes. Jeremy Vincent, P.Geo., Manager of Production and
Development Geology at Capstone and a Qualified Person as defined by NI 43-101, is responsible for the Mineral
Resource estimates at Cozamin. Mineral Resources are presented inclusive of Mineral Reserves.

TABLE 3: COZAMIN MINE ESTIMATED MINERAL RESOURCES AS AT DECEMBER 31, 2017
Zinc
Metal

Tonnes Copper

Copper
Metal

Silver
Metal

Silver

Zinc

Classification

(kt)

(%)

(g/t)

(%)

(kt)

(koz)

(kt)

Measured

Indicated
Measured +
Indicated
Inferred

Measured

Indicated
Measured +
Indicated
Inferred

Measured

Indicated
Measured +
Indicated
Inferred

Copper Zone – San Roberto

404

3,071

1.24

1.03

3,475

1.05

3,931

0.69

1.23

1.64

1.59

1.56

0.40

0.39

0.14

168

2,444

2,612

5,011

572

5,515

6,087

8,942

2.40

2.56

2.55

1.71

1.58

1.71

1.70

1.26

Copper Zone – Mala Noche Footwall

0.74

0.43

0.45

0.53

0.04

0.03

Total – Copper Zones

1.09

1.10

0.98

0.29

0.23

0.24

0.08

103

113

695

4,389

5,084

4,705

228

4,176

4,404

5,876

923

8,564

9,488

10,581

Lead
Metal

(kt)

Measured

Indicated
Measured +
Indicated
Inferred

356

751

0.18

0.10

Measured

Indicated
Measured +
Indicated
Inferred

2,209

0.28

2,209

3,476

0.28

0.23

Measured

Indicated
Measured +
Indicated
Inferred

Measured

Indicated
Measured +
Indicated
Inferred

2,565

0.27

2,565

4,227

572

8,080

0.27

0.21

1.58

1.25

8,652

1.27

13,169

0.92

Zinc Zone – San Roberto Zinc

3.76

0.70

3.76

3.38

0.70

0.39

Zinc Zone – San Rafael

3.59

0.54

3.59

3.16

0.54

0.33

Total – Zinc Zones

3.61

0.56

3.61

3.20

0.56

0.34

Total Mineral Resources (Copper + Zinc Zones)

1.09

1.90

0.29

0.34

1.85

0.33

1.69

0.16

101

110

122

334

562

3,234

3,973

3,567

4,535

923

12,131

13,055

15,116

110

135

154

160

223

NOTE: The Cozamin Mineral Resource estimate was completed by Jeremy Vincent, P.Geo., Manager of Production and Development Geology at
Capstone, and a Qualified Person as defined by NI 43-101. The NSR formula used for reporting the San Roberto and MNFW zone Mineral Resources is
based on US$ 2.50/lb Cu, US$ 20/lb Ag, US$ 1.00/lb Zn, MEX 18.5 to USD 1.0, and metallurgical recoveries of 94.5% Cu, 72% Ag, 70% Zn. The resulting
NSR formula is $42.426*%Cu + 0.364*Agppm + 8.123*Zn%. Note that zero value is attributed to Pb because the circuit is expected to be used minimally
due to low Pb concentrations. The NSR formula used for reporting the San Rafael and San Roberto Zinc zone Mineral Resources is based on US$ 2.50/lb
Cu, US$ 20.00/oz Ag, US$ 1.00/lb Zn, US$ 0.90/lb Pb with recoveries of 90% Cu, 74% Ag, 79% Zn, and 76% Pb. It also assumes a 3:1 blending ratio of
ore from San Roberto and MNFW zones with ore from the San Roberto Zinc and San Rafael zones. Mineral Resources are reported above US$ 35/t
NSR cut-off. Mineral Resources are presented inclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability. Figures may not sum due to rounding.

No changes were made to the Mineral Reserve design shapes during 2017 because the Mineral Reserves areas
were not impacted by the updated July 2017 Mineral Resource estimate. Mineral Reserve estimates for the MNV
San Rafael zone and MNFW zone are scheduled for 2018.

The MNV and MNFW zone Mineral Reserve model was updated in December 2016, by Diego Airo, P.Eng.,
formerly the Senior Mining Engineer at Capstone and a Qualified Person as defined by NI 43-101, using the June
2016 Mineral Resource model completed by Jeremy Vincent, P.Geo. The Mineral Reserve estimate was
generated using Maptek Vulcan Mine Stope Optimizer software, using base assumptions of US$2.50/lb copper,
US$ 20/oz Ag, US$ 1.0/lb Zn, minimum mining width of 2.0 m (internal dilution), external dilution of 0.5 m in the
hanging wall and 0.5 m in the footwall, 48 degree minimum stope walls, stopes generated in 5 m step sizes along
strike, stope heights varying between 12-15 m high, development heights of 4.5 m high and 4.0 m wide, and an
NSR cut-off value of US$ 42.00/t. Resulting stopes were within non-mined out areas or were isolated stope blocks
with sufficient economic value to cover operating and capital costs associated with extraction. Planned sill pillars
that would not be mined due to geotechnical considerations were removed from the Reserve. Previous MNV
Reserve sill pillars and mining remnants were removed from the new estimate. Final triangulations were
reported separately as stopes and development to include additional dilution for the development drifts and
slashing, as well as an additional 5% ore loss for mine extraction and unforeseen geotechnical conditions. A

geotechnical study was completed in 2017 to improve confidence in the proposed mining methodology. The
geotechnical study, including geotechnical bore hole logging and laboratory testing, in-situ stress measurements
and updated geotechnical assessments will continue in 2018.

Proven and Probable Mineral Reserves, discounted for mine production to December 31, 2017, contain 3,277 kt
at an average grade of 1.69% Cu above a US$ 42/t NSR cut-off (fully diluted and recovered) are detailed in the
table below. Pooya Mohseni, P.Eng., Director of Technical Services at Capstone and a Qualified Person as defined
by NI 43-101, is responsible for the Mineral Reserve estimates at Cozamin.

TABLE 4: COZAMIN MINE ESTIMATED MINERAL RESERVES AS AT DECEMBER 31, 2017

Classification

Tonnes

Copper

Silver

Zinc

(kt)

(%)

(g/t)

(%)

Copper
Metal

(kt)

Proven

Probable
Proven +
Probable

Proven

Probable
Proven +
Probable

122

1,139

1,261

125

1,891

2,016

1.42

0.95

1.00

1.81

2.15

2.13

Copper Zone – San Roberto

0.83

1.44

0.33

0.40

1.38

0.40

Copper Zone – Mala Noche Footwall

0.63

0.28

0.03

0.02

0.30

0.02

Total – Copper Zones

Silver
Metal

(koz)

223

1,659

1,882

133

2,759

2,892

Proven

247

1.62

0.73

0.18

356

Zinc
Metal

(kt)

Lead Metal

(kt)

1.69

1.70

0.17

0.71

3,277

3,030

Probable
Proven +
Probable
NOTE: Pooya Mohseni, P.Eng., Director of Technical Services at Capstone Mining Corp., is the Qualified Person for the Cozamin Mineral Reserve. Disclosure of
the Cozamin Mine Mineral Reserves as of December 31, 2017 was completed using fully diluted mineable stope shapes generated by the Maptek Vulcan
Mine Stope Optimizer software and estimated using the 2016 MNFW and 2017 MNV resource block models created by J. Vincent, P.Geo., of Capstone
Mining Corp. The Reserves are based on a US$ 42/t NSR cut-off. The NSR formula used for the Reserves was based US$ 2.50/lb Cu, US$ 20/lb Ag, US$
1.0/lb Zn, MEX 18.5 to USD 1.0, and metallurgical recoveries of 94.5% Cu, 72% Ag, 70% Zn. The resulting NSR formula is $42.425*%Cu + 0.364*Agppm
+ 8.123*Zn%. Note that zero value is attributed to Pb because the circuit is expected to be used minimally due to low Pb concentrations. Tonnage and
grade estimates include dilution and recovery allowances. Figures may not sum due to rounding.

4,418

4,774

0.72

0.17

Mining Operations

The Cozamin Mine is an underground mining operation that commenced in 2006. Ore is extracted primarily using
long-hole open stoping. The mine extends for a strike length of over 1 km and Mineral Reserves extend to a
depth of 1,000 m. Access to the underground workings is via two service and haulage ramps and a hoisting shaft.

Run-of-mine ore is stockpiled on surface and sent to the crushing plant. The crushed ore is stored in two ore bins
that feed parallel conventional grinding circuits. The resulting product is sent to the copper-lead rougher
flotation where a copper- lead concentrate is produced. The tailings report to zinc conditioning tanks prior to
zinc flotation, where reagents are added to activate zinc mineralization. The tailings go through zinc rougher and
cleaning circuits to product a zinc concentrate. Separate copper and lead concentrates are produced from the
copper-lead concentrate via selective flotation. The concentrates are thickened and filtered to produce product
suitable for transport. The concentrates are trucked to Manzanillo, Colima, Mexico. The current mine plans
maintain the Cozamin Mine operations life to 2020. We are currently evaluating the financial viability of blending
zinc-rich mineralization from the San Rafael zone with the copper-rich mineralization from the San Roberto and
Mala Noche Footwall zones.

All necessary permits to conduct mining work on the property have been obtained. There are no known factors
or risks that affect access, title or the ability to conduct mining. Environmental liabilities and issues are limited
to those that are expected to be associated with an underground base metal operation. These include an
underground mine, associated infrastructure, access roads and surface infrastructure including the process
plant, waste and tailings disposal facilities situation within the area of disturbance.

The Cozamin Mine’s applicable taxes include the following:

• Corporate Taxes - the Mexican corporate income tax is at a 30% rate applied on net income after

depreciation.

• A value added tax is payable to the Mexican government. The amount paid in any given year is 100%

refundable, and may be used to offset income tax.

• The 2013 Mexican Tax Reform introduced a 7.5% mining tax. The mining tax, effective January 1, 2014,
is applied on the positive difference between income arising from sales related to mining and the
deductions permitted by the Income Tax Law, not including deductions on investments (except those
involved in mining prospecting and exploration), interest payable and the annual inflation adjustment.
The Tax Reform also introduced a 0.5% mining tax on precious metals that is applied on gross taxable
revenues.

• Property taxes are approximately $20,000 per year.
• The State of Zacatecas introduced taxes effective January 1, 2017 for purposes of reducing the
environmental impact created by industrial activities carried out in the state. These new taxes consist of
the (i) Environmental Remediation Tax on the Extraction of Materials, (ii) Tax on Gas Emissions to the
Atmosphere, (iii) Tax on Emissions of Pollutants to the Soil, Subsoil, and Water, and (iv) Tax on the
Disposal of Wastes. Cozamin won the challenge on constitutional grounds in 2017, but the state filed an
amendment. Final resolution is pending.

Exploration and Development

The 2018 planned exploration program includes a proposed 40,000 metres of surface infill and step-out
exploration drilling on the Mala Noche Footwall Mineral Resource area. Additional surface drilling is also planned
in 2018 and includes a total of 5,000 metres of exploration drilling divided between two other brownfield targets.

Minto Mine (Yukon)

The Minto Mine is the subject of a report titled “Minto Phase VI Preliminary Feasibility Study Technical Report”
dated July 31, 2012 with an effective date of January 1, 2012 (the “Minto Report”). This technical report was
compiled by Minto Explorations Ltd. (“MintoEx”) and written by Brad Mercer, P.Geo.; Wayne Barnett, P.Geo.;
John Eggert, P.Eng.; Bill Hodgson, P.Eng.; Garth Kirkham, P.Geo.; Mike Levy, PE; Pooya Mohseni, P.Eng.; Bruce
Murphy, P.Eng.; and Colleen Roche, P.Eng., each a Qualified Person as defined by NI 43-101. The description of
the Minto Mine in this document is based on assumptions, qualifications and procedures which are set out only
in the full Minto Report. Reference should be made to the full text of this report, which is available in its entirety
on SEDAR at www.sedar.com under Capstone’s profile.

All scientific and technical information in this summary relating to any updates to the Minto Mine since the date
of the Minto Report has been reviewed and approved by Qualified Persons who supervised the preparation of
updates to elements of the Minto Report.

Project Description and Location

The Minto Mine is a 3,850 tpd operating copper mine located in central Yukon, located approximately 240 km
northwest of Whitehorse, Yukon’s capital. The project is roughly centred on NAD 83, UTM Zone 8 coordinates
6,945,000 mN, 385,000 mE. The mine is located on the west side of the Yukon River on Selkirk First Nation (“SFN”)
Category A settlement land (SFN Parcel R-6A). There are no back-in rights, payments or other agreements or

encumbrances to which the property is subject other than a Cooperation Agreement with the SFN and a NSR
payable to the SFN.

The project consists of 164 quartz claims covering an area of approximately 2,760 ha that are 100% owned by
Minto Explorations Ltd., a 100% owned subsidiary of Capstone. The claims have expiry dates ranging between
May 13, 2018 and October 7, 2028. The leases, but not the claim boundaries, have been surveyed by an
authorized Canada Lands Surveyor in accordance with instructions from the Surveyor General.

Environmental liabilities at the Minto Mine relate to the dry stacked tailings facility and waste rock dumps as
well as some water stored at the site that is impacted by operations and to the removal of all operational
infrastructures. A closure plan has been developed and approved (most recently on December 2014 under the
Quartz Mining Licence detailing methods and costs associated with restoring the site to an acceptable
environmental standard. Engineered covers will be placed on tailings and waste rock such that interactions with
surface water are reduced. A C$72.1M surety bond has been put in place with the Yukon Government in
accordance with a territorial closure and reclamation policy. The closure plan and related letter of credit amount
are reviewed every two years. The latest biennial closure plan update was submitted in August 2016 and is
currently under review.

MintoEx has obtained a variety of permits in order to conduct ongoing work on site. The major instruments or
authorizations permitting and governing operations for the project include a Type A Water Use Licence, issued
by the Yukon Water Board and a Quartz Mining Licence issued by the Yukon Government, Energy Mines and
Resources. MintoEx has all permits necessary to extract ore from currently planned mining areas, to maintain
plant throughput, deposit in waste and tailings management facilities and conduct other environmental aspects
of the project. Figure 3 illustrates the location of Minto infrastructure in relation to the open pit and underground
Mineral Resources and Reserves.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Minto Mine is accessible via the Klondike Highway (No. 2) to Minto Landing on the east side of the Yukon
River. At Minto Landing, the mine
operates a barge across the river in
the
and
summer months
constructs an ice bridge in the
winter. The barge has the capacity
to carry one B-train transport
trailer and truck. There is typically
a 6 to 8-week period during each
break-up and freeze-up of the
Yukon River when there is no
access across the river. A 27 km
road
long, all-weather gravel
provides access from the West side
of the Yukon River to the project
site.

The mine access road crosses one
major tributary of the Yukon River,
Big Creek, via a single-lane steel
span bridge made with reinforced
concrete abutments and deck. The
highway, river crossing and gravel
mine access road are suitable for

FIGURE 3: MINTO INFRASTRUCTURE AND LOCATION OF MINERAL
RESOURCES AND MINERAL RESERVES

heavy transport traffic. During the river freeze and thaw periods, personnel are transported from Whitehorse
via charter air services that land on the 1,300 m-long airstrip located at the mine.

The climate in the Minto area of the Yukon is considered sub-arctic with short cool summers and long cold
winters. The average temperature in the summer is 10°C and the average temperature in the winter is -20°C.
Average precipitation is approximately 25 cm of rain equivalent per annum in the form of rain and snow. The
weather does not impede year round operation of the mine and processing plant except in short periods of harsh
cold temperatures (-48°C) that can cause open pit mining operations to be temporarily suspended.

The property lies in the Dawson Range, part of the Klondike Plateau, an uplifted surface that has been dissected
by erosion. Local topography consists of rounded rolling hills and ridges and broad valleys. The highest elevation
on the property is approximately 1,000 masl, compared to elevations of 460 m along the Yukon River. Slopes on
the property are relatively gentle and do not present accessibility problems. Bedrock outcrops can often be found
at the tops of hills and ridges. There are no risks of avalanche on the property.

Vegetation in the area is sub-Arctic boreal forest made up of largely spruce and poplar trees. The area has
experienced several wildfires over the years, the latest in 2010, and has no old-growth trees remaining. The fire
in 2010 led to the partial evacuation of the camp and a short stoppage in production.

The nearest services, including fuel, groceries, hotel, restaurant and medical clinic, are at Carmacks,
approximately 75 km south of Minto on Highway 2. Some services are available at Pelly Crossing, 35 km to the
East of Minto. The nearest large community is Whitehorse, with a population of approximately 28,000. It is
serviced with commercial flights daily from Vancouver, Edmonton and other northern communities. Whitehorse
is also connected via paved highways to British Columbia to the South, to Alaska to the West and to the port of
Skagway to the Southwest, where Minto concentrate is trucked for loading onto ocean-going vessels.

The Minto Mine has sufficient power, water, camp and personnel to continue operations through the life of mine
plan.

History

In 1970, a joint venture between Consolidated Silver Standard (formerly Silver Standard Mines Ltd.) and Asarco
Inc. conducted a regional stream sediment geochemical survey in the area. In 1971, the DEF claims were staked
by United Keno Explorations. That same year a joint venture formed with United Keno Hill Mines, Falconbridge
Nickel and Canadian Superior Explorations, to cover follow-up prospecting. Induced polarization (“IP”) and very-
long-frequency-electromagnetic (“VLF-EM”) geophysical surveys, soil sampling and mapping on the DEF claims
followed. In June 1973, a main mineralized body was discovered. There are no detailed descriptions of historical
sampling methods, preparation, or analysis by Asarco, and there is no useable core from this period. In 1974, a
winter road was built from Yukon Crossing and 58 diamond drillholes (11,228 m) on the Minto claims were
drilled. From 1975-1976 joint Feasibility studies were conducted.

