CONDENSED INTERIM CONSOLIDATED FINANCIAL …s2.q4cdn.com/231101920/files/doc_financials/q1 2015/Q1-2015-FS_… · Condensed Interim Consolidated Statements of Comprehensive Loss Three

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

March 31, 2015 and 2014

(Expressed in US Dollars)

Capstone Mining Corp. Condensed Interim Consolidated Balance Sheets (unaudited)

(expressed in thousands of US dollars)

ASSETS March 31, 2015 December 31, 2014

Current

Cash and cash equivalents (Note 14) 122,615$ 150,105$

Receivables 26,629 19,656

Inventories (Note 4) 106,068 87,149

Other assets (Note 7) 18,162 11,567

273,474 268,477

Mineral properties, plant and equipment (Note 5) 1,471,601 1,467,248

Promissory note receivable (Note 6) 38,688 41,620

Other assets (Note 7) 15,928 20,407

Assets classified as held for sale (Note 8) 45,775 49,748 Total assets 1,845,466$ 1,847,500$

LIABILITIES

Current

Accounts payable and accrued liabilities 75,875$ 71,195$

Current portion of long term debt (Note 9) - 88,889

Other liabilities 3,980 1,891

79,855 161,975

Long term debt (Note 9) 298,496 184,492

Deferred revenue 12,146 13,952

Deferred income tax liabilities 53,040 53,528

Retirement benefit liabilities 7,243 6,989

Provisions 145,524 148,563

Other liabilities 457 764

Total liabilities 596,761 570,263

EQUITY

Share capital (Note 11) 825,062$ 825,062$

Reserve for equity settled share based transactions 48,274 46,422

Share purchase reserve - (262) Investment revaluation reserve (482) (482)

Foreign currency translation reserve (48,768) (35,494)

Retained earnings 207,363 224,322

Total equity attributable to equity holders of the Company 1,031,449 1,059,568

Non-controlling interest 217,256 217,669

Total equity 1,248,705 1,277,237

Total liabilities and equity 1,845,466$ 1,847,500$

Commitments (Note 17) See accompanying notes to these condensed interim consolidated financial statements.

Capstone Mining Corp.

Condensed Interim Consolidated Statements of Loss Three Months Ended March 31, 2015 and 2014 (unaudited)

(expressed in thousands of US dollars, except share and per share amounts)

3

2015 2014

Revenue (Note 12) 102,919$ 160,793$

Operating costs

Production costs (Note 4) (73,094) (102,418)

Royalties (1,133) (1,795)

Depletion and amortization (23,823) (39,498)

Earnings from mining operations 4,869 17,082

General and administrative expenses (6,424) (6,444)

Exploration expenses (Note 5) (1,833) (1,094)

Stock-based compensation (Note 11) (1,057) (2,777)

(Loss) earnings from operations (4,445) 6,767

Other (expense) income

Foreign exchange loss (489) (743)

Impairment on available-for-sale securities (3,575) -

Gain on disposal of investments - 288

Loss on disposal of equipment and mineral property interests - (15)

Other expense (Note 15) (3,339) -

(Loss) earnings before finance costs and income taxes (11,848) 6,297

Interest and other income 57 244

Interest on long term debt (Note 9) (2,717) (2,097)

Other interest expense (1,133) (1,082)

(Loss) earnings before income taxes (15,641) 3,362

Income tax expense (Note 10) (1,733) (7,773) Net loss (17,374)$ (4,411)$

Net loss attributable to:

Shareholders of Capstone Mining Corp. (16,959)$ (4,104)$

Non-controlling interest (415) (307) (17,374)$ (4,411)$

Loss per share - basic (Note 13) (0.04)$ (0.01)$ Weighted average number of shares - basic 382,044,066 380,483,867

Loss per share - diluted (Note 13) (0.04)$ (0.01)$ Weighted average number of shares - diluted 382,044,066 380,483,867

See accompanying notes to these condensed interim consolidated financial statements.

Capstone Mining Corp. Condensed Interim Consolidated Statements of Comprehensive Loss

Three Months Ended March 31, 2015 and 2014 (unaudited)


4

2015 2014Net loss (17,374)$ (4,411)$

Other comprehensive (loss) income Items that may be reclassfied subsequently to profit or loss

Change in fair value of available-for-sale investments, net of tax

of nil (2014 - $0) - (136) Effect of change in functional currency - (51) Foreign currency translation adjustment (13,274) (9,836)

Total items that may be reclassfied subsequently to profit or loss (13,274) (10,023)

Total other comprehensive loss for the year (13,274) (10,023)

Total comprehensive loss (30,648)$ (14,434)$

Total comprehensive loss attributable to:Shareholders of Capstone Mining Corp. (30,233)$ (14,127)$ Non-controlling interest (415) (307)

(30,648)$ (14,434)$


Capstone Mining Corp. Condensed Interim Consolidated Statements of Cash Flows

Three Months Ended March 31, 2015 and 2014 (unaudited)


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2015 2014

Cash provided by (used in):

Operating activitiesNet loss (17,374)$ (4,411)$

Adjustments for:Depletion and amortization 24,395 39,662

Income and mining tax expense 1,733 7,773 Inventory write-down (Note 4) 2,569 9,996 Impairment of available-for-sale investments 3,575 -

Share-based compensation (Note 11) 1,057 2,777 Net finance costs 3,793 2,935

Unrealized loss on foreign exchange 2,581 285

Loss on disposal of assets - (273) Amortization of deferred revenue (1,421) (2,336)

Interest received 57 26 Income taxes paid (4,378) (6,205)

Payments on reclamation and closure cost obligations (45) (10) Changes in non-cash working capital (Note 14) (23,093) (5,045)