In 1984, Consolidated Silver Standard transferred its interest in the Minto claims to Western Copper Holdings, a
subsidiary of Teck Corp. In 1989, Western Copper Holdings transferred its interest in the Minto claims to Teck
Corp. In 1993, MintoEx was formed. Asarco and Teck sold their interest in the Minto claims (and leases) for shares
in MintoEx and provided $375,000 in working capital. Asarco and Teck also received a net smelter royalty of 1.5%
to be divided evenly. In that same year, Falconbridge, the parent of United Keno Hill, sold its interest in the DEF
claims to MintoEx. Falconbridge was granted an option to repurchase the DEF claims on January 1, 2005 if the
deposit was not in production by then. An initial public offering of shares of MintoEx was completed in 1994.
There were 5,912,501 shares issued and outstanding with Asarco being the majority shareholder with 3,297,500
shares (55.8%).

In 1996, funding was arranged with Asarco to bring the deposit into production whereby Asarco would provide
up to $25M. Under the funding arrangement, Asarco would acquire a 70% interest in the project, MintoEx would

retain a 30% interest and remain as operator. That same year, MintoEx made the $1M payment to Falconbridge
for the DEF claims completing the consolidation of the Minto and DEF claims. Also in that year, a 16 km access
road was constructed including a barge landing site on the West side of the Yukon River and a bridge over Big
Creek. A further 12.8 km of road construction in 1997 was done to complete the new access road. Also in 1997,
a co-operation agreement was signed with the SFN. In 1999, a production licence was received.

From 1973 to 2001, most of the drill core samples were split using a mechanical wheel core splitter (in contrast
to a diamond saw). In the case of two holes drilled in 1993 for metallurgical grinding testing, the entire core
through the mineralized interval was utilized to improve the validity and reliability of the metallurgical tests.
Quality control procedures used during the 1973 to 2001 drill programs are not known, with the exception of 10
samples submitted for umpire analysis in 1994.

In 2001, most of the Asarco core and all of the Falconbridge core was destroyed by time and forest fire. A limited
amount of the old Asarco core that could be recovered was re-sampled in 2002. In June 2005, Sherwood acquired
the Minto property. In 2006, mill construction commenced. A C$85M debt package was arranged, forward sales
completed, and concentrate off-take agreement executed in October 2006. In 2007, a Power Purchase
Agreement for Minto was signed. That same year, the first copper-gold concentrates at Minto Mine were
produced and a resource estimate for the Area 2 deposit was completed. First concentrates from the Minto Mine
were delivered to the Port of Skagway, Alaska in July 2007. The Minto Mine declared commercial production and
the first Minto concentrates shipped from Skagway in October 2007. In 2008, Capstone acquired all outstanding
shares of Sherwood.

Geological Setting

The Minto Mine is found in the North-Northwest trending Carmacks Copper Belt along the eastern margin of the
Yukon- Tanana Composite Terrain. The Belt is host to several intrusion-related Cu-Au mineralized hydrothermal
systems. The Minto Property and surrounding area are underlain by plutonic rocks of the Granite Mountain
Batholith (the “Batholith”) of the Early Mesozoic Age. The component of the Batholith represented on the Minto
Property is the Early Jurassic Age Minto pluton and is predominantly of granodiorite composition. Other rock
types, albeit volumetrically insignificant, include thin dykes (typically less than 1 m in thickness) of simple quartz-
feldspar pegmatite, aplite, and an aphanitic- textured intermediate composition rock.

For ease of reference the Minto copper-gold-silver system is divided into seven mineralized areas within the
Minto deposit; from North to South they are: Minto North; Minto North 2 (formerly Inferno North); Minto Main;
Minto East; Minto East 2; Minto South (MSD-a consolidation of Area 2, Copper Keel, Area 118 and Wildfire
deposits that are now considered one continuous deposit); and Ridgetop. In 2014, we renamed the Fireweed
zone to Minto East 2 to reflect the continuity of mineralization between these zones. Each of these deposits
closely share a similar style of mineralization hosted by vertically stacked, shallow dipping deformation zones
within the intrusion. Remnants of the Main deposit are currently exposed in an exhausted open pit mine and
this geometry has been confirmed, with a similar geometry exposed in the exhausted Area 2 open pit. The other
deposits have drill-delineated Mineral Resources and/or Reserves but mineralization is not exposed at the
surface. These deposits and other mineral prospects define a general north-northwest trend informally called
the Priority Exploration Corridor (PEC).

Copper sulphide mineralization is found in the rocks that have a structurally imposed fabric, ranging from a weak
foliation through to a strongly developed gneissic banding. The contact relationship between the foliated
deformation zones and the massive phases of granodiorite is generally very sharp. These contacts do not exhibit
chilled margins and are considered by MintoEx geologists to be structural in nature, separating the variably
strained equivalents of the same or similar rock type.

The more highly strained deformation zones form sub-horizontal horizons and can be traced laterally for more
than 1,000 m in the drill core. They are often stacked in parallel to sub-parallel sequences and it is postulated

that the foliated granodiorite horizons represent healed, shallowly dipping shear zones within the Batholith;
theorized to have formed when the rocks passed through the brittle/ductile transformation zone in the earth’s
crust in transition from a deep emplacement environment of the Batholith to eventual exhumation. There is on-
going debate, however, regarding the stratigraphic, intrusive, or structural nature of the zones hosting the
foliation and mineralization. MintoEx engaged the Mineral Deposits Research Unit (“MDRU”) of the University
of British Columbia to help understand the mineral paragenesis and deformation history. No other recognized
deposit type compares directly with Minto mineralization. While an IOCG style for the Minto Deposit cannot be
unequivocally demonstrated, the authors are of the opinion that this style of deposit provides the most
consistent model for the current level of understanding.

Exploration

Mineral exploration on the Minto property has been conducted intermittently since 1971. Subsequent to the
discovery of the Minto Main deposit, which has been mined out, the adjacent southern half of the property has
undergone systematic brownfield exploration. Exploration on the northern half is more sporadic.

The exploration approach by MintoEx has been the systematic evaluation of modern electrical (chargeability);
geophysical methods by commissioning various “proof-of-concept” surveys over known mineralization and then
expanding survey coverage outward into untested areas using these methods that are calibrated to known
deposits. The predominant electrical geophysical methods used are Gradient Array Induced Potential (“GAIP”),
Dipole-Dipole Induced Potential, and Titan-24 DC Induced Potential. Drill targeting has been predominantly
based upon the coincidence of an anomaly in one of the electrical (chargeability) methods with an anomaly in
the 1993 total field airborne magnetic survey (“MAG”).

GAIP surveys were conducted in 2006 and 2007 with a combined total of 171 line kilometres. Both surveys were
conducted by Aurora Geosciences of Whitehorse, Yukon. The GAIP method proved a successful exploration tool
for locating near- surface mineralization when combined with magnetics; the most notable discovery attributed
to this being Minto North.

A modified pole-dipole geophysical survey was conducted in 2009 over areas west and north of the DEF fault.
The survey targeted areas of known historical geophysical anomalies, as well as overlapping GAIP coverage
where permafrost or deep overburden ground conditions returned poor results. A total of 20.6 line kilometres
were completed by Aurora Geosciences. The results of the survey indicated two separate anomalies, one
approximately 1,000m due west of Minto North, and the second approximately 2,400m due north of Minto
North. Drill testing results for each anomaly were enigmatic in that no significant copper-gold mineralization was
encountered despite the intersection of multiple, thick sequences of foliated favorable host rock.

Three separate mise-a-la-masse drillhole IP surveys were completed in 2009, 2010, and 2011, with all three
surveys being completed by Aurora Geosciences. The results of the surveys were useful in vectoring step-out
drilling at Copper Keel NE and at Inferno.

Another new exploration tool implemented in 2009 included the completion of the deep penetrating Titan-24
geophysical survey of the Minto PEC from July 29 to August 8, 2009. The survey included three double spread
direct current resistivity/induced polarization (“DC/IP”) and magnetotelluric (“MT”) lines totaling 21 line
kilometres. An expanded Titan- 24 DC/IP survey covering about 85% of the property was completed from May
19 to July 15, 2010. Titan-24 surveying for both 2009 and 2010 programs were conducted by Quantec Geoscience
of Toronto, Ontario.

The 2009 Titan-24 survey showed a coincidence of significant copper sulphide mineralization of known deposits
with chargeability anomalies as well as several previously unknown deep anomalies. The most attractive deep
targets were located south of Ridgetop, flanking the Minto Main Pit (west, southeast, northwest, and northeast),
and flanking the Minto North deposit (east, west, and north). The survey also identified a near surface target
southwest of Ridgetop. MT results indicated steeply dipping fault-like structures with an estimated 70⁰ dip to

the north, the most prominent being the DEF fault. Preliminary drill testing of the Titan-24 targets spanned from
September 4 to October 17, 2009. Results of the drilling were variable returning promising copper mineralization
intersections in nine drill holes at Ridgetop Southwest and significant copper-gold mineralization in 2 holes
southeast of Minto Pit (Minto East Discovery); however, in nine holes at eight other separate targets no
significant copper-gold mineralization was encountered.

Similar to the 2009 Titan-24 survey, the expanded 2010 survey identified previously unknown moderate to deep
anomalies; the most attractive new targets were located east of the Copper Keel trend (Wildfire), at Copper Keel
NE, southwest of Ridgetop, at Airstrip SW, and northeast of the Minto airstrip. Drill testing of the 2010 Titan-24
chargeability targets spanned from June 25 to November 5, 2010. Further testing of select Titan-24 targets
continued throughout the 2011 drilling campaign. Results of the 2010 drilling were variable returning significant
copper mineralization in more than 70 drillholes east of the Copper Keel trend (Wildfire discovery), and in four
holes northeast of the Minto Pit (Inferno discovery). Promising copper-gold mineralization was observed in three
holes southwest of Area 118, four holes at Copper Keel NE, and in one hole at Ridgetop NE. No significant results
were encountered in five holes at three other separate targets. Results of the 2011 drilling were variable
returning significant copper mineralization in more than 70 drillholes at Copper Keel NE and 26 holes at the
Minto East 2 Discovery. Similar to 2010, some of the 2011 tested targets did not encounter significant copper-
gold mineralization despite the intersection of multiple, thick sequences of foliated favorable host rock.

Future exploration programs will be more reliant solely on electrical/chargeability methods targeting deeper
mineralization as the near-surface potential and discrete magnetic bull’s-eyes have largely been targeted.
MintoEx sees good exploration potential in the area north of the DEF fault, as evidenced by the discovery of the
high-grade Minto North deposit early in 2009, the Minto North 2 prospect in late 2010, and the Minto North 2
deposit in 2012. Magnetic data in areas located north of Minto North plus areas West and East respectively of
the PEC may still be useful as these regions are still relatively under explored.

In 2009, several other historic bedrock copper occurrences discovered in the 1970’s North of the DEF fault were
relocated and confirmed. In addition, various copper-in-soil geochemical anomalies, often coincident with
magnetic geophysical anomalies, occur throughout the property and many of them remain untested. However,
further understanding of the bedrock geology north of the DEF fault is required before many of these targets can
be properly assessed and placed in perspective. No exploration has been undertaken since 2012.

Mineralization

The primary hypogene sulphide mineralization consists of chalcopyrite, bornite, euhedral chalcocite, and minor
pyrite. Metallurgical testing also indicates the presence of covellite, although this sulphide species has never
been positively logged macroscopically. Texturally, sulphide minerals predominantly occur as disseminations and
foliaform stringers along foliation planes in the deformed granodiorite (i.e. sulphide stringers tend to follow the
foliation planes). Occasionally, coarse free gold is observed associated with chloritic or epidote lined fractures
that crosscut the sulphide mineralization. Sulphide mineralization is always accompanied by variable amounts of
magnetite mineralization and biotite alteration. While these minerals occur in the non-deformed rocks they are
present in the mineralized horizons in a much greater abundance in an order of magnitude greater than
background.

Massive mineralization occurs locally over intervals exceeding 0.5 m in thickness and semi-massive
mineralization over several metres in thickness may occur. In these sulphide rich areas, textures often resemble
those seen in magmatic sulphide zones with sulphide mineralization interstitial to the rock forming silicate
minerals. The higher-grade portion of the Minto Main deposits roughly corresponds to the bornite zone where
locally concentrations of bornite up to 8% by volume are seen. The precious metal grades are elevated in the
bornite zone (very fine gold and electrum occur as inclusions in bornite) and occurrences of coarse grained native
gold are noted almost exclusively in bornite-rich material. The chalcopyrite zone is characterized by the metallic
mineral assemblage of chalcopyrite-pyrite +/- very minor bornite and magnetite. Empirical observations indicate

the highest concentrations of bornite are associated with coarse grained, disseminated and stringer-style
magnetite mineralization, up to 20% by volume locally.

Pervasive, strong potassic alteration occurs within the flat lying zones of mineralization, and is the predominant
alteration assemblage observed in all of the Minto deposits. The potassic alteration assemblage is characterized
by elevated biotite contents and minor secondary potassium-feldspar overgrowth on plagioclase relative to the
more massive textured country rock. Additional alteration includes the replacement of mafic minerals by
secondary chlorite, epidote, or sericite observed both in mineralized and waste rock interstitially or fracture/vein
proximal, as well as variable degrees of hematization of feldspars. Minor carbonate overprint is occasionally
observed associated with secondary biotite. Silicification is present but not pervasive in the Minto deposits.

The Minto North, Minto East, and Minto East 2 Deposits exhibit a zoning from West to East. High-grade bornite-
dominant mineralization is observed in the West with lower grade chalcopyrite-dominant mineralization in the
East. Bornite mineralization occurs as strong disseminations and foliaform stringers locally >10% to occasional
semi-massive to massive lenses up to 2 m in thickness. Mineralization at the Area 2/118/Copper Keel regions of
the Minto South Deposit and at Minto North 2 is distinct in that mineralization is predominantly disseminated
(plus occasional foliaform stringers) and the semi-massive to massive sulphide mineralization is absent; as a
whole the mineralization is more homogeneous and consistent as compared to Minto North or Minto Main.
Mineralization at both Ridgetop and the Wildfire region of Minto South are subdivided into the near surface
horizons that have been affected by supergene oxidation and the more typical primary sulphide mineralization
of the deeper zones. Chalcopyrite is the dominant sulphide in the lower zones, and bornite is only observed in
minor amounts. Texturally, chalcopyrite occurs as disseminations and foliaform stringers, and is rarely observed
as semi-massive to massive bands. Magnetite is coarse grained, disseminated, stringer-style, and can occur in
bands up to 0.3 m in thickness, up to 20% volume locally.

Supergene mineralization occurs proximal to near-surface extension of the primary mineralization and beneath
the Cretaceous conglomerate. Chalcocite is the prime mineral in these horizons along with secondary malachite,
minor azurite and minor native copper. Observations of foliated and even copper mineralized cobbles in drilling
in conglomerate
indicate that “Minto-type” mineralization was exposed, eroded and reincorporated
sedimentary deposits by the Cretaceous Age.

Structural deformation includes the ore-bearing deformation zones, as well as folding present on the regional to
micro- scale. Within the deformation zones the foliation exhibits highly variable orientations with the presence
of small-scale (several centimetres in amplitude) folds. The ore-bearing zones are also occasionally folded on a
scale of several hundred metres. The larger-scale folds appear to be gentle folds with North-South axial traces.
Late brittle fracturing and faulting is noted throughout the property area; some of these faults have
displacements significant enough to compartmentalize the deposits.

Drilling

There are currently more than 1,400 diamond drillholes within a roughly 16 km2 area at Minto. Under the direct
supervision of MintoEx mine geologists, MintoEx drilled a total of 1,145 m in 17 holes of NQ-diameter on the
Minto property at Area 2 between May and December 2016 and a sole 126 m drillhole at Minto North using the
contractor, Driftwood Diamond Drilling Ltd., of Smithers, BC. MintoEx drilled a total of 115,223 m in 401 vertical
and 37 angled, NQ and NTW-diameter, diamond drillholes at the Minto South Deposit from February 2006 to
July 2011, October 2014 to March 2015, July to December 2016 and February 2017. The average drillhole length
is 257 m. Drillhole spacing ranges between 30 m to 60 m at the Area 2 resource sub-domain, 40 m at the Area
118 resource sub-domain, and 40 m to 60 m at the Wildfire and Copper Keel sub-domains. At Ridgetop, MintoEx
drilled a total of 20,227 m in 159 NQ-diameter, vertical diamond drillholes, 13 angled diamond drillholes and 5
HQ-diameter vertical diamond drillholes from May 2007 to September 2009 and September to November 2017.
The average length of the Ridgetop drillholes is 114 m. Drillhole collars are spaced between 20 m and 60 m apart.
The mineralized zones dip moderately to the northeast. At Minto North, MintoEx drilled a total of 11,548 m in

71 vertical and 17 angled, NQ and NTW-diameter, diamond drillholes from January to October 2009. The average
drillhole length is 130 m. Drillhole collars are spaced between 15 m and 20 m apart. Mineralized zones are
shallowly dipping to the northwest. At Minto East, MintoEx drilled a total of 12,817 m in 13 vertical and 25 angled,
NQ-diameter, diamond drillholes from April 2007 to August 2010, December 2015 and September 2017. The
average drillhole length is 337 m, which are spaced approximately 40 m apart. Mineralized zones are shallowly
dipping to the northwest. At Minto East 2, MintoEx drilled a total of 24,295 m in 13 vertical and 46 angled, NQ-
diameter, diamond drillholes from 2011 to 2012. The average drillhole length is 412 m. Drillhole collars are
spaced between 40 m and 80 m apart. At Minto North 2, MintoEx drilled a total of 1,566 m in 9 vertical, NQ-
diameter, diamond drillholes from March to April 2012. The average drillhole length is 174 m. Drillhole collars
are spaced from 40 to 80 m apart. The mineralized zone is sub-horizontal.