(6,551) 45,174

Investing activitiesMineral properties, plant and equipment additions (45,100) (17,459) Purchase of Pinto Valley net assets - (6,679)

Proceeds on disposal of assets - 31 Proceeds from the disposal of available for sale securities - 9,503

(45,100) (14,604) Financing activities

Proceeds from bank borrowings (Note 9) 313,925 -

Repayment of bank borrowings (Note 9) (286,148) -

KORES payment against promissory note (Note 6) 3,000 2,100 Repayment of finance lease obligations (232) (246)

Proceeds from issuance of share capital (Note 11) - 2,199 Financing fees (Note 9) (3,024) (182)

Interest paid (2,991) (2,089) 24,530 1,782

Effect of exchange rate changes on cash and cash equivalents (403) (661)

Increase (decrease) in cash and cash equivalents (27,524) 31,691 Cash and cash equivalents - beginning of period 150,159 104,227

Cash and cash equivalents - end of period 122,635$ 135,918$

Supplemental cash flow information (Note 14) See accompanying notes to these condensed interim consolidated financial statements.

Capstone Mining Corp. Condensed Interim Consolidated Statements of Changes in Equity (unaudited)

(expressed in thousands of US dollars, except share amounts)

6

Number of

shares Share capital

Reserve for

equity settled

share based

transactions

Investment

revaluation

reserve

Foreign currency

translation

reserve

Share purchase

reserve

Retained

earnings Total

Non-controlling

interest Total equity

January 1, 2015 382,044,066 825,062$ 46,422$ (482)$ (35,494)$ (262)$ 224,322$ 1,059,568$ 217,671$ 1,277,239$

Share-based compensation (Note 11) - - 1,852 - - - - 1,852 - 1,852

Settlement of share units - - - - - 262 - 262 - 262

Net loss - - - - - - (16,959) (16,959) (415) (17,374)

Foreign currency translation - - - - (13,274) - - (13,274) - (13,274)

March 31, 2015 382,044,066 825,062$ 48,274$ (482)$ (48,768)$ -$ 207,363$ 1,031,449$ 217,256$ 1,248,705$

January 1, 2014 379,863,523 818,519$ 45,536$ (1,309)$ (17,467)$ -$ 245,464$ 1,090,743$ 218,919$ 1,309,662$

Exercise of options 1,109,158 3,691 (1,492) - - - - 2,199 - 2,199

Share-based compensation (Note 11) - - 1,778 - - - - 1,778 - 1,778

Change in fair value of

available-for-sale securities - - - (136) - - - (136) - (136)

Reversal of fair value on disposal of

available-for-sale securities - - - (51) - - - (51) - (51)

Net loss - - - - - - (4,104) (4,104) (307) (4,411)

Foreign currency translation - - - - (9,836) - - (9,836) - (9,836)

March 31, 2014 380,972,681 822,210$ 45,822$ (1,496)$ (27,303)$ -$ 241,360$ 1,080,593$ 218,612$ 1,299,205$

Attributable to equity holders of the Company



Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended March 31, 2015 and 2014 (tabular amounts expressed in thousands of US dollars, except share amounts)

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1. Nature of operations Capstone Mining Corp. (“Capstone” or the “Company”), a Canadian mining company publicly listed on the Toronto Stock Exchange, is engaged in the production of and exploration for base metals in the United States (“US”), Mexico, Canada and Chile. Pinto Valley Mining Corp. (“Pinto Valley”), a wholly owned US subsidiary, owns and operates the copper Pinto Valley Mine located in Arizona, US. Capstone Gold S.A. de C.V. (“Capstone Gold”), a wholly owned Mexican subsidiary, owns and operates the coppersilver Cozamin Mine located in Zacatecas, Mexico. Minto Explorations Ltd. (“Minto”), a wholly owned Canadian subsidiary, owns and operates the copper Minto Mine located in Yukon, Canada. Kutcho Copper Corp. (“Kutcho Copper”), a wholly owned Canadian subsidiary, owns the Kutcho copper-zinc project in British Columbia, Canada. Capstone Exploraciones S.A. de C.V., a wholly owned Mexican subsidiary, is performing exploration for base metal deposits in Mexico. 0840559 B.C. Ltd., a wholly owned Canadian subsidiary, is performing exploration for base metal deposits in Canada. Capstone Mining Chile SpA, a wholly owned Chilean subsidiary, is performing exploration for base metal deposits in Chile. 0908113 B.C. Ltd. (“Acquisition Co.”) is a 70% owned subsidiary of Capstone and 30% owned by a wholly owned subsidiary of Korea Resources Corp. (“KORES”). Through Acquisition Co.’s wholly-owned Canadian subsidiary, Far West Mining Ltd. (“Far West”), the Company is engaged in the exploration for and production of base metals primarily in Chile. Minera Santo Domingo SCM (“Santo Domingo”), a 70% owned Chilean subsidiary, is advancing the Santo Domingo copper-iron project in Chile towards a production decision. Far West Exploration S.A., a 70% owned Chilean subsidiary, holds active exploration properties in Chile. Far West Mining Pty Ltd. (“Far West Australia”), a 70% owned Australian subsidiary, holds exploration properties in Australia. The head office, registered and records office and principal address of the Company are located at 510 West Georgia Street, Vancouver, British Columbia, Canada and the Company is incorporated in British Columbia. These financial statements were approved by the Board of Directors and authorized for issuance on April 28, 2015.

2. Significant accounting policies

Basis of preparation and consolidation These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using the same accounting policies and methods of application as the audited annual consolidated financial statements of the Company for the year ended December 31, 2014 which were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). Accordingly, certain information and footnote disclosure normally included in annual financial statements have been omitted or condensed.

These condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2014.




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The Company has not applied the following revised or new IFRS that have been issued but were not yet

effective at March 31, 2015. These accounting standards are not expected to have a significant effect on the

Company’s accounting policies or financial statements:

IFRS 7, Financial Instruments Disclosures (effective January 1, 2018) requires new disclosures resulting from the amendments to IFRS 9.

IFRS 9, Financial Instruments (effective January 1, 2018) introduces new requirements for the classification and measurement of financial assets and liabilities.

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers ("IFRS 15") which supersedes IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC 31 Revenue Barter Transactions involving Advertising Services. IFRS 15 establishes a single five-step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The standard is effective for annual periods beginning on or after January 1, 2017, with early adoption permitted. The Company is currently evaluating the impact the standard is expected to have on its consolidated financial statements. Certain of the prior year comparative amounts have been reclassified to conform with the presentation adopted for the current period.

3. Financial instruments

At March 31, 2015 the levels in the fair value hierarchy into which the Company’s financial assets and liabilities are measured and recognized on the Condensed Interim Consolidated Balance Sheets at fair value on a recurring basis are categorized as follows:

Level 1 Level 2 Level 3 Total

Concentrate receivables - 13,102 - 13,102 Available-for-sale securities (included in

other assets in the Condensed Interim

Consolidated Balance Sheet) 5,758 - - 5,758

Total financial assets 5,758$ 13,102$ -$ 18,860$

Finance lease obligations -$ 1,299$ -$ 1,299$ Share based payment obligations - 2,409 - -

Total financial liabilities -$ 3,708$ -$ 1,299$

At March 31, 2015, there were no financial assets and liabilities measured and recognized at fair value on a non-recurring basis. The Company’s policy for determining when a transfer occurs between levels in the fair value hierarchy is to assess the impact at the date of the event or the change in circumstances that could result in a transfer. There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2015.




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Valuation methodologies for Level 2 financial assets – accounts receivable arising from sales of metals concentrates The Company’s metal concentrate sales contracts are subject to provisional pricing with the selling price adjusted at the end of the quotational period. At each reporting date, the Company’s accounts receivable on these contracts are marked-to-market based on a quoted forward price for which there exists an active commodity market. There have been no changes in the three months ended March 31, 2015 as to how the Company categorizes its financial assets and liabilities by fair-value through profit or loss, available-for-sale, loans and receivables, and other financial liabilities. Fair value of financial assets and liabilities not already measured and recognized at fair value on the Condensed Interim Consolidated Balance Sheets At March 31, 2015, the carrying amounts of accounts receivable not arising from sales of metal concentrates, accounts payable and accrued liabilities, and other assets and liabilities are considered to be reasonable approximations of their fair values due to the short-term nature of these instruments. The Company’s share-based payment obligations are recorded at fair value based on quoted market prices at the reporting date. The carrying value of the promissory note receivable approximates its fair value due to its demand nature. The fair value of the Company’s loan facilities uses current market values and approximates the carrying value. Financial instruments and related risks The Company’s activities expose it to financial risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth and shareholder returns. The principal financial risks to which the Company is exposed are commodity price risk, credit risk, foreign exchange risk, liquidity risk, and interest rate risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework and reviews the Company’s policies on an ongoing basis. There have been no significant changes in the Company’s exposure to these financial risks in the three months ended March 31, 2015.

4. Inventories

Details are as follows:

March 31, 2015 December 31, 2014

Consumable parts and supplies 42,610$ 40,073$ Ore stockpiles 1,505 1,954

Concentrates 59,549 43,658 Cathode 2,404 1,464

Total inventories 106,068$ 87,149$ During the three months ended March 31, 2015, concentrate and cathode inventories recognized as a production cost amounted to $70.5 million (2014 – $92.7 million).




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During the three months ended March 31, 2015, the Company recorded a non-cash charge of $2.6 million (2014 - $10.0 million) in production costs related to write-downs of Minto’s ore stockpile and concentrate inventory to net realizable value.

5. Mineral properties, plant and equipment


Non-depletable

Producing

mineral

properties

Deferred

stripping

Mineral

exploration

and

development

properties

Mill

development

costs

Plant &

equipment

Facilitites

&

equipment

under

finance

leases

Construction

in progress Total

At January 1, 2015, net 535,557$ -$ 540,798$ 4,956$ 327,380$ 4,545$ 54,012$ 1,467,248$

Additions - 1,168 8,567 - (121) - 30,838 40,452

Disposals - - - - (54) - - (54)

Reclassifications 7,887 - (7,888) - 44,445 - (44,444) -

Depletion and amortization (13,579) - - (254) (11,609) (810) - (26,252)

Currency translation adjustments (3,814) - (339) (100) (4,386) (366) (788) (9,793)

At March 31, 2015, net 526,051$ 1,168$ 541,138$ 4,602$ 355,655$ 3,369$ 39,618$ 1,471,601$

At January 1, 2015:

Cost 682,701$ 74,779$ 540,798$ 16,948$ 453,182$ 26,699$ 54,012$ 1,849,119$

Accumulated amortization (147,144) (74,779) - (11,992) (125,802) (22,154) - (381,871)$

Net carrying amount 535,557$ -$ 540,798$ 4,956$ 327,380$ 4,545$ 54,012$ 1,467,248$

At March 31, 2015:

Cost 684,471$ 69,659$ 541,138$ 16,251$ 486,867$ 24,454$ 39,618$ 1,862,458$

Accumulated amortization (158,420) (68,491) - (11,649) (131,212) (21,085) - (390,857)

Net carrying amount 526,051$ 1,168$ 541,138$ 4,602$ 355,655$ 3,369$ 39,618$ 1,471,601$

Mineral properties

Depletable

Plant and equipment

Subject to amortization

The Company’s exploration costs incurred during the period were as follows:

March 31, 2015 March 31, 2014Exploration capitalized to mineral

properties 7,346$ 3,128$ Green field exploration expensed to

the statement of earnings 1,833 1,094 Total exploration costs 9,179$ 4,222$

Three months ended

At March 31, 2015, construction in progress relates to capital costs incurred in connection with sustaining capital at Pinto Valley, Cozamin and Minto Mine. As at March 31, 2015, bank borrowings (Note 9) were secured on mineral properties, plant and equipment with a net carrying value of $986.3 million (December 31, 2014 – $992.8 million).