A review of drill hole spacing was conducted for various mineralization zones in 2014 and it was identified that
in-fill drilling was appropriate to reduce the drill spacing in some areas. The first area targeted was the planned
pushback of the Area 2 pit (Area 2 Stage 3), with drilling conducted by Driftwood Diamond Drilling Ltd. in the fall
of 2014. Nineteen holes were drilled, for a total of 3,026 metres, reducing the drill spacing to an approximate 40
m grid pattern. The program continued in January 2015 with an additional four NQ and 2 angled HQ drillholes
totalling 959 metres in the Area 2 Stage 3 Area. The two angled holes were drilled for geotechnical assessment
of potential pit wall stability. Drilling then continued to mid-March 2015, targeting gaps in drill coverage in the
Area 118 underground area. Fourteen NQ holes, totalling 3,112 metres were completed in Area 118. Drilling was
then put on hiatus until, lastly, one 369 metre drillhole for geo- mechanical assessment was drilled into Minto
East during December 2015.

Drillhole collar locations were initially located using a differential GPS unit, followed by survey using a Trimble
G8 GPS unit after completion of the drillhole. Since 2008, downhole survey measurements were taken primarily
using a Reflex™ Flexit downhole survey tool. Although local magnetite concentrations sometimes prevented
measurement of azimuth deviations, the tool provided overall readings that were realistic showing minor
deviation in azimuth and dip. In 2010 a Reflex™ Maxibor II, which is not magnetically susceptible, was used in 22
drillholes in areas known to be highly magnetic. Between 2008 and 2015 we collected magnetic susceptibility
data, but we determined that high magnetic susceptibility does not imply the presence of mineralization, even
though magnetic susceptibility is elevated in mineralized intervals.

Mineralized intervals measured in the vertical drillholes are considered to be nearly true width because of the
shallow-dipping nature of the mineralization. Drillcore is transported from the drill rig to the logging facility by
the drilling contractor, where MintoEx personnel log it for geological, sampling, and geotechnical purposes.
Geological data including lithology, structure, alteration, mineralization, and density is recorded for all drillholes.
All drillcore is photographed.

Sampling and Analysis

Exploration work by MintoEx was conducted using a quality assurance and quality control program generally
meeting industry best practices. All aspects of the exploration data acquisition and management including
surveying, drilling, sampling, sample security, and assaying and database management were conducted under
the supervision of appropriately qualified geologists and include written field procedures and verifications.

Our quality assurance protocols require certified reference materials, sample blanks, and duplicate samples to
be regularly inserted into the sample stream. Our samples have generally been sent to the ALS Geochemistry
(“ALS”) laboratory in Vancouver, but we have also used SGS Canada Inc. (“SGS”) for parts of our drilling programs.
MintoEx inserted one each of a certified reference material, blank, coarse reject duplicate and pulp reject
duplicate with every 16 core samples until 2014. In 2014, a field duplicate sample, the other half of the core, was
added to the suite of control samples except where whole core is required for metallurgical or geotechnical
testing. The duplicate control samples are cycled between field duplicates, coarse reject duplicates and pulp
reject duplicates within every batch of 20 samples including control samples. In 2017, field duplicates were not

routinely collected in order to preserve material for further metallurgical study. Umpire assaying of pulps at a
secondary laboratory was conducted periodically, typically involving analysis of 0.5% or more of the core
samples. Other quality control measures include random checks of drillhole collar locations using handheld GPS
units and comparing entries in our database to original data sources.

Drill core samples are normally 1.5 m in length in foliated granodiorite (mineralized) and 3.0 m in length in the
unfoliated granodiorite (waste) rock. The geological contact between these units is generally sharp and it is
respected during sampling. Shoulder samples are taken in the waste at both the upper and lower contacts,
consisting of a 1.5 m and a 1.0 m sample. Unfoliated granodiorite units between mineralized units are completely
sampled if they are 10 m in thickness or less between mineralized, foliated units, otherwise they are sampled at
the geologist’s discretion.

Bulk density measurements are taken in both mineralized and waste material. Since 2005, a weight-in-air-weight-
in-water method is used for bulk density determinations. In 2016 and 2017, bulk density measurements were
taken on whole sample intervals. From 2005-2015, measurements were taken at approximately every 1-3 m in
mineralized zones, every 5 m in poorly mineralized zones, and every 20-30 m in waste zones.

Bulk density sampling method accuracy is ensured by measuring against an aluminum cylinder as a reference
material with a known density. Bulk density sample precision is assessed through duplicate measurements.

The MintoEx drillhole database was audited by SRK and Garth Kirkham several times between 2005 and 2012, in
addition to internal validations. No significant errors were found. Furthermore, before Mineral Resource
updates, checks are undertaken on 10% of all new drillhole data in the database.

We consider our samples to be representative and we are not aware of any factors that may have resulted in
sample biases. We do not know of any drilling, sampling, or recovery factors that could materially impact the
accuracy or reliability of the drilling results.

Security of Samples

Only employees and contractors are permitted in the core logging facility when unsampled drillcore is ready to
be cut and samples are awaiting transport. Sample bags were sealed using cable ties. The cut samples were
bagged for shipment, then stored on pallets at the site warehouse until a backhaul to Whitehorse became
available, typically two to three times per week. When the sample shipment left site, the Chief Geologist or
designate emailed a submittal form to ALS. The expeditor transferred the samples from the shipping contractor
to the ALS. At that time, ALS sent chain of custody notification to site. No samples were lost or tampered with.

Mineral Resource and Mineral Reserve Estimates

The Mineral Resource estimates for the Minto South Deposit (“MSD”) and Ridgetop deposits were completed
under the supervision of Dr. Wayne Barnett, Ph.D., P.Geo., of SRK Consulting (Canada) Inc. (“SRK”), an
independent Qualified Person as defined by NI 43-101. The effective date of the MSD resource estimate is May
31, 2015 and the effective date of the Ridgetop resource estimate is August 30, 2010.

The MSD comprises the Area 2 (including the Copper Keel extension), Area 118, and Wildfire zones that form a
part of the same system of mineralization. The most recent geological model in 2015 was created using Leapfrog
Geo™ to update the foliated and non-foliated units, weathering horizons, and key fault structures offsetting the
mineralization from the previous model created in GEMS™.

In 2017, the Copper Keel zone resource model was updated to reflect improvements to the geological
interpretation using past drilling. The estimation methodology followed from the 2015 MSD estimate (discussed
below). Outlier samples were capped before compositing. Data were composited to 1.5 m lengths. Exploratory
data analysis indicated gold and copper were highly correlated, so estimation parameters for these elements
were the same. Copper and gold were estimated by ordinary kriging into blocks measuring 10 m Easting by 10 m

Northing by 3 m Elevation. Silver and bulk density were estimated using inverse-distance-weighting. Sample
search ellipses were oriented to match the directions of the modelled geology. Estimation validation included
visual checks, comparison of average grades to assess global bias, and generation of swath plots to assess
smoothing of blocks compared to the declustered, input, composite data. In 2016, the underground P-lens of
the Area 2 deposit was updated to reflect improved geological domaining by the Minto Ex Geology department.
The grades were estimated using the same parameters used in the June 2015 MSD iteration.

For the Ridgetop deposit, a similar process was followed to model the geology and undertake the Mineral
Resources estimate, although it was completed entirely within GEMS™ software. The Ridgetop resource model
will be updated in Q1 2018 to reflect the 2017 infill drilling.

In 2016, Mineral Resource reporting at MSD was reviewed in collaboration with SRK to ensure the potential
economic viability of Mineral Resources above a 0.5% copper cut-off grade. With the completion of the Main,
Area 2 and Area 118 open pits, along with underground mining of the lenses below these pits, we noted that
marginal material originally contained within an optimized pit shell demonstrating potential for economic
extraction was no longer captured. We decided to review the potential economic viability of MSD Mineral
Resources in the context of an underground mining scenario above a 1% copper cut-off grade, which is
considered to demonstrate potential for economic extraction based on Minto’s operational performance data.
The net result was a 11.2 kt reduction of Measured and Indicated Resources at an average grade of 0.72% Cu.
An additional 9.6 kt of Inferred Resources at an average grade 0.70% Cu were also removed.

With the continued mining depletion of the Area 2 pit, we repeated this exercise at the end of 2017. The
optimized pit shell demonstrating potential economic viability continued to shrink, effectively eliminating all
material outside of the designed pit limits that could be accessed by open-pit mining. This resulted in a reduction
of 12.7 kt of Measured and Indicated Resources with an average grade of 0.80% Cu, and 10.5 kt of Inferred
Resources with an average grade of 0.68% Cu. Outside of the Area 2 open pit, all remaining Resources at MSD
are reported above a 1.0% copper cut-off grade and demonstrate potential for economic extraction in an
underground mining scenario.

The Minto East deposit was updated in 2016 by Jeremy Vincent, P.Geo., Manager of Production and
Development Geology, and a Qualified Person as defined by NI 43-101, using the updated domain solid that was
modelled by the Minto Ex Geology team. The revised interpretation provides a tighter confinement of the
mineable mineralization that is more suitable for underground mining by excluding obvious intervals of barren
foliated granodiorite oriented sub-parallel to the mineralization from the interpretation. The Indicated
classification boundary was adjusted slightly to take into consideration the 40 m drillhole spacing requirement.

Garth Kirkham, P.Geo., FGC, an independent Qualified Person as defined by NI 43-101, is responsible for the
Minto North, Minto East 2, and Minto North 2 resource estimates. The effective date of the Minto North resource
estimate is December 1, 2009. Mining of this pit commenced in November 2015 and was completed in October
2016. A total of 477 kt of Measured and Indicated Resources with an average grade of 0.97% Cu remain after
removal of Resources sterilized by the open pit (60 kt at 2.67% Cu).

The effective date of the Minto North 2 resource estimate is October 25, 2012. The Minto North 2 geology was
modelled using cross-sectional interpretations considering lithology, copper grade and site knowledge. Samples
were composited to 1.5 m lengths. Similar to the MSD and Ridgetop deposits, outlier samples were not top cut,
but their influence was lessened by the use of restricted search distances above specified grade thresholds.
Grades were estimated into blocks measuring 10 m Easting x 10 m Northing x 3 m Elevation using ordinary
kriging, while bulk density was estimated using inverse distance squared. Search ellipses were oriented to match
the directions of the modelled geology. Estimation validation included visual checks, comparison of average
grades to assess global bias, and generation of swath plots to assess smoothing of blocks compared to the
declustered, input, composite data.

The effective date of the Minto East 2 resource estimates is May 1, 2015. The Minto East 2 deposit is an
underground target, located approximately 300 m below the surface. In 2015, the 100, 300, 500, 700, 800, and
900 zones in Minto East 2 were re-modelled using Leapfrog Geo™. Samples were composited to 2.5 m lengths
to align with the selective mining unit. Outlier samples greater than 6.0% copper, 2.9 g/t Au, and 24 g/t Ag were
top cut to limit the influence of high-grade samples. Grades were estimated into blocks measuring 5 m Easting x
5 m Northing x 5 m Elevation using Ordinary Kriging with a single-pass search strategy. Bulk density was
estimated using inverse-distance weighting. The search ellipses were oriented to match the modelled geology.
Estimation validation included visual checks, comparison of average grades to assess global bias, and generation
of swath plots to assess smoothing of blocks compared to the de-clustered, input, composite data.

Mineral Resources reported in Table 5 are based on the Mineral Resources models estimated by Dr. Wayne
Barnett, P. Geo., Garth Kirkham, P.Geo., FGC, and Jeremy Vincent, P.Geo., and reflect mining activities until
December 31, 2017. Discounting of the Mineral Resource models for mining activities was undertaken by Douglas
McIlveen, P.Geo., Chief Geologist with MintoEx, and a Qualified Person as defined by NI 43-101. Block model
depletion from mining activities in 2017 totalled 1,410 kt at an average grade of 1.38% Cu.

All open-pit Mineral Resources are presented above a 0.5% copper cut-off, while underground Resources are
reported above a 1.0% Cu cut-off grade. Mineral Resources are reported inclusive of Mineral Reserves. Stockpiles
are reported as Measured Mineral Resources. Measured and Indicated Resources as at December 31, 2017 total
16,548 kt at an average grade of 1.42% Cu.

Classification

TABLE 5: MINTO MINE ESTIMATED MINERAL RESOURCES AS AT DECEMBER 31, 2017
Gold
(g/t)

Contained Copper Contained Silver Contained Gold
(koz)

Tonnes
(kt)

Copper
(%)

Silver
(g/t)

(koz)

(kt)

Measured (M)

Indicated (I)
Total (M+I)
Inferred

Measured (M)
Indicated (I)
Total (M+I)
Inferred

1,685

5,185

6,870
2,370

1,531
3,534

5,065
318

221
257

477
28

-
890

890
124

Minto South Deposit (MSD) (Open Pit and Underground)
0.56
1.48

1.64

1.60
1.53

0.96
0.87

0.90
0.75

0.94
1.00

0.97
0.70

-
2.40

2.40
1.48

5
6

2
3

3
2

3
6

0.61

0.60
0.56
Ridgetop (Open Pit)
0.25
0.30

0.28
0.13
Minto North (Open Pit)
0.21
0.61

4
0.42
0.32
3
Minto East (Underground)
-
-
1.03
7

7
5

1.03
0.60

110
36

15
31

45
2

2
3

5
0

-
21

21
2

250

878

1,128
461

105
326

431
16

20
46

67
3

-
201

201
20

30.3

101.9

132.2
42.9

12.3
34.1

46.4
1.3

1.5
5.0

6.5
0.3

-
29.6

29.6
2.5

Measured (M)
Indicated (I)
Total (M+I)
Inferred

Measured (M)
Indicated (I)

Total (M+I)
Inferred

-
2,778

2,778
1,889

-
-

-
1,419

-
1.72

1.72
1.38

-
-

-
1.42

Stockpiles (M)

468

1.02

Measured (M)
Indicated (I)

Total (M+I)

Inferred

3,904
12,644

16,548
6,147

1.19
1.48

1.42
1.42

Minto East 2 (Underground)
-
-
0.80
7

-
48

7
4

0.80
0.50
Minto North 2 (formerly Inferno North)
-
-

48
26

-
-

-
5

-
0.51
Stockpiles

-
20

5
0.25
Minto – Total Mineral Resources
46
0.38
188
0.60

3
5

5
5

0.55
0.51

234
87

-
629

629
247

-
-

-
214

422
2,080

2,502
962

-
71.8

71.8
30.1

-
-

-
23.3

3.8

47.9
242.4

290.3
100.4

NOTE: Dr. Wayne Barnett, Ph.D., P.Geo., of SRK Consulting (Canada) Inc. (“SRK”), is the Qualified Person responsible for the Mineral Resource estimates of
the MSD and Ridgetop deposits. Garth Kirkham, P.Geo., FGC, of Kirkham Geosystems Ltd., is the Qualified Person responsible for the Mineral Resource
estimates of the Minto North, Minto East 2, and Minto North 2 deposits. Jeremy Vincent, P.Geo., Manager of Production and Development Geology at Capstone is
the Qualified Person responsible for the estimate of the Minto East mineral deposit. Mineral Resources are reported as at December 31, 2017 above a 0.5% Cu cut-
off grade for potential open-pit scenarios and above a 1.0% Cu cut-off grade for underground mining scenarios. Stockpiles are treated as Measured
Mineral Resources. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. Mineral Resources are presented
inclusive of Mineral Reserves. Totals may not sum exactly due to rounding.

The Mineral Reserve estimates for the MSD – Area 2 open pit were completed by Pooya Mohseni, P.Eng., Director
of Technical Services at Capstone, and a Qualified Person as defined by NI 43-101. The Mineral Reserve estimates
were generated using a NSR model that estimates metal prices, exchange rates, mining dilution, mill recovery,
concentrate grade, and offsite costs. Economic pit shells were generated using the Whittle™ mine planning
software. The pit shells were further optimized by Minto personnel to developed detailed pit designs. In the
fourth quarter of 2015, an engineering change occurred whereby the Area 2 Pit Mineral Reserves were updated
to reflect the changes to MSD block model. In 2017, the Area 2 Pit design was revised based on the decision to
continue mining. The eastern wall of the pit was pushed back to gain access to deeper ore associated with the
east-dipping L- and M-lenses. This increased tonnage by 809 kt and decreased the average copper grade by 12%
to 1.07% Cu, while increasing contained copper metal by 77% (7 kt).

The Mineral Reserves for the MSD – Area 2 underground, Minto East underground, and MSD – Copper Keel
underground were completed by Pooya Mohseni, P.Eng. The Mineral Reserves estimates were generated using
a NSR model and then reported above a NSR cut-off value of C$ 64.40/t. The success in MSD – Area 118 and Area
2 (M-zone) mining established the viability of the long-hole mining method at Minto. All underground Reserves
for the remaining MSD – Area 2 underground, Minto East underground, and MSD – Copper Keel underground
zones are based on the long-hole mining method.

In early 2017, the development and stoping plan in the Area 2 underground was optimized. This increased
tonnage by 3% and the average copper grade by 7% to 2.20% Cu, leading to an 10% overall increase in contained
copper metal (1 kt). Underground mining of this zone is scheduled for completion in Q2 2018. Design updates
are scheduled for the MSD – Copper Keel and Minto East underground zones in early 2018.

The 2017 Mineral Reserve depletion from mining of the Area 2 open pit and underground zones totalled 1,275 kt
with an average grade of 1.30% Cu.

Kevin Cymbalisty, P.Eng., Mine Manager at Minto Ex, and a Qualified Person as defined by NI 43-101, oversaw
the process of discounting the Mineral Reserves models for mining activity until December 31, 2017 (Table 6).

Classification

Proven

Probable

Total

Proven
Probable

Total

Proven
Probable

Total

Proven
Probable

Total

Proven
Probable

Total

Proven
Probable

Proven

Total

Proven

Probable

Total Minto

TABLE 6: MINTO MINE ESTIMATED MINERAL RESERVES AS AT DECEMBER 31, 2017
Gold
(g/t)

Contained Copper Contained Silver Contained Gold
(koz)

Tonnes
(kt)

Copper
(%)

Silver
(g/t)

(koz)

(kt)

1
622

623

-
617

617

-
120

120

-
1,616

1,616

-
-

468

469
2,975

3,444

0.76
1.05

1.05

-
2.09

2.09

-
2.47

2.47

-
1.73

1.73

-
-

1.02

1.02
1.69

1.60

Minto North Open Pit
-

-
MSD - Area 2 Open Pit

0.18
0.27

3
1

0.27
Minto East Underground
-
-
0.90
6

0
7

-
13

13
0.90
MSD – Area 2 / 118 Underground
-
-
3
1.30

-
15

3
1.30
MSD – Copper Keel Underground

-
6

-
0.63

0.63
6
MSD - Wildfire Underground
-
-
-
-

3
5

-
Stockpiles
0.25

0.25
Total Minto Reserves
0.25
0.63

0.58

-
28

-
-

5
50

0
17

-
119

119

-
56

-
315

315

-
-

46
507

553

0.0
5.4

5.4

17.8
17.8

-
5.0

5.0

-
32.5

32.5

-
-

3.8

60.7

64.4

NOTE: Pooya Mohseni, P.Eng., Director of Technical Services at Capstone, is the Qualified Person responsible for the estimation of the Minto Mineral
Reserves. Mineral Reserves are reported as at December 31, 2017. Mineral Reserves are reported above a cut-off grade of 0.5% Cu for open-pit material and
above a US$ 64.40/t NSR cut-off for underground material. Stockpiles are treated as Proven Mineral Reserves. Metal price assumptions used to determine
NSR cut-off for all deposits are: Cu=$2.50, Au=$300, Ag=$3.90. Process recoveries for all deposits are: Cu=91%, Au=70, Ag=78%. Totals may not sum exactly
due to rounding.

Mining Operations

The Minto Mine is an open pit and underground mining operation that commenced in 2007. Open pit mining
uses conventional drill and blast, and a truck and shovel contractor fleet. Pit designs vary on the site but are
typically 12 m benches with a double bench configuration. Underground operations primarily use long-hole open
stoping. Access to the underground workings is via a single service and haulage ramp.

Run-of-mine ore is stockpiled on surface depending on the copper grade of the material. A loader transports the
stockpiled material to the primary crusher which feeds a gyratory crusher. The crushed product is then fed to a
conventional grinding and flotations circuit to produce a bulk copper concentrate. The concentrate is thickened
and filtered to produce product suitable for transport. The product is transported by truck to Skagway, Alaska
for export.

In 2017 Capstone management elected to continue mining operations in response to improved market
conditions. Instead of putting the operation into care and maintenance, the Area 2 pit limit was expanded to the
east. This pit is scheduled to be completed in Q1 2018. The Ridgetop deposit is being re-evaluated for open-pit
mining in Q2 2018 as an additional source of mill feed.

Underground mining activities focused on production from the Area 2 underground while simultaneously driving
access to the Minto East deposit, which was reached in late Q4 2017. In 2018, development to the Copper Keel
zone will be completed.

The Yukon Environmental and Socio-economic Assessment Board completed its evaluation for the Phase V/VI
expansion in April 2014. An amended and renewed Quartz Mining Licence for the entire Phase V/VI expansion
was received in December 2014. Minto received its Water Use Licence amendment for Phase V/VI operations in
August 2015. We intended to apply for an amendment in 2018 for Phase VII to add Minto East 2 and Minto North
underground to the license.

Federal and Territorial income tax applies to the Minto Mine. Taxable income generally starts with the before-
tax cash flow and essentially deducts the cost of building and developing the mine and mill (Class 41a un-
depreciated capital costs (“UCC”), Canadian exploration expenses (“CEE”) and Canadian development expense
(“CDE”)) as would be expected over the life of the mine and as allowed by the Canadian tax rules. Generally,
Class 41a UCC and CEE can be deducted 100% against profit from the mine while CDE can only be deducted on a
declining balance basis at 30% per year. The losses that are generated in the first few years of mine operation
are deducted against income in later years.

The Yukon Quartz Mining Act (“QMA”) Royalty also starts with before-tax cash flow from the cash flow portion
of the model and deducts depreciation at 15% per year on a straight-line basis for the mine capital assets and
mill capital assets. It deducts deferred pre-operating costs that are not capital assets on a unit of production
method. The Yukon QMA Royalty does not have a loss carryover or carry back provision. Taxes are paid at rates
that increase as income increases to a maximum of 12%.

Due to improvements in the outlook for copper prices during 2017, management has updated its mine plan for
Minto, bringing a number of previously impaired deposits back into the mine plan. This resulted in an impairment
reversal of $20.6 million being recorded during the year ended December 31, 2017. The recoverable amount was
determined using a discounted cash flow model based on the most current operating plan, using management’s
best estimates, taking into account the forward markets or analyst consensus on metal prices and exchange
rates. Management used an after-tax discount rate of 8%. The long-term metal price assumption used for the
estimation of Mineral Reserves at Minto remains $2.50 per pound of copper.

Exploration and Development

No exploration activities are slated at Minto for 2018. Infill drilling campaigns are proposed in 2018 for the
Copper Keel, Wildfire, and Minto East 2 deposits, as well as additional underground targets ahead of anticipated

resource updates and Mineral Reserve evaluations. These programs comprise 66 drillholes totaling
approximately 17,000 m with a proposed budget of over US$ 2M. We anticipate infill drilling at Minto North 2 in
2019.

Purchase Agreement

The Transaction is expected to close in the second quarter of 2018.

3.3

Other Properties

Santo Domingo Project (Chile)

With copper and iron prices continuing to deteriorate in 2015, Capstone suspended most work on its Santo
Domingo project in September 2015, and downsized the Santiago and Diego de Almagro offices in Chile.

A number of preliminary internal studies were carried out between 2015 and 2017 to evaluate development
options for copper only and/or copper with a deferred option to expand to iron production in the future. A
scoping level study evaluating the economics of combining Santo Domingo with another copper deposit under a
central processing facility was also undertaken. Following consideration of a Santo Domingo copper-only project
and combined copper-only project, the highest return is expected to be generated by the copper-iron project
originally envisioned in the 2014 Santo Domingo Report.

Prior to the suspension of the project in 2015, the Environmental Impact Assessment was approved and permit
applications were completed for six long-lead permits. With market conditions improving in 2017, the majority
of these applications were submitted in July 2017 and are going through the regulatory process. In 2018,
Capstone will be focused on reviewing regional opportunities for port and iron ore infrastructure synergies and
has commenced planning activities to update the 2014 Santo Domingo Report to reflect current economic and
operational inputs, with the most significant being the substantial reduction in power costs since the 2014 Santo
Domingo Report. Reference should be made to the consolidated financial statements which are available in their
entirety on SEDAR at www.sedar.com under Capstone’s profile.

The Santo Domingo Project is the subject of a report titled “Santo Domingo Project, Region III, Chile, NI 43-101
Technical Report on Feasibility Study” dated May 22, 2014 (the “Santo Domingo Report”), that summarizes the
Feasibility Study completed on the Project in 2014. This technical report was authored by Joyce Maycock, P.Eng.,
David Frost, FAusIMM, Vikram Khera, P.Eng., Carlos Guzman, FAusIMM, Roy Betinol, P.Eng., Hans Gopfert,
P.Eng., Anna Klimek, P.Eng., David Rennie, P.Eng., and Tom Kerr, P.Eng., each a Qualified Person as defined in NI
43-101. The following descriptions of the Santo Domingo Project are based on assumptions, qualifications and
procedures which are set out in the Santo Domingo NI 43-101 Technical Report. Reference should be made to
the full text of this report which is available in its entirety on SEDAR at www.sedar.com under Capstone’s profile.

Project Description and Location

The Santo Domingo Project is based on a large open pit copper/gold/magnetite resource located approximately
two hours north of Copiapó by paved road and 7 km southeast of the town of Diego de Almagro in Region III of
Northern Chile. The Santo Domingo property was originally part of the BHP Billiton Candelaria project area, which
consisted of eight non-contiguous concessions in a north-south corridor extending between the towns of Taltal
to the North and to a point about 75 km South of the city of Copiapó.

The project was owned by Far West Mining Ltd. (“Far West”), which was formerly a Toronto Stock Exchange
(“TSX”) listed mineral exploration company headquartered in Vancouver. The initial Candelaria Project land
package assembled by BHP Billiton in 2002 consisted of 3,434.5 km2 of exploration concessions. In 2002 and
2003, Far West and BHP Billiton entered into Project Area Agreements that allowed Far West to earn an interest
in the concessions within the project area. Effective August 5, 2003, Far West assigned interests in the Project
Area Agreements to its wholly owned Chilean subsidiary, Minera Lejano Oeste S.A. (“MLO”). On May 4, 2005,
BHP Billiton terminated any interest in the concessions within the project area and commenced transfer of title
of all these concessions to MLO in exchange for a retained 2% NSR royalty. As of the date of the Santo Domingo
Report, all concessions in the Candelaria Project area are 100% owned by MLO. On June 17, 2011, Far West was
acquired by Capstone at the same time as Capstone entered into a strategic relationship with Korea Resources
Corporation (“KORES”). The terms of this relationship provided for amongst other things, a private placement in
the equity of Capstone, representation on the Board of Directors of Capstone, the acquisition of a 30% interest
in the project by KORES, participation in the financing of the project as well as an agreement to enter into a life
of mine off-take agreement for 50% of the production of copper and iron from the project on prevailing market
terms.

Far West, a subsidiary of Capstone, controls 100% of four groups of concessions with a total of 178 claims (82
exploitation concessions totaling 19,375 ha and 96 exploration concessions totaling 17,000 ha) that cover a total
of 36,375 ha and includes the areas of the planned mine site, plant area, and auxiliary facilities including
proposed port facilities and the planned seawater and concentrate pipelines from the port to the mine. The
centre of the deposit is located at approximately 26°28'00”S and 70°00'30”W.

Mineral Resource and Mineral Reserve Estimates

David Rennie, P.Eng., of RPA Inc. (“RPA”), is the Qualified Person responsible for the preparation of the Mineral
Resources estimates for the Santo Domingo Project. The Mineral Resources estimates for Santo Domingo Sur,
Iris, and Iris Norte have an effective date of August 31, 2012 and the Mineral Resources estimate for Estrellita
has an effective date of October 30, 2007.

RPA constructed 3D wireframe or solid models and gridded surfaces of the mineralized zones, fault structures
and topography for use in constraining the block grade interpolations. The principal controls were lithology and
structure; however, in some places a nominal grade shell boundary was used. Most zones required construction
of wireframes for post-mineral dikes that transect the mineralized mantos. There are also some sequences of
barren tuffs that were modelled. A wireframe model was also created to enclose oxidized material which has
been demonstrated to yield much lower metallurgical recoveries than the un-oxidized mineralization. A modest
amount of underground and open pit mining has been carried out at Estrellita. Far West personnel provided raw
cavity monitoring device (CMD) data from which RPA was able to construct approximate wireframe models of
the void spaces. A grade capping strategy was utilized that represented approximately 0.2% of the total number
of assays in the Santo Domingo Sur, Iris and Iris Norte deposits. Grades at Estrellita were capped at 3% copper
and 0.3 g/t gold. Samples from Santo Domingo Sur, Iris and Iris Norte were composited in downhole intervals of
4 m starting at the contact for each zone and continuing until the hole exited the zone. Drill samples at Estrellita
were composited to 2 m lengths, weighted by both length and density. Grades for copper, gold, iron, and
magnetic susceptibility were interpolated into each block using ordinary kriging for the Santo Domingo Sur, Iris
and Iris Norte deposits. The interpolation was configured to use an ellipsoidal search with a minimum of three

and a maximum of 18 composites and a maximum of three composites allowed from any one drillhole. For
Estrellita, ordinary kriging was utilized to interpolate copper and gold grades into each block. Iron was not
estimated. The search was constrained to a minimum of three and maximum of 12 composites, with a maximum
of three composites from any one drillhole. Grade interpolations were validated, and no significant errors or
biases were noted. Blocks receiving an estimate for copper were assigned to at least the Inferred category at
Santo Domingo Sur, Iris and Iris Norte. All blocks with an average distance to composites of 200 m or less and for
which the nearest composite was within 100 m were classified as Indicated. Within the area of infill drilling
completed in 2011–2012, a boundary was drawn around the 50 m drilling pattern and Indicated blocks
encompassed by it were nominally assigned to the Measured classification. The final step in the classification
was to use the oxide wireframe to tag oxidized blocks and remove these from the Mineral Resources. The
classification of Indicated at Estrellita was applied to all blocks estimated by at least two drillholes with the closest
composite less than 65 m away. Remaining blocks were classified as Inferred.

RPA ran a pit optimization during 2009 using a Lerchs–Grossmann (LG) algorithm for Santo Domingo Sur, Iris and
Iris Norte deposits. Copper equivalent (CuEq) grades were calculated using estimates for recovery, toll
treatment/refinement charges, and transport costs for each metal and based on the operating cost estimates
contained in the 2008 Preliminary Assessment. At the 0.25% CuEq cut-off, all but 5% of the Mineral Resources
were captured by the pit shell. On the basis of this result, it was concluded that there was little merit in restricting
the Mineral Resources to those blocks contained only within the pit shell. In RPA’s opinion, the shape and depth
of the Mineral Resources have not changed since the previous estimate and it is still valid to consider them as
having reasonable prospects of economic extraction by open pit mining. The Estrellita resource estimate is not
constrained within a LG shell. RPA’s opinion was that a 0.3% Cu cut-off would be appropriate for the reporting
of the estimate. At the time of the estimate in 2007, RPA considered that the 0.3% Cu cut-off was similar to that
used in other operations of similar size and grade. Table 7 summarizes the Santo Domingo Mineral Resources as
at December 31, 2017. No mining has occurred on the property.

Risk factors that could potentially affect the Mineral Resources estimates include the following: long-term
commodity price and exchange rate assumptions; changes in the assumptions used in the LG shell constraining
Mineral Resources at Santo Domingo Sur, Iris, and Iris Norte; the assumed mining methods and cost assumptions
for the Santo Domingo Sur, Iris, and Iris Norte deposits being those from the 2008 Preliminary Economic Analysis
are not those arising from the Feasibility Study; no LG shell being employed to support reasonable prospects at
Estrellita; delays or other issues in reaching agreements with local communities, changes in permitting, surface
rights and environmental assumptions.

TABLE 7: SANTO DOMINGO ESTIMATED MINERAL RESOURCES AS AT DECEMBER 31, 2017

Deposit

Tonnage
(Mt)

CuEq
(%)

Measured Resources

Santo Domingo Sur
Iris
Total Measured

Santo Domingo Sur
Iris
Iris Norte
Estrellita
Total Indicated
Total Measured and Indicated

63.3
1.54
64.8

214.0
111.0
92.3
31.7
449
514

0.95
0.46
0.94

Indicated Resources

0.72
0.63
0.67
n/a
-
-

Cu
(%)

0.62
0.43
0.62

0.33
0.19
0.12
0.53
0.27
0.31

Au
(g/t)

0.083
0.052
0.082

0.045
0.028
0.015
0.050
0.034
0.040

Fe
(%)

31.3
25.3
31.2

27.4
26.0
26.7
n/a
25.0
25.8

Inferred Resources

0.55
0.60
0.70
0.61
n/a
-

29.8
5.05
20.5
55.4
2.7
58.1

0.26
0.18
0.08
0.19
0.48
0.20

0.037
0.024
0.009
0.025
0.050
0.026

Santo Domingo Sur
Iris
Iris Norte
Inferred (Santo Domingo Sur/Iris)
Estrellita
Total Inferred
NOTE: Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated
economic viability. The Qualified Person for the estimates is Mr. David Rennie, P.Eng., an employee of Roscoe Postle Associates Inc. Mineral Resources for
the Santo Domingo Sur, Iris, and Iris Norte deposits have an effective date of August 31, 2012. Mineral Resources for the Estrellita deposit have an effective
date of October 30, 2007. Mineral Resources for the Santo Domingo Sur, Iris, and Iris Norte deposits are reported using a cut-off grade of 0.25% copper
equivalent (CuEq). CuEq grades are calculated using average long-term prices of US$3.50/lb Cu, US$ 1,500/oz Au and US$ 1.94/dmtu Fe (US$ 120/dmt conc.
At 62% Fe). The CuEq equation is: Metal Value = Grade*Cm*R%/100*(Price-TCRC-Freight)*(100-Royalty)/100, where Cm is a constant to convert grade
of metal, m, to metal price units; R is metallurgical recovery and %Cu Equivalent = (Cu Value + Au Value + Fe Value)/(Cu Value per 1%Cu). An assessment
of Mineral Resources for the Santo Domingo Sur, Iris, and Iris Norte deposits was performedusing a Lerchs–Grossman pit shell that has the following
assumptions: pit slopes averaging 45°; mining cost of US$1.19/t, processing cost of US$ 4.49/t; processing recovery of 85%; selling price of US$2.25/lb, and
a selling cost of US$0.247/lb. At the 0.25% CuEq cut-off, all but 5% of the Mineral Resources were captured by the pit shell. On the basis of this result, it was
concluded that there was little merit in restricting the Mineral Resources to those blocks contained only within the pit shell. Accordingly, the Mineral
Resource inventory was reported in its entirety. Mineral Resources for the Estrellita deposit are reported using a cut-off grade of 0.3% Cu. Rounding as
required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.