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6. KORES promissory note

Details of changes in the balance of the promissory note receivable are as follows:

Balance, December 31, 2014 47,377$

KORES payment against promissory note (3,000)

Balance, March 31, 2015 44,377$


KORES promissory note 44,377$ 47,377$

Less: current portion (5,689) (5,757)

Long-term portion 38,688$ 41,620$ The current portion of the promissory note represents management’s best estimate of the portion of the note that will be repaid within 12 months of the balance sheet date.

7. Other assets



Current:

Taxes receivable 9,035$ 5,809$ Prepaids and other 9,127 5,758 Total other assets - current 18,162$ 11,567$

Non-current:

Taxes receivable 5,351$ 5,391$ Investments classified as available-for-sale 5,758 10,128 Deferred income tax assets 1,557 1,400 Other 3,262 3,488 Total other assets - non-current 15,928$ 20,407$




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8. Held for sale assets The Kutcho project, which the Company classifies as held for sale, is included in the operating segment entitled “Other” within the Segmented Information - Note 16. The major classes of assets and liabilities of the Kutcho project at the end of the reporting period are as follows:


Cash 20$ 54$

Receivables 2 5 Mineral properties 45,753 49,689 Assets classified as held for sale 45,775$ 49,748$

Accounts payable and accrued liabilites 8$ 31$ Reclamation and closure cost obligations 40 43

Total liabilities associated with assets classified as held for sale 48$ 74$

Net assets classified as held for sale 45,727$ 49,674$

9. Long term debt



Long term debt 303,925 276,147 Financing fees (5,429)$ (2,766)$

Total long term debt 298,496$ 273,381$ Less: current portion - (88,889)

Long term portion 298,496$ 184,492$ On January 2, 2015, the Company drew down an additional $10.0 million on its senior secured corporate revolving term facility (“SSRCF”) and on January 5, 2015, the Company repaid $22.2 million of the senior secured reducing revolving corporate credit facility (“SSRRCF”), thereby reducing the outstanding long term debt to $263.9 million on January 5, 2015. On January 16, 2015, the Company entered into an amended senior secured corporate revolving credit facility (“RCF”) with a four year term. The amended facility comprises a committed $440 million plus an available extension of $60 million. The rate is US LIBOR plus 3.0% with a standby fee of 0.675% payable on the undrawn balance (adjustable in certain circumstances). On January 26, 2015, $283.9 million was drawn down on the RCF, of which $263.9 million was used to repay the outstanding balances on the SCRCF and the SSRRCF. During the first quarter of 2015, the Company incurred fees of $2.4 million (2014 - $0.2 million) associated with the amended SSRCF and the new RCF, which were capitalized and are being amortized to the statement of earnings over the term of the facility. During the first quarter of 2015 a total of $0.4 million (2014 – $0.2 million) was amortized and recorded in other interest expense.




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The RCF is secured against the present and future real and personal property, assets and undertakings of Capstone (excluding certain assets, which include Acquisition Co., Far West, Santo Domingo, Far West Exploration S.A. and Far West Australia and subject to certain exclusions for Capstone Mining Chile SpA and Capstone Exploraciones, S. A. de C. V.). The credit facility requires certain financial ratios relating to debt and interest coverage. Failure to meet these covenants would result in a default under the facilities. Capstone was in compliance with these covenants as at March 31, 2015. At March 31, 2015 there were four Surety Bonds totaling $125.2 million to support various reclamation obligation bonding requirements. This comprises C$42.0 million securing reclamation obligations at the Minto mine and $92.0 million securing reclamation obligations at Pinto Valley.

10. Income taxes

Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes. These differences result from the following items:

March 31, 2015 March 31, 2014

Loss before income taxes (15,641)$ 3,362$

Canadian federal and provincial income tax rates 26.00% 26.00%

Income tax (recovery) expense based on the above rates (4,067) 874

Increase (decrease) due to:Effects of different statutory tax rates on (losses) earnings

of subsidiaires (1,087) 496

Mexican mining royalty tax 279 792 Impact of losses for which no deferred tax asset is

recognized 5,091 5,876

Other 1,517 (265)

Income tax expense 1,733$ 7,773$

Current income and mining tax expense (2,197)$ (8,356)$

Deferred income tax recovery 464 583

Income tax expense (1,733)$ (7,773)$

Three months ended




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11. Share capital Authorized An unlimited number of common voting shares without par value. Share issuances During the three months ended March 31, 2015, no options were exercised and no shares were issued.