23.6
26.7
28.0
25.5
n/a
24.3

Mr. Carlos Guzman, CMC, a NCL Ingeniería y Construcción SpA. (“NCL”) employee, is the Qualified Person
responsible for the preparation of the Santo Domingo Mineral Reserves estimate as a part of the 2014 Feasibility
Study. The effective date of the Mineral Reserves estimate is May 2, 2014.

Pit optimization, mine design and mine planning were carried out by NCL using the 2012 block model prepared
by RPA and did not include consideration of material classified as Inferred. Inferred Mineral Resources were
treated as waste. A block size of 12.5 m Easting x 12.5 m Northing x 12 m Elevation was selected for the block
model. The selected block size was based on the geometry of the domain interpretation and the data
configuration. The mining cost estimate for the pit optimization process is based on studies developed by NCL
during 2012. The estimated average project mining cost was separated into various components such as fuel,
explosives, tires, parts, salaries and wages, benchmarked against similar current operations in Chile. Each
component was updated for first-quarter 2013 prices and the exchange rate from Chilean Pesos to US dollars.
This resulted in an estimated mining cost of approximately $1.53/t. The metal prices, processing costs, refining
costs, and processing recoveries were provided to NCL by Capstone. A number of calculations were performed
in the model in order to determine the NSR of each individual block. The internal (or mill) cut-off of $7.84/t milled
incorporates all operating costs except mining. This internal cut-off is applied to material contained within an
economic pit shell, where the decision to mine a given block was determined by the pit optimization and was
applied to all of the Mineral Reserve estimates. Marginal ore was calculated for the same $7.84/t cut-off, but for
a NSR determined at higher metal prices. Final slope angles used for the pit optimization process were a result
of multiple iterations and analysis carried out by the NCL mining team and geotechnical specialists Derk
Ingeniería y Geología Ltda (“Derk”). The original block model was based on an ore percentage with dimensions
of 12.5 m x 12.5 m x 12 m, resulting in a 1,875 m3 block volume; this means that every block has a defined “ore”
proportion with an ore density, and a corresponding “waste” proportion with a waste density. To accommodate
selective mining methods, any resource block with an ore percentage that was <10% was treated as waste. Blocks
with an ore percentage that was higher than 90% were diluted with waste such that all high-ore blocks were
considered to contain only 90% ore. Selective mining therefore will be performed on those blocks that have an
ore percentage of between 10% and 90%. The Santo Domingo Mineral Reserves estimate is summarized in Table
8.

In the opinion of the NCL, the main factors that may affect the Mineral Reserves estimate are metallurgical
recoveries and operating costs (fuel, energy and labour). NCL notes that the base price, as well as changes in the
price of metals, even though this is the most important factor for revenue calculation, does not affect the Mineral
Reserves estimate to any significant degree. A revenue factor of 0.86 was used for the LG shell that was employed
as the guide for the practical design for both the Santo Domingo and Iris Norte pits. This selected revenue factor

is conservative and as such allows for a broad swing in metals pricing before any salient effect on the Mineral
Reserves estimate will occur.

TABLE 8: SANTO DOMINGO ESTIMATE MINERAL RESERVES AS AT DECEMBER 31, 2017
Contained Metal
Au
(koz)

Grade
Au
(g/t)

Tonnage
(Mt)

Cu
(kt)

Cu
(%)

Fe
(%)

Stage

Magnetite
Conc. (Mt)

8.2

48.3
18.7
66.9

398

679
97
777

169.9

300.5
36
336.4

Santo Domingo Sur

65.3

0.61

0.08

30.9

Probable Reserves

Proven Reserves

Santo Domingo Sur
Iris Norte
Total Probable

251.6
74.8
326.4

0.27
0.13
0.24

0.04
0.01
0.03

27.9
26.9
27.6
Total Mineral Reserves
28.2

0.04

0.30

391.7

Proven + Probable
NOTE: The Mineral Reserves estimate have an effective date of May 2, 2014 and were prepared by Mr. Carlos Guzman, CMC, and employee of NCL.
Mineral Reserves are reported as constrained within Measured and Indicated pit designs, and supported by amine plan featuring variable throughput rates
and cut-off optimization. The pit designs and mine plan were optimized using the following economic and technical parameters: metal prices of US$ 2.75/lb
Cu, US$ 1,275/oz Au and US$80/dmt of Fe concentrate; recovery to concentrate assumptions of a maximum of 93.6% for Cu and 75% for Au, with magnetite
concentrate recovery varying on a block-by-block basis; copper concentrate treatment charges of US$70/dmt, U$0.07/lb of Cu refining charges,
US$5.0/oz of Au refining charges, US$48/wmt and US$3/wmt for shipping Cu and Fe concentrates respectively; waste mining cost of $1.53/t, mining cost of
US$1.53/t ore, and process and G+A costs of US$7.84/t processed; average pit slope angles that range from 37.6° to 43.6°; a 2% royalty rate assumption,
and an assumption of 100% mining recovery. Rounding as required by reporting guidelines may result in apparent summation differences between
tonnes, grade and contained metal content.

506.3

1,175

75.1

4 – RISK FACTORS

Capstone is subject to a number of significant risks due to the nature of our business which includes acquisition,
financing, exploration, development and operation of mining properties and ownership of a rail transportation
company. You should carefully consider the risks and uncertainties described below and other information
contained in this Annual Information Form before deciding whether to invest in Capstone common shares. The
risks and uncertainties described below could have a material adverse effect on our business, financial condition
or results of operations, and the trading price of our common shares may decline and investors may lose all or
part of their investment. We cannot give assurance that we can control or will successfully address these risks or
other unknown risks that may affect our business. Additional risks or uncertainties not presently known to
Capstone or that Capstone currently considers immaterial may also impair our business operations.

Mining is inherently dangerous and subject to conditions or events beyond Capstone’s control, the occurrence of
which could have a material adverse effect on Capstone’s business, financial condition, results of operations
and prospects.
Capstone’s operations are subject to all the hazards and risks normally encountered in the exploration,
development and production of copper and other metals, including, without limitation, workplace accidents,
fires, power outages, labour disruptions, flooding, explosions, cave-ins, landslides and other geotechnical
instabilities, equipment failure or structural failure, metallurgical and other processing problems and other
conditions involved in the mining of minerals, any of which could result in damage to, or destruction of, our
mines, plants and equipment, personal injury or loss of life, environmental damage, delays in mining, increased
production costs, asset write-downs, monetary losses and legal liability. The occurrence of any of these events
could result in a prolonged interruption in Capstone’s operations that would have a material adverse effect on
Capstone’s business, financial condition, results of operations and prospects.

Changes in the market price of copper and other metals could negatively affect the profitability of the
Company’s operations and financial condition and negatively impact Mineral Reserve estimations or render
our business, or part thereof, no longer economically viable. Our business is largely concentrated in the copper

mining industry, and, as a result, may be negatively impacted by fluctuation in the copper mining industry
generally.
Capstone is concentrated in the copper mining industry, and as such our profitability will be sensitive to changes
in, and our performance will depend, to a greater extent, on the overall condition of the copper mining industry.

The commercial viability of Capstone’s properties and Capstone’s ability to sustain operations is dependent on,
amongst other things, the market price of copper, zinc, lead, gold, silver and molybdenum. Depending on the
expected price for any minerals produced, Capstone may determine that it is impractical to continue commercial
production at the Pinto Valley Mine, the Cozamin Mine or the Minto Mine or to develop the Santo Domingo
Project.

A reduction in the market price of copper, zinc, lead, gold, silver, iron, or molybdenum may prevent Capstone’s
properties from being economically mined or result in the write-off of assets whose value is impaired as a result
of low metals prices. The market price of copper, zinc, lead, gold, silver, iron and molybdenum is volatile and is
impacted by numerous factors beyond Capstone’s control, including, amongst others:

the supply/demand balance for any given metal;
international economic and political conditions;

•
•
• expectations of inflation or deflation;
•
international currency exchange rates;
•
interest rates;
• global or regional consumptive patterns;
•
•
• decreased production due to mine closures;
•
improved mining and production methods;
• availability and costs of metal substitutes;
• new technologies that use other materials in place of our products;
• metal stock levels maintained by producers and others; and
•

speculative activities;
increased production due to new mine developments;

inventory carry costs.

The effect of these factors on the price of base and precious metals cannot be accurately predicted and there
can be no assurance that the market price of these metals will remain at current levels or that such prices will
improve. A decrease in the market price of copper, zinc, lead, gold, silver or molybdenum would affect the
profitability of the Pinto Valley Mine, the Cozamin Mine and the Minto Mine and could affect Capstone’s ability
to finance the exploration and development of our other properties, which would have a material adverse effect
on Capstone’s business, financial condition, results of operations and prospects.

Within this industry context, the Company’s strategy is to maintain a cost structure that will allow it to achieve
adequate levels of cash flow during the low point in the copper price cycle. Circumstances may arise, however,
where increased certainty of cash flows is considered more important to long term value creation than providing
investors short term exposure to the volatility of metal prices. In these circumstances, the Company may elect
to fix prices within a contractual quotational period and/or to lock in future prices through the variety of financial
derivative instruments available. There are, however, risks associated with programs to fix prices including,
amongst other things, the potential risk that the counter party will not be able to meet their obligations, the risk
of opportunity losses in the event of an increase in the world price of the commodity, the possibility that rising
operating costs will make delivery into hedged positions uneconomic, and production interruption events.

Financial covenant compliance risks
The terms of Capstone’s amended senior secured corporate revolving credit facility requires that Capstone
satisfy various affirmative and negative covenants and meet certain quarterly financial ratio tests. These
covenants limit, amongst other things, Capstone’s ability to incur further indebtedness if doing so would cause
it to fail to meet certain financial ratio tests. They also limit the ability of Capstone to create certain liens on

certain assets or to engage in certain types of transactions. A failure to comply with these covenants, including
a failure to meet the financial tests or ratios, could result in an event of default and allow lenders to accelerate
the debt repayment.

Surety bonding risks
Capstone secures its obligations for reclamation and closure costs with surety bonds provided by leading global
insurance companies in favour of regulatory authorities in Yukon and Arizona. These surety bonds include the
right of the surety bond provider to terminate the relationship with Capstone on providing notice of up to 90
days. The surety bond provider would, however, remain liable to the regulatory authorities for all bonded
obligations existing prior to the termination of the bond in the event Capstone failed to deliver alternative
security satisfactory to the regulator. Capstone may require substantial additional capital to accomplish its
exploration and development plans and fund strategic growth and there can be no assurance that financing will
be available on terms acceptable to Capstone, or at all.

Capstone may require substantial additional financing to advance the Pinto Valley Mine, the Cozamin Mine and
the Minto Mine to achieve designed production rates, to finance potential strategic acquisitions required for
growth and to accomplish any exploration and development plans for the Santo Domingo Project. These
financing requirements could adversely affect Capstone’s ability to access the capital markets in the future.
Failure to obtain sufficient financing, or financing on terms acceptable to Capstone, may result in a delay or
indefinite postponement of exploration, development or production at one or more of our properties. Additional
financing may not be available when needed and the terms of any agreement could impose restrictions on the
operation of our business. Failure to raise financing when needed could have a material adverse effect on our
business, financial condition, results of operations and prospects.

Capstone may be unable to realize the anticipated benefits of the proposed transaction of Minto Explorations
Ltd.
The proposed transaction of Minto Explorations Ltd. is subject to uncertainties regarding closing conditions.
Capstone and Pembridge may fail to satisfy all required closing conditions in a timely manner and on favourable
terms or at all. The occurrence of any event, change or other circumstances could give rise to the termination of
the agreement. Further, Capstone may incur certain direct costs as a result of the proposed transaction, in
addition to indirect costs, such as the diversion of management time from ongoing business operations.
Uncertainty resulting from the agreement or delays in the completion of the transaction may have a negative
impact on relations with key stakeholders such as our investors, customers, suppliers, employees and
surrounding communities.

Capstone’s ability to acquire properties for growth.
The life of any mine is limited by its ore Reserves. As we seek to replace and expand our Reserves through
exploration, acquisition of interests in new properties or of interests in companies which own the properties, we
encounter strong competition from other companies in connection with the acquisition of properties. This
competition may limit our ability to adequately replace Reserves.

The sale of our metals is subject to counterparty and market risks.
Capstone has entered into concentrate off-take agreements whereby 100% of planned production of the
concentrate produced from the Pinto Valley and Cozamin mines was committed to various external parties
through calendar year 2017. Thereafter, 100% is committed under contract through 2018. 100% of the planned
production at Minto was committed to external parties’ through November 2017, beyond this, none of Minto’s
copper production is committed under an offtake agreement. Capstone has also sold forward all of the
Company’s gold and silver production from the Minto Mine to Wheaton Precious Metals. If any counterparty to
any off-take or forward sales agreement does not honour such arrangement, or should any such counterparty
become insolvent, Capstone may incur losses on the production already shipped or be forced to sell a greater
volume of our production in the spot market, which is subject to market price fluctuations. In addition, there can
be no assurance that Capstone will be able to renew any of our off-take agreements at economic terms, or at all,

or that Capstone’s production will meet the qualitative and quantitative requirements under such agreements.

Fluctuations in foreign currency exchange rates could have an adverse effect on Capstone’s business, financial
condition, results of operations and prospects.
Fluctuations in the Canadian dollar or Mexican peso relative to the US dollar could significantly affect our
business, financial condition, results of operations and prospects. Exchange rate movements can have a
significant impact on Capstone as all of Capstone’s revenue is received in US dollars but a portion of the
Company’s operating and capital costs are incurred in Canadian dollars and Mexican pesos. Also, Capstone is
exposed to currency fluctuations in the Chilean peso relating to expenditures for the Santo Domingo Project. As
a result, a strengthening of these currencies relative to the US dollar will reduce Capstone’s profitability and
affect its ability to finance its operations. While Capstone does not currently have any foreign currency contracts
in place to hedge against currency risk, circumstances may arise in the future where this may be an appropriate
strategy to manage costs and risks.

General economic conditions or changes in consumption patterns may adversely affect Capstone’s growth
and profitability.
Many industries, including the base and precious metals mining industry, are impacted by global market
conditions. Some of the key impacts of financial market turmoil include contraction in credit markets resulting
in an increase in credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and
metals markets, and a lack of market liquidity. A slowdown in the financial markets or other economic conditions,
including, but not limited to, reduced consumer spending, increased unemployment rates, deteriorating
business conditions, inflation, deflation, volatile fuel and energy costs, increased consumer debt levels, lack of
available credit, changes in interest rates and changes in tax rates may adversely affect Capstone’s growth and
profitability potential. Specifically:

• a global credit/liquidity issue could impact the cost and availability of financing and our overall liquidity;
• volatility of prices for copper, zinc, lead, gold, silver and/or molybdenum prices may impact our future

revenues, profits and cash flows;
recessionary pressures could adversely impact demand for our production;

•
• volatile energy prices, commodity and consumables prices and currency exchange rates could negatively

impact potential production costs; and

• devaluation and volatility of global stock markets could impact the valuation of Capstone’s securities,

which may impact Capstone’s ability to raise funds through future issuances of equity.

These factors could have a material adverse effect on our business, financial condition, results of operations and
prospects.

Capstone’s calculations of Mineral Resources and Mineral Reserves are estimates and are subject to
uncertainty.
Our calculations of Mineral Resources and Mineral Reserves are estimates and depend upon geological
interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be
inaccurate. Actual recoveries of copper, zinc, lead, gold, silver and molybdenum from mineralized material may
be lower than those indicated by test work. Any material change in the quantity of mineralization, grade or
stripping ratio, may affect the economic viability of Capstone’s properties. In addition, there can be no assurance
that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site
conditions or during production. Notwithstanding pilot plant tests for metallurgy and other factors, there
remains the possibility that the ore may not react in commercial production in the same manner as it did in
testing. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mining
and metallurgy are inexact sciences and, accordingly, there always remains an element of risk that a mine may
not prove to be commercially viable.

Until a deposit is actually mined and processed, the quantity of Mineral Resources and Mineral Reserves and
grades must be considered as estimates only. In addition, the quantity of Mineral Resources and Mineral

Reserves may vary depending on, amongst other things, metal prices, cut-off grades and operating costs. Any
material change in quantity of Mineral Reserves, Mineral Resources, grade, percent extraction of those Mineral
Reserves recoverable by underground mining techniques or the stripping ratio for those Mineral Reserves
recoverable by open pit mining techniques may affect the economic viability of Capstone’s mining projects.