Stock options Pursuant to the Company’s amended stock option plan, directors may authorize the granting of options to directors, officers, employees and consultants of the Company. Options granted under the plan have a term not to exceed 5 years and vesting periods that range from zero to 2 years. The continuity of stock options issued and outstanding is as follows:

Options

outstanding

Weighted average

exercise price

(C$)

Outstanding, December 31, 2014 21,241,458 2.90$

Granted 7,823,518 1.38

Expired (2,362,505) 2.99

Forfeited (4,529) 2.30

Outstanding, March 31, 2015 26,697,942 2.45$ As at March 31, 2015, the following options were outstanding and outstanding and exercisable:

Exercise prices (C$)

Number of

options

Weighted

average

exercise price

Weighted

average

remaining life

Number of

options

Weighted

average

exercise price

Weighted

average

remaining life

$0.67 51,175 0.67$ 3.8 51,175 0.67$ 3.8

$1.30 - $1.90 9,149,245 1.44 4.6 3,849,871 1.50 4.2

$2.13 - $2.99 13,932,522 2.63 2.8 12,590,052 2.62 2.7

$3.00 - $3.88 455,000 3.31 1.3 455,000 3.31 1.3

$4.34 - $4.48 3,110,000 4.47 0.8 3,110,000 4.47 0.8

26,697,942 2.45$ 3.2 20,056,098 2.70$ 2.7

Outstanding Outstanding & exercisable

During the three months ended March 31, 2015, the fair value of options granted was $3.6 million (2014 – $3.5 million) and had a weighted average grant-date fair value of C$0.57 (2014 – C$1.16) per option. Assumptions used in calculating fair value of options granted during the period were as follows:

March 31, 2015 March 31, 2014

Risk-free interest rate 0.57% 1.34%

Expected dividend yield nil nil

Expected share price volatility 53% 51%

Expected forfeiture rate 4.73% 4.62%

Expected life 3.7 years 4.0 years

Three months ended




15

Other share-based compensation plans The Company has other share-based compensation plans in the form of Deferred Share Units (“DSUs”), Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”).

DSUs RSUs PSUs

Outstanding, December 31, 2014 616,524 2,311,958 1,143,849

Granted 431,930 2,349,745 1,041,415

Forfeited - (97,919) (19,340) Settled - (273,218) (255,732)

Outstanding, March 31, 2015 1,048,454 4,290,566 1,910,192 During the three months ended March 31, 2015, the fair value of DSUs, RSUs, and PSUs granted was $5.3 million (2014 - $4.8 million) and had a weighted average grant-date fair value of C$1.38 (2014 – C$2.88).

Share-based compensation expense

March 31, 2015 March 31, 2014

Share-based compensation expense related to stock options 1,852$ 1,778$

Share-based compensation expense (gain) related DSUs, RSUs, and PSUs (795) 999

1,057$ 2,777$

Three months ended

12. Revenue

The Company’s revenue breakdown by metal is as follows:

March 31, 2015 March 31, 2014

Copper 109,416$ 175,369$ Zinc 3,102 3,605 Lead 670 826

Molybdenum 773 - Silver 3,434 4,694 Gold 1,445 2,775

Total gross revenue 118,840 187,269 Less: treatment and selling costs (15,921) (26,476) Revenue 102,919$ 160,793$

Three months ended




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13. Loss per share

Loss per share, calculated on a basic and diluted basis, is as follows:

March 31, 2015 March 31, 2014

Loss per share

Basic and diluted (0.04)$ (0.01)$

Net lossNet loss available to common shareholders -

basic and diluted (16,959)$ (4,104)$

Weighted average shares outstanding

Weighted average shares outstanding - basic and diluted 382,044,066 380,483,867

Weighted average shares excluded

Stock options 26,697,942 22,474,132

Three months ended

Diluted loss per share was determined using the basic weighted average shares outstanding rather than diluted weighted average shares outstanding as the effects would have been anti-dilutive.




17

14. Supplemental cash flow information The components of cash and cash equivalents are as follows:


Cash 122,615$ 150,105$

Cash classified as held for sale (Note 8) 20 54

122,635$ 150,159$ The changes in non-cash working capital items are comprised as follows:

March 31, 2015 March 31, 2014

Receivables (9,633)$ 4,469$

Inventories (21,287) (3,955)

Other current assets (3,436) 56

Accounts payable and accrued liabilities 12,200 (4,263)

Other liabilities (937) (1,352)

Net change in non-cash working capital (23,093)$ (5,045)$

Three months ended

The significant non-cash financing and investing transactions during the period are as follows:

March 31, 2015 March 31, 2014

Capitalized mineral properties, plant and

equipment expenditures included in

accounts payable and accrued liabilities 11,748$ 7,489$ Fair value of stock options allocated to

share capital upon exercise (Note 11) -$ 1,492$

15. Other expense Details are as follows:

March 31, 2015 March 31, 2014Pinto Valley restructuring costs 2,232$ -$ Stand-by fees 1,088 -

Other 19 - 3,339$ -$

Three months ended




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16. Segmented information The Company is engaged in mining, exploration and development of mineral properties, and has operating mines in the US, Mexico and Canada. The Company has five reportable segments as identified by the individual mining operations of Pinto Valley (US), Cozamin (Mexico), and Minto (Canada), as well as the Santo Domingo development project (Chile) and Other. Segments are operations reviewed by the CEO who is considered to be the chief operating decision maker. Operating segment details are as follows:

Pinto Valley Cozamin Minto

Santo

Domingo Other TotalRevenue 63,643$ 24,375$ 14,901$ -$ -$ 102,919$

Production costs (46,349) (13,960) (12,785) - - (73,094)

Royalties - (782) (351) - - (1,133) Depletion and amortization (11,192) (5,041) (7,590) - - (23,823)

Earnings (loss) from mining

operations 6,102 4,592 (5,825) - - 4,869

Exploration expenses - - - (36) (1,797) (1,833)

General and administrative

expenses, and share-based

compensation (136) (134) - - (7,211) (7,481) Earnings (loss) from operations 5,966 4,458 (5,825) (36) (9,008) (4,445)

Other expense (1,627) (561) 487 (38) (5,664) (7,403)

Earnings (loss) before finance

costs, and income taxes 4,339 3,897 (5,338) (74) (14,672) (11,848)

Net finance costs (867) (3) (211) - (2,712) (3,793) Earnings (loss) before

income taxes 3,472 3,894 (5,549) (74) (17,384) (15,641)