We face added risks and uncertainties of operating in foreign jurisdictions, including changes in regulation and
policy.
Capstone’s business operates in a number of foreign countries where there are added risks and uncertainties
due to the different economic, cultural and political environments. Our mineral exploration and mining activities
may be adversely affected by political instability and changes to government regulation relating to the mining
industry. Recent changes in governmental leadership in the US and Chile, or upcoming election in Mexico, could
impact Capstone’s operations and local societal conditions. Other risks of foreign operations include political
unrest, labour disputes and unrest, invalidation of governmental orders and permits, corruption, organized
crime, theft, war, civil disturbances and terrorist actions, arbitrary changes in law or policies of particular
countries (including nationalization of mines), foreign taxation, price controls, delays in obtaining or renewing or
the inability to obtain or renew necessary environmental permits, opposition to mining from environmental or
other non-governmental organizations, social perception impacting our social licence to operate, limitations on
foreign ownership, limitations on the repatriation of earnings, limitations on mineral exports and increased
financing costs. Local economic conditions, including higher incidences of criminal activity and violence in areas
of Mexico can also adversely affect the security of our operations and the availability of supplies. In addition,
risks of operations in Mexico include extreme fluctuations in currency exchange rates, high rates of inflation,
significant changes in laws and regulations including but not limited to tax regulations, hostage taking and
expropriation. These risks may limit or disrupt Capstone’s projects, reduce financial viability of local operations,
restrict the movement of funds or result in the deprivation of contract rights or the taking of property by
nationalization or expropriation without fair compensation. There can be no assurance that changes in the
government or laws or changes in the regulatory environment for mining companies or for non-domiciled
companies will not be made that would adversely affect Capstone’s business, financial condition, results of
operation and prospects.

Differences in interpretation or application of tax laws and regulations or accounting policies and rules and
Capstone’s application of those tax laws and regulations or accounting policies and rules where the tax impact
to the Company is materially different than contemplated may occur and adversely affect Capstone’s business,
financial condition, results of operation and prospects.

Resource nationalism
Governments in certain jurisdictions struggle with depressed economies and as a result have targeted mining
companies for additional revenue by way of increased economic rent for the exploitation of resources in their
countries. Many countries including Chile and Mexico have implemented changes to their respective mining
regimes. Future changes could include things such as, but not limited to, law affecting foreign ownership and
take-overs, mandatory government participation, taxation and royalties, working conditions, export duties or
repatriation of income or return of capital.

Our operations are subject to significant governmental regulation, which could significantly limit our
exploration and production activities.
Capstone’s mineral exploration and development activities are subject to governmental approvals and various
laws and regulations governing development, operations, taxes, labour standards and occupational health, mine
safety, toxic substances, land use, water use and land claims affecting local, First Nations and Aboriginal
populations. The liabilities and requirements associated with the laws and regulations related to these and other
matters may be costly and time- consuming and may restrict, delay or prevent commencement or continuation
of exploration or production operations. We cannot provide definitive assurance that we have been or will be at
all times in compliance with all applicable laws and regulations. Failure to comply with applicable laws and

regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup
and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or
revocation of permits or authorizations and other enforcement measures that could have the effect of limiting
or preventing production from our operations. Capstone may incur material costs and liabilities resulting from
claims for damages to property or injury to persons arising from Capstone’s operations. If Capstone is pursued
for sanctions, costs and liabilities in respect of these matters, Capstone’s mining operations and, as a result,
Capstone’s financial performance, financial position and results of operations, could be materially and adversely
affected.

In addition, no assurance can be given that new rules and regulations will not be enacted or that existing rules
and regulations will not be applied in a manner that could limit or curtail our exploration, development or
production. This risk may increase following changes to government leadership or governing parties, or through
increasing societal pressures. Amendments to current laws, tax regimes, regulations and permits governing
operations and activities of mining and exploration companies, or the more stringent implementation thereof,
could have a material adverse impact on Capstone and increase our exploration expenses, capital expenditures,
ability to attract funds, or production costs or reduce production at our producing properties or require
abandonment or delays in exploring or developing our properties.

Climatic conditions can affect our operations at the Pinto Valley, Cozamin and Minto mines.
Arizona can be subject to periods of drought. Operations at the Pinto Valley Mine require water for normal
operations. Capstone has entered to a Water Supply Agreement with BHP Copper, but such agreement is subject
to water availability and BHP Copper’s own requirements. A lack of necessary water for a prolonged period of
time could affect operations at the Pinto Valley Mine and materially adversely affect our results of operations.
Arizona can also be subject to significant rainfall events which could result in flooding of the pit at the Pinto
Valley Mine adversely affecting our results of operations.

Operations at the Cozamin Mine are also subject to extreme adverse weather conditions. Drought has been
prevalent in Central Mexico for years and the effects of lack of water might disrupt normal process operations.
As a proactive measure, Cozamin has made agreements with local government and water rights owners for the
purchase and use of water from offsite sources.

Operations at the Minto Mine may be subject to extreme weather conditions. Unseasonable weather conditions
may preclude normal work patterns and can severely limit Capstone’s mining operations, resulting in additional
costs and delays. In the past, Yukon experienced extreme weather conditions that resulted in abnormally high
run-off at the Minto Mine, exceeding the normal containment capacity of the mine site. As a result, we decided
to fill an active mining pit with water, which caused Capstone to cease mining operations until Capstone obtained
regulatory permission to discharge the excess waters. Future extreme weather in Yukon could again result in
excess run-off at the mine site, which could have an adverse effect on the results of operations at the Minto
Mine and on our business, financial condition, results of operation and prospects.

Changes in climate change regulatory regime could adversely affect our business.
Climate change is an international concern and as a result poses risk of both climate changes and government
policy in which governments are introducing climate change legislation and treaties at all levels of government
that could result in increased costs, and therefore, decreased profitability at some of our operations. As the
regulatory requirements are evolving there is uncertainty to the requirements. Regulation specific to emission
levels and energy efficiency is becoming more stringent. The trend towards more stringent regulations aimed at
reducing the effects of climate change could impact our decision to pursue future opportunities, or maintain our
existing operations, which could have an adverse effect on our business.

Capstone is required to obtain, maintain and renew environmental, construction and mining permits, which is
often a costly, time-consuming and uncertain process.
Mining companies, including Capstone, need many environmental, construction and mining permits, each of
which can be time-consuming and costly to obtain, maintain and renew. In connection with our current and

future operations, we must obtain and maintain a number of permits that impose strict conditions, requirements
and obligations on Capstone, including those relating to various environmental and health and safety matters.
To obtain, maintain and renew certain permits, we are required to conduct environmental assessments
pertaining to the potential impact of our current and future operations on the environment and to take steps to
avoid or mitigate those impacts. For example, additional permits will be required to fully exploit the resources
at Pinto Valley and Minto. There is a risk that Capstone will not be able to obtain such permits or that obtaining
such permits will require more time and capital than anticipated.

Permit terms and conditions can also impose restrictions on how we operate and limits our flexibility in
developing our mineral properties. Many of Capstone’s permits are subject to renewal from time to time, and
renewed permits may contain more restrictive conditions than Capstone’s existing permits. In addition, we may
be required to obtain new permits to expand our operations, and the grant of such permits may be subject to an
expansive governmental review of our operations. Alternatively, we may not be successful in obtaining such
permits, which could prevent Capstone from commencing, extending or expanding operations or otherwise
adversely affect Capstone’s business, financial condition, results of operation and prospects. Further, renewal of
our existing permits or obtaining new permits may be more difficult if we are not able to comply with our existing
permits. Applications for permits, permit area expansions and permit renewals may be subject to challenge by
interested parties, which can delay or prevent receipt of needed permits. The permitting process can also vary
by jurisdiction in terms of its complexity and likely outcomes.

Accordingly, permits required for Capstone’s operations may not be issued, maintained or renewed in a timely
fashion or at all, may be issued or renewed upon conditions that restrict Capstone’s ability to operate
economically, or may be subsequently revoked. Any such failure to obtain, maintain or renew permits, or other
permitting delays or conditions, including in connection with any environmental impact analyses, could have a
material adverse effect on Capstone’s business, results of operations, financial condition and prospects.

Our operations are subject to stringent environmental laws and regulations that could significantly limit our
ability to conduct our business.
Our operations are subject to various laws and regulations governing the protection of the environment,
exploration, development, production, taxes, labour standards, occupational health, waste disposal, safety and
other matters. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions
of various substances produced in association with certain mining operations, such as seepage from tailings
disposal areas, which would result in environmental pollution. A breach of such legislation may result in the
imposition of fines and penalties. In addition, certain of our operations require the submission and approval of
environmental impact assessments. Environmental legislation is evolving in the direction of stricter standards
and enforcement, higher fines and penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and their directors, officers and
employees. Compliance with changing environmental laws and regulations may require significant capital
outlays, including obtaining additional permits, and may cause material changes or delays in, or the cancellation
of, our exploration programs or current operations.

Aboriginal title claims and rights to consultation and accommodation may affect Capstone’s existing operations
as well as development projects and future acquisitions.
The nature and extent of First Nations rights and title remains the subject of active debate, claims and litigation
in Canada. The Minto Mine lies on Category A land in Yukon where the Selkirk First Nation own both surface and
subsurface rights. In many cases, environmental assessment, subsequent permitting, development and
operation of proposed projects is only possible with the support of the local First Nations group. In order to
secure such support, we may have to take measures to limit the adverse impact to, and ensure that some of the
economic benefits of the construction and mining activity will be enjoyed by, the local First Nations group. There
is a risk that the First Nations may publicly oppose a proposed project at any stage and this potential opposition
may adversely affect a project or Capstone’s public image. Further, Canadian law related to aboriginal rights,

including aboriginal title rights, is in a period of change. There is a risk that future changes to the law may
adversely affect Capstone’s rights to the Minto Mine.

Land reclamation and mine closure requirements may be burdensome and costly.
Land reclamation and mine closure requirements are generally imposed on mining companies, which require
Capstone, amongst other things, to minimize the effects of land disturbance. Such requirements may include
controlling the discharge of potentially dangerous effluents from a site and restoring a site’s landscape to its pre-
exploration form. The actual costs of reclamation and mine closure are uncertain and planned expenditures may
differ from the actual expenditures required. Therefore, the amount that we are required to spend could be
materially higher than current estimates. Any additional amounts required to be spent on reclamation and mine
closure may have a material adverse effect on our financial performance, financial position and results of
operations and may cause Capstone to alter Capstone’s operations. Although we include liabilities for estimated
reclamation and mine closure costs in our financial statements, it may be necessary to spend more than what is
projected to fund required reclamation and mine closure activities.

There are uncertainties and risks related to the potential development of the Santo Domingo Project and
if the construction and development of this project remains in a long-term suspension, it could adversely affect
the Company’s business, financial condition, results of operations and prospects.
Development of the Santo Domingo Project will require obtaining permits and financing, and the construction
and operation of mines, processing plants and related infrastructure. Capstone has received the approval for the
Environmental Impact Assessment (“EIA”) If Capstone proceeds to development we will be subject to all of the
risks associated with establishing new mining operations. However, due to the prevailing market conditions,
Capstone temporarily suspended the Santo Domingo Project in 2015. As the project remains in long-term
suspension, there are risks associated with a prolonged suspension, including the timing of receipt of the
remaining approvals and permits, changes in requirements of Governmental Authorities, the availability of key
personnel, the availability of contractors, and the potential for higher costs than estimated if and when Capstone
decides to develop the project. These events could have a material adverse effect on Capstone’s financial
condition, business, operating results and prospects.

The costs, timing and complexities of developing Capstone’s projects may be greater than anticipated.
Cost estimates may increase significantly as more detailed engineering work is completed on a project. It is
common in mining operations to experience unexpected costs, problems and delays during construction,
development and mine start-up. Accordingly, we cannot provide assurance that our activities will result in
profitable mining operations at our mineral properties. If there are significant delays in when these projects are
completed and are producing on a commercial and consistent scale, or their capital costs were to be significantly
higher than estimates, these events could have a significant adverse effect on Capstone’s results of operation,
cash flow from operations and financial condition.

Mineral rights or surface rights to our properties could be challenged, and, if successful, such challenges could
have a material adverse effect on our production and our business, financial condition, results of operations
and prospects.
Title to Capstone’s properties may be challenged or impugned. Our property interests may be subject to prior
unregistered agreements or transfers and title may be affected by undetected defects. Surveys have not been
carried out on the majority of our properties and, therefore, in accordance with the laws of the jurisdiction in
which such properties are situated, their existence and area could be in doubt.

A claim by a third party asserting prior unregistered agreements or transfer on any of Capstone’s properties,
especially where Mineral Reserves have been located, could result in Capstone losing a commercially viable
property. Even if a claim is unsuccessful, it may potentially affect Capstone’s current operations due to the high
costs of defending against the claim and its impact on Capstone’s resources. Title insurance is generally not
available for mineral properties and Capstone’s ability to ensure that Capstone has obtained a secure claim to
individual mineral properties or mining concessions may be severely constrained. We rely on title information

and/or representations and warranties provided by our grantors. If we lose a commercially viable property, such
a loss could lower our future revenues or cause Capstone to cease operations if the property represented all or
a significant portion of our Mineral Reserves at the time of the loss.

It may be difficult for Capstone to find and hire qualified people in the mining industry who are situated in
Arizona, Mexico, Yukon and Chile or to obtain all of the necessary services or expertise in Arizona, Mexico, Yukon
and Chile or to conduct operations on Capstone’s projects at reasonable rates.
If qualified people and services or expertise cannot be obtained in Arizona, Mexico, Yukon and Chile, we may
need to seek and obtain those services from people located outside of these areas, which will require work
permits and compliance with applicable laws and could result in delays and higher costs.

We are dependent on key management personnel.
We are very dependent upon the personal efforts and commitment of our existing management and our current
operations and future prospects depend on the experience and knowledge of these individuals. Capstone does
not maintain any “key person” insurance. To the extent that one or more of Capstone’s members of management
are unavailable for any reason, or should Capstone lose the services of any of them, a disruption to Capstone’s
operations could result, and there can be no assurance that Capstone will be able to attract and retain a suitable
replacement.

Our directors and officers may have interests that conflict with Capstone’s interests.
Certain of Capstone’s directors and officers also serve as directors or officers, or have significant shareholdings
in, other companies that are similarly engaged in the business of acquiring, developing and exploiting natural
resource properties. To the extent that such other companies may participate in ventures which Capstone may
participate in, or in ventures which Capstone may seek to participate in, our directors and officers may have a
conflict of interest in negotiating and concluding terms respecting the extent of such participation. In all cases
where our directors and officers have an interest in other companies, such other companies may also compete
with Capstone for the acquisition of mineral property investments. As a result of these conflicts of interest, we
may not have an opportunity to participate in certain transactions, which may have a material adverse effect on
our business, financial condition, results of operation and prospects.

Corruption and bribery risk
Capstone is required to comply with anti-corruption and anti-bribery laws of various countries including, Canada,
US, Mexico and Chile. In recent years there has been an increase in enforcement and severity of penalties under
such laws. A company may be found liable for violations by employees, contractors and third party agents.
Capstone has implemented policies and taken measures including training to mitigate the risk of non-
compliance, however, such measures are not always effective in ensuring that Capstone, its employees,
contractors and third party agents comply strictly with such laws. If Capstone is found to be in violation of such
laws, this may result in significant penalties, fines and/or sanctions resulting in a material adverse effect on
Capstone’s reputation and financial results.

Capstone’s insurance does not cover all potential losses, liabilities and damage related to Capstone’s business
and certain risks are uninsured or uninsurable.
In the course of exploration, development and production of mineral properties and in the conduct of our
operations, certain risks, including rock bursts, cave-ins, fires, flooding, earthquakes and cyber-attacks may
occur. It is not always possible to fully insure against such risks. Capstone currently does not have insurance
against all risks and may decide not to take out insurance against all risks as a result of high premiums or other
reasons. Further, insurance against certain risks, including those related to environmental matters, is generally
not available to Capstone or to other companies within the mining industry. Losses from these events may cause
Capstone to incur significant costs that could have a material adverse effect on Capstone’s business, financial
condition, results of operation and prospects.

Our operations will be adversely affected if we fail to maintain satisfactory labour relations.
Our workforce is not unionized with the exception of approximately 394 of the hourly employees at the Pinto
Valley Mine which are represented by six unions, governed by one collective bargaining agreement negotiated
by the United Steelworkers Union which expired June 30, 2014 and is currently under negotiation. We cannot
predict at this time whether we will be able to reach new agreements with our unionized workforce without a
work stoppage or other labour unrest, and any such new agreements may not be on terms favourable to
Capstone. Additional groups of non-union employees may seek union representation in the future. Further,
relations with employees may be affected by changes in the scheme of labour relations that may be introduced
by the relevant governmental authorities in jurisdictions where Capstone conducts business. Changes in such
legislation or otherwise in our relationship with our employees may result in higher ongoing labour costs,
employee turnover, strikes, lockouts or other work stoppages, any of which could have a material adverse effect
on our business, results of operations and financial condition.

Increased energy prices could adversely affect Capstone’s results of operations and financial condition.
Mining operations and facilities are intensive users of electricity and carbon-based fuels. Energy prices can be
affected by numerous factors beyond our control, including global and regional supply and demand, political and
economic conditions, and applicable regulatory regimes. The prices of various sources of energy may increase
significantly from current levels. An increase in energy prices for which Capstone is not hedged could materially
adversely affect our results of operations and financial condition.

We may not be able to compete successfully with other mining companies.
The mining industry is competitive in all of its phases. Capstone faces strong competition from other mining
companies in connection with the acquisition of properties producing, or capable of producing, metals. Many of
these companies have greater liquidity, greater access to credit and other financial resources, newer or more
efficient equipment, lower cost structures, more effective risk management policies and procedures and/or a
greater ability than Capstone to withstand losses. Our competitors may be able to respond more quickly to new
laws or regulations or emerging technologies, or devote greater resources to the expansion or efficiency of their
operations than we can. In addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships amongst themselves or with third parties. Accordingly, it is possible that new
competitors or alliances amongst current and new competitors may emerge and gain significant market share to
our detriment. Capstone may also encounter increasing competition from other mining companies in our efforts
to hire experienced mining professionals. Increased competition could adversely affect Capstone’s ability to
attract necessary capital funding, to acquire it on acceptable terms, or to acquire suitable producing properties
or prospects for mineral exploration in the future. As a result of this competition, we may not be able to compete
successfully against current and future competitors, and any failure to do so could have a material adverse effect
on our business, financial condition, results of operations and prospects.