Income tax expense

(297) (1,833) 94 (14) 317 (1,733)

Net earnings (loss) 3,175$ 2,061$ (5,455)$ (88)$ (17,067)$ (17,374)$

Mineral properties, plant &

equipment additions 26,914$ 1,570$ 4,918$ 6,982$ 68$ 40,452$

Three months ended March 31, 2015




19


Santo

Domingo Other Total

Revenue 84,526$ 35,106$ 41,161$ -$ -$ 160,793$

Production costs (56,787) (15,840) (29,791) - - (102,418)

Royalties - (1,152) (643) - - (1,795)

Depletion and amortization (12,227) (4,630) (22,641) - - (39,498)

Earnings (loss) from mining

operations 15,512 13,484 (11,914) - - 17,082

Exploration expenses - - - (134) (960) (1,094)

General and administrative

expenses, and share-based

compensation (55) (163) - - (9,003) (9,221)

Earnings (loss) from operations 15,457 13,321 (11,914) (134) (9,963) 6,767

Other income (expense) 188 (446) (92) (85) (35) (470)

Earnings (loss) before finance

costs and income taxes 15,645 12,875 (12,006) (219) (9,998) 6,297

Net finance (costs) income (449) (15) (165) - (2,306) (2,935)

Earnings (loss) before

income taxes 15,196 12,860 (12,171) (219) (12,304) 3,362

Income tax expense (3,547) (4,428) 375 - (173) (7,773)

Net earnings (loss) 11,649$ 8,432$ (11,796)$ (219)$ (12,477)$ (4,411)$

Mineral properties, plant &

equipment additions (includes $0.1

million in other classified as held for

sale - Note 8) 1,987$ 1,793$ 9,088$ 2,839$ 116$ 15,823$

Three months ended March 31, 2014


Santo

Domingo Other Total

Mineral properties, plant

and equipment (includes

$45.8 million in Other classified as

held for sale - Note 8) 717,107$ 116,107$ 104,282$ 529,594$ 50,291$ 1,517,381$

Total assets (includes $45.8 million in

Other classified as held for sale - Note 8) 861,858$ 159,577$ 158,317$ 538,156$ 127,558$ 1,845,466$

Total liabilities (includes $0.1 million in

Other classified as liabilities associated

with assets classified as held for sale -

Note 8) 183,331$ 59,093$ 39,598$ 5,258$ 309,481$ 596,761$

As at March 31, 2015




20


Santo

Domingo Other Total

Mineral properties, plant

and equipment (includes

$49.7 million in Other classified as

held for sale - Note 8) 703,635$ 119,548$ 116,837$ 522,653$ 54,264$ 1,516,937$

Total assets (includes $49.7 million in

Other classified as held for sale - Note 8) 846,276$ 162,733$ 156,185$ 529,052$ 153,254$ 1,847,500$

Total liabilities (includes $0.1 million in

Other classified as liabilities associated

with assets classified as held for sale -

Note 8) 170,376$ 64,549$ 42,082$ 4,290$ 288,966$ 570,263$

As at December 31, 2014

17. Commitments

As at March 31, 2015 the Company had equipment purchase commitments of $7.7 million outstanding as part of the Pinto Valley expansion.

Management’s Discussion and Analysis of

Capstone Mining Corp. (“Capstone” or the “Company”)

For the three months ended March 31, 2015 The Company has prepared the following interim management’s discussion, analysis (the “MD&A”) as of April 28, 2015 and it should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements, and notes thereto for the three months ended March 31, 2015. All financial information has been prepared in accordance with International Financial Reporting Standards (“IFRS” or “GAAP”) and all dollar amounts presented are US dollars unless otherwise stated. Cautionary Note Regarding Forward-Looking Information

This document 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 Company 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 Company management’s expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “outlook”, “guidance”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. In this document, certain forward-looking statements are identified by words including “may”, “future”, “expected”, “intends” and “estimates”. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of resources; possible variations in ore reserves, grade or recovery rates; accidents, dependence on key personnel, labour pool constraints, labour disputes; availability of infrastructure required for the development of mining projects; delays or inability to obtain governmental and regulatory approvals for mining operations or financing or in the completion of development or construction activities; compliance with debt covenants, and other risks of the mining industry as well as those factors detailed from time to time in the Company’s interim and annual financial statements and management’s discussion and analysis of those statements, all of which are filed and available for review under the Company’s profile on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company provides no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Table of Contents

Nature of Business ........................................................................................................................................ 3 New Alternative Performance Measures...................................................................................................... 3 Overview ....................................................................................................................................................... 4 Financial and Operational Highlights ............................................................................................................ 4 Revised Credit Facility ................................................................................................................................... 6 Outlook ......................................................................................................................................................... 7 Mine Segment Profitability ........................................................................................................................... 8

Pinto Valley Mine ...................................................................................................................................... 8 Cozamin Mine ........................................................................................................................................... 9 Minto Mine ............................................................................................................................................. 10

Consolidated Results of Operations............................................................................................................ 11 Revenue .................................................................................................................................................. 11 Sales Overview ........................................................................................................................................ 11 Operating Costs ....................................................................................................................................... 13 Other Income and Expense ..................................................................................................................... 14 Taxes ....................................................................................................................................................... 14

Selected Quarterly Financial Information ................................................................................................... 15 Mining Operations ...................................................................................................................................... 16

Production Overview .............................................................................................................................. 16 Pinto Valley Mine .................................................................................................................................... 17 Cozamin Mine ......................................................................................................................................... 19 Minto Mine ............................................................................................................................................. 21 Santo Domingo Project ........................................................................................................................... 22 Greenfield Exploration ............................................................................................................................ 24 Kutcho Project ......................................................................................................................................... 25