Capstone may experience difficulties with Capstone’s joint venture partners.
Capstone currently operates the Santo Domingo Project through a joint ownership arrangement with KORES and
may in the future enter into additional joint ownership arrangements with other partners. Capstone is subject
to the risks normally associated with the conduct of joint ownership arrangements, which include disagreements
with Capstone’s partners on how to develop, operate and finance Capstone’s joint ownership activities, including
future acquisitions or the Santo Domingo Project, and possible disputes with Capstone’s partners regarding joint
ownership arrangement matters. These disagreements and disputes may have an adverse effect on Capstone’s
ability to successfully pursue joint ownership arrangements, including the development of the Santo Domingo
Project, which could affect our business, financial condition, results of operation and prospects.

Capstone may experience problems integrating new acquisitions into Capstone’s existing operations.
Capstone’s success at completing acquisitions will depend on a number of factors, including, but not limited to,
identifying acquisitions that fit Capstone’s strategy, negotiating acceptable terms with the seller of the business
or property to be acquired and obtaining approval from regulatory authorities in the jurisdictions of the business

or property to be acquired. Any positive effect on Capstone’s results from Capstone’s acquisitions will depend
on a variety of factors, including, but not limited to, assimilating the operations of an acquired business or
property in a timely and efficient manner, maintaining Capstone’s financial and strategic focus while integrating
the acquired business or property, implementing uniform standards, controls, procedures and policies at the
acquired business, as appropriate, and to the extent that Capstone makes an acquisition outside of markets in
which Capstone has previously operated, conducting and managing operations in a new operating environment.
The Pinto Valley Mine was acquired on an “as is where is” basis with limited representations and warranties. In
addition, Capstone has provided indemnities to BHP Copper with respect to certain liabilities and have limited
recourse against BHP Copper with respect to many potential liabilities related to the Pinto Valley Mine. As a
result, the acquisition of mineral properties, such as the Pinto Valley Mine, may subject Capstone to unforeseen
liabilities, including environmental liabilities.

Capstone may experience cybersecurity threats
We rely on secure and adequate operations of information technology systems in the conduct of our operations.
Access to and security of the information technology systems are critical to our operations. To our knowledge,
we have not experienced any material losses relating to disruptions to our information technology systems. We
have enhanced and implemented ongoing policies, controls and practices to manage and safeguard Capstone
and our stakeholders from internal and external cybersecurity threats and to comply with changing legal
requirements and industry practice. Given that cyber risks cannot be fully mitigated and the evolving nature of
these threats, we cannot assure that our information technology systems are fully protected from cybercrime or
that the systems will not be inadvertently compromised, or without failures or defects. Disruptions to our
information technology systems, including, without limitation, security breaches, power loss, theft, computer
viruses, cyber-attacks, natural disasters, and non- compliance by third party service providers and inadequate
levels of cybersecurity expertise and safeguards of third party information technology service providers, may
adversely affect the operations of Capstone as well as present significant costs and risks including, without
limitation, loss or disclosure of confidential, proprietary, personal or sensitive information and third party data,
material adverse effect on our financial performance, compliance with our contractual obligations, compliance
with applicable laws, damaged reputation, remediation costs, potential litigation, regulatory enforcement
proceedings and heightened regulatory scrutiny.

Reputational risk
Capstone is subject to public scrutiny and negative publicity which may impact our public image and reputation
and ultimately impact the social license to operate. Our reputation can be damaged by the actual or perceived
occurrence of any number of events or societal trends.

Legal Proceedings
From time to time, Capstone is involved in routine legal matters, including but not limited to, regulatory
investigations, claims, lawsuits and other proceedings in the ordinary course of our business. There can be no
assurances that these matters will not have a material effect on our business.

5 – DIVIDENDS AND DISTRIBUTIONS

We have not declared or paid any dividends or distributions on our common shares in the last three financial
years and have no present intention of doing so, as we anticipate that all available funds will be invested to
finance the growth of our business.

6 – DESCRIPTION OF CAPITAL STRUCTURE

6.1

General Description of Capital Structure

Capstone has an authorized capital of an unlimited number of common shares without par value, 398,854,483 of
which were issued and outstanding as of March 19, 2018.

Common Shares

The holders of the common shares are entitled to receive notice of and to attend and vote at all meetings of the
shareholders of Capstone and each common share confers the right to one vote in person or by proxy at all
meetings of the shareholders. The holders of the common shares, subject to the prior rights, if any, of the holders
of any other class of shares of Capstone, are entitled to receive such dividends in any financial year as the Board
of Directors of Capstone may determine. In the event of liquidation, dissolution or winding-up of Capstone,
whether voluntary or involuntary, the holders of the common shares are entitled to receive, subject to the prior
rights, if any, of the holders of any other class of shares, the remaining property and assets of Capstone.

7 – MARKET FOR SECURITIES

Trading Price and Volume – Common Shares

Our common shares are listed for trading on the TSX under the symbol “CS”. The following table sets out the
monthly price ranges and volumes of Capstone common shares on the TSX during the 12 months ended
December 31, 2017 and up to the date of this Annual Information Form:

Month
March 2018*
February 2018
January 2018
December 2017
November 2017

October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017

Volume
3,019,474
13,454,873
11,314,962
7,365,971
10,242,682

20,947,059
23,716,502
24,828,391
19,916,518
11,465,295
19,660,798
42,715,330
58,428,558
33,198,094
23,721,756

High (C$)
1.40
1.48
1.62
1.47
1.54

Low (C$)
1.32
1.27
1.30
1.32
1.36

1.60
1.56
1.48
1.24
1.00
1.11
1.36
1.75
1.81
1.52

1.33
1.24
1.07
0.85
0.77
0.85
0.88
1.11
1.43
1.23

* includes data from March 1 to March 19, inclusive.
Source: Bloomberg

8 – DIRECTORS AND OFFICERS

8.1

Name and Occupation

As of the date of this AIF, the directors and executive officers of Capstone are as follows:

Name and Address

George L. Brack[2][4]
British Columbia,
Canada

Robert J.
Gallagher[3]
British Columbia,
Canada
Jill V. Gardiner[2][5]
British Columbia,
Canada

Office held with
Capstone
Chairman and
Director

Director

Soon Jin (Alex) Kwon[6]
Ontario, Canada

Director

Kalidas
Madhavpeddi[3][4][5]
Arizona, US

Director

Dale C. Peniuk[2][4][5]
British Columbia,
Canada

Darren M. Pylot
British Columbia,
Canada
Richard N. Zimmer[3][4]
British Columbia,
Canada

Director

President
and CEO
and Director
Director

Principal Occupation
during past five years

Currently the Chairman of Capstone; and a
director of Geologix Explorations Inc, Wheaton
(formerly Silver
Precious Metals Corp.
Wheaton Corp.) and Alio Gold Inc. (formerly
Timmins Gold Corp.)

A director of Yamana Gold Inc., Southern Arc
Minerals Inc. and Japan Gold Corp.; former
President & CEO of New Gold Inc.

Financial consultant and corporate director; a
director of Capital Power Corporation and
Parkbridge Lifestyle Communities Inc.; previously
served as a director of SilverBirch Hotels &
Resorts and Timber Investments Ltd.; and served
as chair of the board for Turquoise Hill Resources
Ltd. until December 2016.

Director & Chief Operating Officer of KORES
Canada Corporation, a wholly owned subsidiary of
Korea Resources Corporation since 2013. Director
& Team Leader of Investment Strategy Team for
Overseas Mineral Resources Development at
Korea Resources Corporation.

President, Azteca Consulting LLC from 2006;
advisor to China Molybdenum Co. Ltd. from 2008;
currently a director of Trilogy Metals Inc. (formerly
Novacopper Inc.) and NovaGold Resources Inc.;
and served as a director of Namibia Rare Earths
Inc. until November 2016.

Chartered Professional Accountant (CPA, CA) and
corporate director; a director of Argonaut Gold
Inc. Lundin Mining Corporation and Miramont
Resources Corp.; previously a Partner with KPMG
President and CEO of the Company and a director
of the Company since October 2003; currently a
director of Zena Mining Corp.
A director of Alexco Resource Corp. and Chairman
of Ascot Resources Ltd.

Director Since[1]

May 19, 2009

November 1, 2016

April 29, 2015

June 1, 2012

May 19, 2009

October 23, 2003

June 20, 2011

[1] Each director is appointed for a term of one year, which expires on the date of the annual meeting of shareholders of Capstone

following his or her appointment. Capstone’s next annual meeting is scheduled to be held on April 25, 2018.

[2] Member of the Human Resource & Compensation Committee
[3] Member of the Technical, Health, Environmental, Safety & Sustainability Committee
[4] Member of the Corporate Governance & Nominating Committee
[5] Member of the Audit Committee

Name and Address

Cindy L. Burnett
British Columbia,
Canada

Gregg B. Bush
British Columbia,
Canada

Jason P. Howe
British Columbia,
Canada

Wendy A. King
British Columbia,
Canada

Office held
with Capstone
Vice President, Investor Relations and
Communications

Principal Occupation
during past five years

Vice President,
Investor Relations and
Communications since September 2012 and
Vice President, Investor Relations from March
2011 to September 2012.

Senior Vice President and Chief Operating
Officer

Senior Vice President and Chief Operating
Officer since May 2010.

Vice President, Corporate Development

Vice President, Legal, Risk and Governance

and Corporate Secretary

Vice President, Corporate Development since
October 2016; previously Vice President,
Business Development from March 2009 to
October 2016; President & CEO of Zena
Mining since 2008.

Vice President, Legal, Risk and Governance
since February 2014 and Corporate Secretary
since March 2015; previously Senior Vice
President Government Relations, General
Counsel, Chief Compliance Officer and
Corporate Secretary for Central 1 Credit Union
from March 2012 to February 2014; Senior
Legal Counsel and Assistant Corporate
Secretary for Weyerhaeuser Company Limited
from 2001 to 2012.

Vice President, Human Resources since March
2013; previously, Director of Human Resources
from December 2011 to March 2013.

Senior Vice President, Exploration since March
2013, Vice President, Exploration
from
November 2008 to March 2013.

Senior Vice President and Chief Financial
Officer since July 2013; previously Vice
President and Chief Financial Officer of Inmet
Mining Corporation from July 2005 to April
2013.

Gillian A. McCombie
British Columbia,
Canada

Brad J. Mercer
Alberta, Canada

D. James Slattery
British Columbia,
Canada

Vice President,
Human Resources

Senior Vice President, Exploration

Senior Vice President and Chief Financial
Officer

Note: Tomas Iturriaga held the position of Vice President, North American Operations from August 1, 2015 to February 2, 2017.

Ownership of Securities by Directors and Officers

As at March 19, 2018, the directors and executive officers as a group beneficially owned or exercised control or
direction over, directly or indirectly, an aggregate of 3,883,814 Capstone common shares, representing
approximately 0.97% of the issued and outstanding common shares of Capstone.

To the knowledge of Capstone, after reasonable enquiry, no director or officer of Capstone is, as at the date of
this Annual Information Form, or was within 10 years before the date of this Annual Information Form, a director,
chief executive officer or chief financial officer of any company that: (a) was subject to a cease trade order, an
order similar to a cease trade order, or an order that denied the relevant company access to any exemption
under securities legislation, that was in effect for a period for more than 30 consecutive days (together, an
“order”), that was issued while the director or officer was acting in the capacity as director, chief executive officer
or chief financial officer; or (b) was subject to an order that was issued after the director or officer ceased to be
a director, chief executive officer or chief financial officer and which resulted from an event that occurred while
that person was acting in the capacity as director, chief executive officer or chief financial officer.

To the knowledge of Capstone, after reasonable enquiry, no director or officer of Capstone, or a shareholder
holding a sufficient number of securities of Capstone to affect materially the control of Capstone: (a) is as at the
date of this Annual Information Form, or has been within the 10 years before the date of this Annual Information
Form, a director or officer of any company that, while that person was acting in that capacity, or within a year of
that person was acting in that capacity, became bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (b) has, within the 10
years before the date of this Annual Information Form, become bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or
compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the
director, executive officer or shareholder.

To the knowledge of Capstone, after reasonable enquiry, no director or officer of Capstone, or a shareholder
holding a sufficient number of securities of Capstone to affect materially the control of Capstone has been
subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities
regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or any
other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to
a reasonable investor in making an investment decision.

8.2

Conflicts of Interest

Certain of our directors and officers serve or may agree to serve as directors or officers of other reporting
companies, including public companies as noted in 8.1 above, or have significant shareholdings in other reporting
companies and, to the extent that such other companies may participate in ventures in which we may
participate, our directors may have a conflict of interest in negotiating and concluding terms respecting the
extent of such participation. In the event that such a conflict of interest arises at a meeting of our directors, a
director who has a conflict abstains from voting for or against the approval of such participation or such terms
and such director will not participate in negotiating and concluding terms of any proposed transaction. From
time to time, several companies may participate in the acquisition, exploration and development of natural
resource properties thereby allowing for their participation in larger programs, permitting involvement in a
greater number of programs and reducing financial exposure in respect of any one program. It may also occur
that a particular company will assign all or a portion of its interest in a particular program to another of these
companies due to the financial position of the company making the assignment. Under the laws of the Province
of British Columbia, the directors of Capstone are required to act honestly, in good faith and in the best interests
of Capstone. In determining whether or we will participate in a particular program and the interest we will

acquired, the directors will primarily consider the degree of risk to which we may be exposed and our financial
position at that time. See also “Risk Factors”.

9 – AUDIT COMMITTEE INFORMATION

9.1

Audit Committee Terms of Reference

The full text of our Audit Committee Terms of Reference is included as Schedule “A” to this Annual Information
Form.

9.2

Composition of the Audit Committee and Relevant Education and Experience

Our Audit Committee consists of three members all of whom are independent and financially literate as defined
by National Instrument 52-110 - Audit Committees (“NI 52-110”). The name, relevant education and experience
of each Audit Committee member is outlined below:

Dale C. Peniuk (Chair)

Mr. Peniuk is a Chartered Professional Accountant (CPA, CA) and corporate director. In addition to Capstone, Mr.
Peniuk currently serves on the board and as Audit Committee Chair of Lundin Mining Corporation, Argonaut Gold
Inc. and Miramont Resources Corp. and has been on the board and chair of the audit committee of numerous
other Canadian public mining companies since 2006. Mr. Peniuk obtained a B.Comm from the University of
British Columbia in 1982 and his Chartered Accountant designation from the Institute of Chartered Accountants
of British Columbia (now the Chartered Professional Accountants of British Columbia) in 1986, and spent more
than 20 years with KPMG LLP, Chartered Accountants (now KPMG LLP, Chartered Professional Accountants) and
predecessor firms, the last 10 of which as an assurance partner with a focus on mining companies.

Jill V. Gardiner

Ms. Gardiner is a corporate director and has a financial consulting practice. She is currently a director of Capital
Power Corporation and Parkbridge Lifestyle Communities Inc. Previously, Ms. Gardiner spent over 20 years in
the investment banking industry, most recently as Managing Director and Regional Head, British Columbia, for
RBC Capital Markets. She also held various positions in corporate finance, mergers and acquisitions and debt
capital markets as well as serving as Head of the Forest Products Group and Head of the Global Utilities Group.
Prior to joining the investment banking industry, Ms. Gardiner was Senior Project Manager at the Ontario Energy
Board and was also a lecturer at the University of Victoria, School of Business. Ms. Gardiner has an MBA and BSc
from Queen’s University. Ms. Gardiner has extensive experience analyzing and evaluating financial statements
as both a director and as Managing Director of RBC Capital Markets.

Kalidas Madhavpeddi

Mr. Madhavpeddi is President of Azteca Consulting LLC and also an advisor to China Molybdenum Inc., a former
Senior Vice President of Business Development at Phelps Dodge Corporation, former President of Phelps Dodge
Wire and Cable and Senior Vice President of Phelps Dodge Sales Company and other various technical and
engineering positions. In addition to Capstone, Mr. Madhavpeddi currently serves on the board of Trilogy Metals
Inc. and NovaGold Resources Inc. He holds a M.S., Industrial Management and Engineering from the University
of Iowa, and a B.S., Civil Engineering from the Indian Institute of Technology in Madras, India and completed the
Advanced Management Program at Harvard Business School. Mr. Madhavpeddi has extensive experience
analysing and evaluating financial statements as both a director and senior vice president of public companies.

9.3

Audit Committee Oversight

At no time since the commencement of our most recently completed financial year was a recommendation of
the Committee to nominate or compensate an external auditor not adopted by the Board of Directors.

9.4

Pre-Approval Policies and Procedures

The Audit Committee pre-approves all non-audit services provided by our external auditor and has established
policies and procedures accordingly. When a new service is proposed by Capstone’s external auditor,
management confirms with the audit engagement partner that there is no independence concern related to the
proposed service. Once it is confirmed by the audit engagement partner and the Chair of the Audit Committee
that the proposed service(s) would not impair the auditor’s independence, the matter is raised to the Audit
Committee for approval before management proceeds with engaging the external auditor to perform the
proposed service(s).

9.5

External Auditors Service Fees (By Category)

The aggregate fees billed by our external auditors in the last two fiscal years ended December 31, 2017 and 2016
are as follows:

Year Ending

Audit Fees1

Audit-Related Fees2

Tax Fees3

All Other Fees4

December 31, 2017

C$953,000

C$55,000

December 31, 2016

C$944,000

nil

C$143,000

C$140,000

C$81,000

C$43,000

1This amount includes the fees billed for the audit of the annual consolidated financial statements and for the review of the interim condensed
consolidated financial statements.
2This amount relates to the IFRS technical accounting advisory fees billed related to the audit. These fees must be approved by the Audit Committee.
3The aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. All fees for tax compliance, tax advance and
tax planning must be approved by the Audit Committee.
4The aggregate fees billed that are not “Audit Fees”, “Audit-Related Fees” or “Tax Fees”. These fees in 2017 relate primarily to month end and Corporate
transformation strategy advisory services, whereas the fees in 2016 relate primarily to IT advisory services. All fees for other professional services
must be approved by the Audit Committee.

10 – LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Legal Proceedings

Capstone was not subject to any material legal proceedings throughout the recently completed financial year.
Capstone is, from time to time, involved in legal claims, proceedings and complaints arising in the ordinary course
of business. While the outcome of these legal proceedings cannot be predicted with certainty, we believe that
any adverse decision in such proceedings or complaints will not have a material adverse effect on the financial
condition or operations of Capstone. The directors and the management know of no contemplated or pending
proceedings against anyone that might materially adversely affect our financial condition or results of
operations.

Regulatory Actions

Capstone is not subject to:

• any penalties or sanctions imposed against Capstone by a court relating to securities legislation or by a

securities regulatory authority during the financial year ended December 31, 2017; or

• any other penalties or sanctions imposed by a court or regulatory body against Capstone that would likely

•

be considered important to a reasonable investor in making an investment decision; or
settlement agreements Capstone entered into before a court relating to securities legislation or with a
securities regulatory authority during the financial year ended December 31, 2017.

11 – INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Except as otherwise disclosed herein, no director, executive officer or principal shareholder of Capstone, or any
associate or affiliate of the foregoing, have had any material interest, direct or indirect, in any transaction within

the three most recently completed financial years or during the current financial year prior to the date of this
Annual Information Form that has materially affected or will materially affect Capstone.

12 – TRANSFER AGENT AND REGISTRAR

Computershare Investor Services Inc., at 3rd Floor, 510 Burrard Street, Vancouver, British Columbia V6C 3B9, is
the transfer agent and registrar of our common shares, and Computershare Investor Services Inc., at 11th Floor,
100 University Avenue, Toronto, Ontario M5J 2Y1, is the co-transfer agent and registrar.

13 – MATERIAL CONTRACTS

Material contracts, other than contracts entered into in the ordinary course of business, that were entered into
by Capstone between January 1, 2017 and as of the date of this AIF, or before that time, but that are still in effect
are listed below:

1. Shareholders’ Agreement between the Company, KORES, Korea Chile Mining Corporation and 0908113
BC Ltd. dated June 17, 2011 with respect to the ownership of the Santo Domingo Project. This agreement
governs the conduct of the business and affairs of 0908113 B.C. Ltd. and the relationship of the
parties, and provides restrictions on transfer of title and ownership of shares. A copy of the Shareholders’
Agreement is available on SEDAR at www.sedar.com.

2. The Third Amended and Restated Credit Agreement (“the RCF”) between Capstone, The Bank of Nova
Scotia, Canadian Imperial Bank of Commerce, Wells Fargo Bank N.A., Canadian Branch, Citibank, N.A.,
Canadian Branch, Bank of Montreal, Export Development Canada, and ING Capital LLC was amended
effective April 19, 2017. The RCF was amended as follows

• The maturity of the RCF was extended from January 16, 2019 to April 19, 2021;
• The credit limit was reduced to $350 million on April 19, 2017 with an annual $25 million reduction

of the credit limit on each anniversary of the facility to $275 million on April 19, 2020;

• The current pricing grid (starting at LIBOR + 2.5% and increasing to LIBOR + 3.5% based on the total
leverage ratio) was maintained until March 31, 2019, after which date pricing increases to LIBOR +
3.0% (adjustable to LIBOR + 4.5% depending on the total leverage ratio); and,

• The accordion feature of $60 million was cancelled.

A copy of the RCF and the related amendment is available on SEDAR at www.sedar.com.

3. On February 14, 2018, Capstone entered into a definitive Share Purchase Agreement (the “Agreement”)
pursuant to which it has agreed to sell its subsidiary which owns the Minto Mine to Pembridge Resources
plc (“Pembridge”) (the “Transaction”). Under the terms of the Agreement, Capstone will receive $37.5
million in cash, subject to working capital adjustments, and common shares representing 9.9% of the
issued and outstanding shares of Pembridge upon completion of the Transaction.
The Transaction is subject to closing conditions, including the requirement for Pembridge to post the
required financial security with respect to the closure bonding requirements at Minto. Capstone has
agreed, for a period of one-year post-closing, to retain one-third (approximately Cdn$24 million) of the
existing surety bond if requested by Pembridge, after which time Capstone will have no further
obligation with respect to the closure of the Minto Mine. A copy of the Share Purchase Agreement is
available on SEDAR at www.sedar.com.

14 – INTERESTS OF EXPERTS

14.1 Names of Experts

Deloitte LLP, Chartered Professional Accountants (“Deloitte”), Capstone’s independent auditors, have prepared
an auditors’ report dated February 14, 2018, on Capstone’s annual consolidated financial statements as of and

for the years ended December 31, 2017 and December 31, 2016 which have been filed on SEDAR. Deloitte have
confirmed they are independent of Capstone within the meaning of the Rules of Professional Conduct of the
Chartered Professional Accountants of British Columbia.

The following persons or companies have prepared or certified a statement, report or valuation in this Annual
Information Form, either directly or in a document incorporated by reference, and whose profession or business
gives authority to the statement, report or valuation made by the person or company: Dave Hallman, PE,
Diego Airo, P.Eng., Jenna Hardy, P.Geo., Jeremy Vincent, P.Geo., Kenneth Major, P.Eng., Mel Lawson, SME-RM,
Patrick Andrieux, P.Eng., Vivienne McLennan, P.Geo., Bill Hodgson, P.Eng., Bruce Murphy, P.Eng., Colleen Roche,
P.Eng., Douglas McIlveen, P.Geo., John Eggert, P.Eng., Michael Levy, PE, Kevin Cymbalisty, P.Eng., Pooya
Mohseni, P.Eng., Wayne Barnett, P.Geo., Carolla Hoag, CPG, SME-RM, Garth Kirkham, P.Geo., FGC, Claydon Craig,
P.Geo., John Marek, PE, Tony Freiman, PE, Anna Klimek, P.Eng., Carlos Guzman, F.AusIMM, David Frost,
F.AusIMM, David W. Rennie, P.Eng., Hans Gopfert, P.Eng., Joyce Maycock, P.Eng., Roy Betinol, P.Eng., Tom Kerr,
P.Eng., and Vikram Khera, P.Eng.

14.2

Interests of Experts

Except as listed below, none of the experts named under “Names of Experts”, when or after they prepared the
statement, report or valuation, has received or holds any registered or beneficial interests, direct or indirect, in
any securities or other property of Capstone or of one of Capstone’s associates or affiliates (based on information
provided to us by the experts) or is or is expected to be elected, appointed or employed as a director, officer or
employee of Capstone or of any of our associates or affiliates.

Jenna Hardy, Douglas McIlveen, Vivienne McLennan, Kevin Cymbalisty, Pooya Mohseni, Diego Airo, and Jeremy
Vincent beneficially own, directly or indirectly, less than one percent of the outstanding common shares of the
Company.

Pooya Mohseni, Vivienne McLennan, Diego Airo, and Jeremy Vincent are employees of Capstone, and Douglas
McIlveen and Kevin Cymbalisty are employees of Minto Explorations Ltd.

15 – ADDITIONAL INFORMATION

Additional information relating to Capstone may be found on SEDAR at www.sedar.com, including financial and
other information in our consolidated financial statements and management’s discussion and analysis for the
year ended December 31, 2017, under “Capstone Mining Corp.”

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of
Capstone’s securities, and securities authorized for issuance under equity compensation plans is contained in
Capstone’s Information Circular for our most recent annual general meeting of security holders that involved the
election of directors.

SCHEDULE A

AUDIT COMMITTEE

TERMS OF REFERENCE FOR THE AUDIT COMMITTEE

1. PURPOSE

The overall purpose of the Audit Committee of Capstone Mining Corp. (“Capstone”) is to assist the Board of
Directors (the “Board”) in fulfilling its oversight responsibilities related to the quality and integrity of financial
reporting, including ensuring fair presentation of the financial position and results of operations of Capstone in
accordance with Canadian generally accepted accounting principles. The Audit Committee will also ensure that
management has designed and implemented an effective system of internal financial controls and review their
compliance with regulatory and statutory requirements as they relate to consolidated financial statements,
taxation matters and disclosure of material facts.

2. COMPOSITION

A. The Audit Committee shall consist of at least three members of the Board, all of whom shall be
“independent directors”, as that term is defined in National Instrument 52-110, “Audit
Committees”.

B. The Board, at its organizational meeting held in conjunction with each annual general meeting
of the shareholders, shall appoint the members of the Audit Committee for the ensuing year.
The Board may at any time remove or replace any member of the Audit Committee and may fill
any vacancy in the Audit Committee.

C. The Board shall have appointed the chair of the Audit Committee on an annual basis.

D. All members of the Audit Committee shall be “financially literate” (i.e. able to read and
understand a set of financial statements that present a breadth and level of complexity of the
issues that can reasonably be expected to be raised by Capstone’s consolidated financial
statements).

E. The secretary of the Audit Committee shall be designated from time to time from one of the
members of the Audit Committee or, failing that, shall be the Corporate Secretary, unless
otherwise determined by the Audit Committee.

F. The quorum for meetings shall be a majority of the members of the Audit Committee, present
in person or by telephone or other telecommunication device that permits all persons
participating in the meeting to speak and to hear each other.

3. CORE RESPONSIBILITIES

A. The overall duties and responsibilities of the Audit Committee shall be as follows:

ii.

iii.

To assist the Board in the discharge of its responsibilities relating to accounting
principles, reporting practices and internal controls and its approval of Capstone’s
annual and quarterly consolidated financial statements;

To ensure that management has designed, implemented and is maintaining an effective
system of internal financial controls;

To assist the Board in the fulfilment of its enterprise risk management oversight
specifically relating to financial risks affecting Capstone, including but not limited to the
significant financial risks identified by management in Capstone’s corporate risk register

and the significant financial risks disclosed in Capstone’s continuous and other public
disclosure documents such as the interim and annual financial statements, the interim
and annual management’s discussion and analysis, and the annual information form;
and

iv.

To report regularly to the Board in the fulfilment of its duties and responsibilities.

B. The duties and responsibilities of the Audit Committee as they relate to the external auditors
shall, in general, be to oversee the work of the external auditors engaged for the purpose of
preparing or issuing an auditor’s report or performing other audit, review or attest services for
Capstone, including the resolution of disagreements between management and the external
auditor regarding financial reporting. Specifically, these duties and responsibilities include the
following:

ii.

iii.

iv.

To recommend to the Board a firm of external auditors to be engaged by Capstone, and
to consider the independence of such external auditors;

To review and pre-approve the audit and any other services rendered by the external
auditors and review the fee, scope and timing of these services;

To review the audit plan of the external auditors prior to the commencement of the
audit;

To review with the external auditors, upon completion of their audit, the following:

a) content of their report to the Audit Committee;

b) scope and quality of the audit work performed;

c) adequacy of Capstone’s financial and auditing personnel;

d) co-operation received from Capstone’s personnel during the audit;

e) significant transactions outside of the normal business of Capstone;

f) significant proposed adjustments and recommendations for improving internal

accounting controls, accounting principles or management systems;

g) any significant changes to their audit plan; and

h) any serious difficulties or disputes with management encountered during the

audit;

vi.

vii.

viii.

To discuss with the external auditors the quality and not just the acceptability of
accounting principles;

To implement structures and procedures to ensure that the Audit Committee meets the
external auditors on a regular basis in the absence of management;

To review the performance of the external auditors, making recommendations to the
auditors, to management and/or to the Board as appropriate; and

To review and approve hiring policies for employees or former employees of the past
and present external auditors.

C. The duties and responsibilities of the Audit Committee as they relate to the internal control

procedures are to:

Review and approve the internal control assessment plan;

ii.

iii.

iv.

vi.

Review any significant findings and recommendations, and management’s response
thereto;

Review the appropriateness and effectiveness of the policies and business practices
which impact on the financial integrity of Capstone, including those relating to internal
information services and systems and financial controls,
auditing, accounting,
management reporting and risk management;

Review any unresolved issues between management and the external auditors that
could affect the financial reporting or internal controls;

Review all material written communications between the external auditors and
management; and

Periodically review the financial and auditing procedures and the extent to which
recommendations made by the internal audit staff or by the external auditors have been
implemented.

D. The Audit Committee is also charged with the responsibility to:

ii.

iii.

iv.

vi.

vii.

viii.

ix.

Review the quarterly financial statements and associated MD&A and earnings release
and recommend approval to the Board with respect thereto;

Review and approve the financial sections of:

a) the annual report to shareholders;

b) the annual information form;

c) prospectuses and other offering documents; and

d) other public reports requiring approval by the Board and report to the Board

with respect thereto;

Review regulatory filings and decisions as they relate to the consolidated financial
statements;

Review the appropriateness of the policies and procedures used in the preparation of
the consolidated financial statements and other required disclosure documents, and
consider recommendations for any material change to such policies;

Review and report on the integrity of the consolidated financial statements;

Review the minutes of any audit committee meetings of subsidiary companies;

Review with management, the external auditors and, if necessary, with legal counsel,
any litigation, claim or other contingency, including tax assessments that could have a
material effect upon the financial position or operating results and the manner in which
such matters have been disclosed in the consolidated financial statements;

Review the compliance with regulatory and statutory requirements as they relate to
consolidated financial statements, tax matters and disclosure of material facts;

Review with management the policies and procedures with respect to officers’ expense
accounts and perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the external auditors;

Receive a report annually from management of all accounting firms employed, other
than the principal external auditors, with such report to include the nature of the
services performed and the fees charged;

xi. Develop a calendar of activities to be undertaken by the Audit Committee for each
ensuing year and to submit the calendar in the appropriate format to the Board
following each annual general meeting of shareholders;

xii.

Establish and periodically review procedures for:

a) the receipt, retention and treatment of complaints received regarding

accounting, internal accounting controls, or auditing matters; and

b) the confidential, anonymous submission by employees of concerns regarding

questionable accounting or auditing matters; and

xiii.

Review the adequacy of the Terms of Reference annually, proposing modifications as
appropriate.

4. RESPONSIBILITIES OF THE COMMITTEE CHAIR

The fundamental responsibility of the Audit Committee Chair is to be responsible for the management and
effective performance of the Audit Committee and provide leadership to the Audit Committee in fulfilling its
core responsibilities and any other matters delegated to it by the Board. To that end, the Audit Committee Chair’s
responsibilities shall include:

A. Working with the Chairman of the Board, the Chief Financial Officer and the Corporate Secretary

to establish the frequency of the Audit Committee meetings;

B. Providing leadership to the Audit Committee and presiding over Audit Committee meetings;

C. Facilitating the flow of information to and from the Audit Committee and fostering an
environment in which Audit Committee members may ask questions and express their
viewpoints;

D. Reporting to the Board with respect to the significant activities of the Audit Committee and any

recommendations of the Audit Committee;

E. Leading the Audit Committee in annually reviewing and assessing the adequacy of its terms of

reference and evaluating its effectiveness in fulfilling its terms of reference; and

F. Taking such other steps as are reasonably required to ensure that the Audit Committee carries

out its core responsibilities under its terms of reference.

5. AUTHORITY

A. The Audit Committee shall have access to such officers and employees and to such information
respecting Capstone, as it considers to be necessary or advisable in order to perform its duties
and responsibilities.

B. The external auditors shall have a direct line of communication to the Audit Committee through
its Chair and may bypass management if deemed necessary. The Audit Committee, through its
Chair, may contact directly any Capstone employee as it deems necessary, and any employee
may bring before the Audit Committee any matter involving questionable, illegal or improper
financial practices or transactions.

C. The Audit Committee shall have authority to engage independent counsel, consultants and other
advisors at the expense of Capstone, as it determines to be necessary or advisable to carry out
its duties and responsibilities,
including setting and authorizing the payment of the
compensation for any advisors employed by the Audit Committee, and to communicate directly
with the internal and external auditors.

6. ACCOUNTABILITY

A. The Audit Committee Chair has the responsibility to make periodic reports to the Board, as
requested, on financial reporting and internal financial control matters relative to Capstone.

B. The Audit Committee shall report its discussions to the Board by maintaining minutes of its

meetings and providing an oral report at the next Board meeting.

7. MEETINGS

Meetings of the Audit Committee shall be conducted as follows:

A. The Audit Committee shall meet at least four times annually at such times and at such locations
as may be requested by the Chair of the Audit Committee. The external auditors or any member
of the Audit Committee may request a meeting of the Audit Committee;

B. Notice of the time and place of every meeting of the Audit Committee shall be given in writing

to each member of the Audit Committee a reasonable time before the meeting;

C. The external auditors shall receive notice of and have the right to attend all meetings of the Audit

Committee;

D. Agendas for meetings of the Audit Committee shall be developed by the Chair of the Audit
Committee in consultation with management and the Corporate Secretary, and should be
circulated to Audit Committee members one week prior to Audit Committee meetings;

E. The following management representatives shall be invited to attend all meetings, except

executive sessions and private sessions with the external auditors:

i. Chief Executive Officer;

ii. Chief Operating Officer; and

iii. Chief Financial Officer;

F. Other management representatives shall be invited to attend as necessary;

G. A member of the Audit Committee may be designated as the liaison member to report on the

deliberations of the Audit Committee to the Board; and

H. All meetings shall include an in-camera session of independent directors without management

present.