Liquidity and Financial Position Review ...................................................................................................... 25 Precious Metals Streams ............................................................................................................................. 28 Risks and Uncertainties ............................................................................................................................... 28 Transactions with Related Parties............................................................................................................... 28 Off Balance Sheet Arrangements ................................................................................................................ 28 Accounting Changes .................................................................................................................................... 28 Alternative Performance Measures and Reconciliations............................................................................ 29 Outstanding Share Data and Dilution Calculation ...................................................................................... 31 Management’s Report on Internal Controls ............................................................................................... 32 Other Information ....................................................................................................................................... 32 National Instrument 43-101 Compliance .................................................................................................... 32

1 These are alternative performance measures: please see “Alternative Performance Measures and Reconciliations” below. Page 3

Nature of Business Capstone, a Canadian mining company publicly listed on the Toronto Stock Exchange, is engaged in the production of and exploration for base metals in the United States (“US”), Mexico, Canada and Chile. Pinto Valley Mining Corp., a wholly owned US subsidiary, owns and operates the copper Pinto Valley Mine located in Arizona, US. Capstone Gold, S.A. de C.V. (“Capstone Gold”), a wholly owned Mexican subsidiary, owns and operates the copper-silver Cozamin Mine located in Zacatecas, Mexico. Minto Explorations Ltd. (“Minto”), a wholly owned Canadian subsidiary, owns and operates the copper Minto Mine located in Yukon, Canada. Kutcho Copper Corp. (“Kutcho Copper”), a wholly owned Canadian subsidiary, owns the Kutcho copper-zinc project in British Columbia, Canada. Capstone Mining Chile SpA, a wholly owned Chilean subsidiary, is performing exploration for base metal deposits in Chile. 0908113 B.C. Ltd. (“Acquisition Co.”) is a 70% owned subsidiary of Capstone and 30% owned by Korea Resources Corp. (“KORES”). Through Acquisition Co.’s wholly-owned Canadian subsidiary, Far West Mining Ltd. (“Far West”), the Company is engaged in the exploration for and production of base metals primarily in Chile. Minera Santo Domingo SCM (“Santo Domingo”), a 70% owned Chilean subsidiary, is advancing the Santo Domingo copper-iron project in Chile towards a production decision. Far West Exploration S.A., a 70% owned Chilean subsidiary, holds active exploration properties in Chile. Far West Mining Pty Ltd. (“Far West Australia”), a 70% owned Australian subsidiary, holds exploration properties in Australia.

New Alternative Performance Measures Effective for 2015, Capstone has commenced reporting C1 cash cost1 on the basis of per pound of payable copper SOLD as well as the previously reported per pound of payable copper PRODUCED. Throughout the MD&A, explicit distinction will be made with respect to which measure is being reported. The Company has also commenced reporting additional Alternative Performance Measures that are more fulsome in nature, all of which will be reported on the basis of per pound of payable copper SOLD:

All-in sustaining cost – equal to C1 cash cost plus sustaining costs

All-in cost – equal to all-in sustaining costs plus development capital

Fully-loaded all-in cost – equal to all-in costs plus taxes and interest on long term debt These new unit cost figures are meant to provide our stakeholders with a better understanding of the economics of our operations. Additionally, each measure has been defined in a detailed table at the end of the MD&A and comparative amounts will also be reflected in the tables to show a full breakdown of amounts that would have been reported under the new measures.


Overview Q1 2015 Q1 2014

Revenue ($ millions) 102.9 160.8

Copper produced (tonnes) 23,677 27,215

Payable copper produced (tonnes) 22,853 26,245

C1 cash cost per payable pound produced (1) ($/lb) 1.97 1.92

Copper sold (tonnes) 20,082 26,601

Realized copper price per pound sold ($/lb) * 2.47 2.99

C1 cash cost per payable pound sold (1) ($/lb) 1.89 1.86

All-in sustaining cost per payable pound sold (1) ($/lb) 2.36 2.28

All-in cost per payable pound sold (1) ($/lb) 3.05 2.33

Fully-loaded all-in cost per payable pound sold (1) ($/lb) 3.15 2.50

Net loss ($ millions) (17.4) (4.4)

Net loss per common share ($) (0.04) (0.01)

Adjusted net loss (1) ($ millions) (8.9) (4.4)

Adjusted net loss (1) per common share ($) (0.02) (0.01)

Adjusted EBITDA (1) ($ millions) 24.3 56.4

Adjusted EBITDA (1) per common share ($) 0.06 0.15

Operating cash flow before changes in working capital (1) ($ millions) 16.5 50.2

Operating cash flow before changes in working capital per common share (1) ($) 0.04 0.14

Cash and cash equivalents ($ millions) 122.6 135.7

Net debt (1) ($ millions) 177.2 175.5

* Q1 2015 includes a negative provisional pricing adjustment of $12.7 million (2014 – $2.7 million) related to prior shipments, equivalent to $0.29 per pound (2014 – $0.04 per pound) of copper sold during the quarter.

Financial and Operational Highlights Financial and Production Highlights for the three months ended March 31, 2015 & 2014

Net loss of $17.4 million or $0.05 per common share (2014 – net loss of $4.4 million or $0.01 per common share) which included:

o Earnings from mining operations of $4.9 million (2014 - $17.1 million), Realized copper price of $2.47 per pound sold (2014 - $2.99 realized price) and a

C1 cash cost1 of $1.89 per payable pound sold (2014 – $1.86 per pound sold). o Production costs included a $2.6 million (2014 – $10.0 million) non-cash charge related

to the write-down of inventory at the Minto Mine, o A non-cash charge of $3.6 million related to the impairment of available-for-sale

securities (2014 – $nil), o Operational restructuring costs of $2.2 million (2014 – $nil) related to Pinto Valley, o Stand-by fees of $1.1 million (2014 – $nil) at Minto for reduced open pit mining rates, o $1.7 million in current and deferred tax expenses (2014 - $7.8 million).

Adjusted EBITDA1 of $24.3 million or $0.06 per common share after making adjustments for certain non-cash and other items (2014 – $56.4 million or $0.15 per common share).

Operating cash flow before changes in working capital1 of $16.5 million or $0.04 per common share (2014 - $50.2 million or $0.14 per common share).


Adjusted net loss1 of $8.9 million or $0.02 per common share after making adjustments for certain non-recurring items (2014 – net loss of $4.4 million or $0.01 per common share).

Working capital increased to $193.6 million at March 31, 2015 (which included $122.6 million of cash and cash equivalents) from $106.5 million at December 31, 2014.

Production of 22,853 tonnes of payable copper at a C1 cash cost1 of $1.97 per pound of payable copper produced (2014 – 26,245 tonnes at $1.92 per pound produced).

Revenue of $102.9 million generated primarily from the sale of 20,082 tonnes of payable copper (2014 - $160.8 million generated primarily from the sale of 26,601 tonnes of payable copper) at a realized copper price of $2.47 per pound sold (2014 – $2.99 per pound sold) and a C1 cash cost1 of $1.89 per pound sold (2014 – $1.86 per pound sold).

Additional Highlights

Pinto Valley Mine:

Produced 15,809 tonnes of copper in concentrates and cathode during Q1 2015 (2014 – 16,893) at a C1 cash cost1 of $1.93 per pound of payable copper produced (2014 – $2.12 per pound produced).

During Q1 2015, an additional hydraulic shovel and three more haul trucks arrived at site as part of the capital considered under the PV2 expansion plan.

Completed a reorganization to improve operational efficiency and accountability. As part of the redesign, approximately 40 salaried staff left the organization and a further 30 people changed roles, resulting in a reduction to the salaried workforce of 15% and restructuring costs of $2.2 million recognized in the quarter.

Work continued during the quarter to advance two PV3 scenarios towards a Pre-Feasibility study level (“PV3 PFS”). The PV3 PFS base case will include a 10% to 15% increase in throughput and the possibility of a mine life extension beyond 2026 and a second case will evaluate a throughput increase to 90,000 tonnes per day combined with a potential mine life extension. The PV3 PFS is expected to be completed in the third quarter of 2015, at which time we will evaluate the two alternatives and the best use of capital.

Cozamin Mine:

Produced 3,773 tonnes of copper in concentrates during Q1 2015 (2014 – 5,101 tonnes) at a C1 cash cost1 of $1.51 per pound of payable copper (2014 – $1.23 per pound produced).

Mine development rates were reviewed in Q1 2015 with a focus on improvement through training, thereby helping to ensure sufficient underground production inventory going forward.

Efforts continued throughout Q1 2015 on the permitting process for additional surface drilling at the Cozamin mine site with the permit expected to be received in Q2 2015.

Underground access for the Mala Noche vein resource drilling program is advancing on plan with an expected start to the program in Q3 2015.

Minto Mine:

Produced 4,095 tonnes of copper in concentrates during Q1 2015 (2014 – 5,221 tonnes) at a C1 cash cost1 of $2.58 per pound of payable copper produced (2014 – $1.94 per pound produced), which included $0.14 per pound of cost allocated from stockpile (2014 – $0.04 per pound) which was spent in prior periods, bringing the actual cash expended during Q1 2015 to $2.44 per pound of payable copper produced (2014 – $1.90 per pound produced).

The hearing with the Yukon Water Board on the Water Use Licence Amendment took place in the first week of March and the Company awaits receipt of the licence. The current plan has the mill continuing to process ore from underground and stockpiles, with surface mining on hold until receipt of the required licence, which is expected in Q2 2015.


Santo Domingo Project:

The Company completed the tender process for Engineering, Procurement, and Construction (“EPC”) and Engineering, Procurement, and Construction Management (“EPCM”) packages for project development. Capstone has selected POSCO E&C (“POSCO”) as the preferred EPC fixed price lump sum contractor for the Santo Domingo project. While the EPC contract has not been concluded, Capstone has awarded a Limited Notice to Proceed to the end of Stage-Gate 1, which will include confirmation of completeness of the engineering and contractual performance guarantee parameters. This award totals approximately $4.5 million and is part of Capstone’s previously announced 2015 base case budget of $16.9 million (of which Capstone’s 70% share is $11.8 million). This work is expected to be completed before the end of Q2 2015. Following Stage-Gate 1 next steps will be determined and communicated. The total capital cost of the project is expected to be at or below the previously estimated $1.7 billion.

During Q2 2015 the Company expects to present its third addendum for the Environmental Impact Assessment. Based on the current timetable it is now expected to be approved during Q2 2015, which aligns with the revised engineering development plan outlined above.

A third party objection to the Santo Domingo port concession application was rejected by the Chilean Armed Forces, clearing the way for the anticipated approval of the application in Q2 2015.

Greenfield Exploration:

Exploration work at Project Providencia in Region II, Chile during Q1 2015 included minor infill soil sampling and trenching. Drilling resumed in late March but was temporarily halted due to extensive flash flooding in the Atacama region.

Four separate copper-gold prospects are slated for testing when drilling resumes in Q2 2015. Two targets are porphyry-type and two are IOCG / Manto type. To date in 2015, a total of 496 metres of RC drilling was completed in two holes before the temporary shutdown.

Revised Credit Facility In January 2015 Capstone entered into an amended senior secured corporate revolving credit facility (“RCF”) for up to $500-million. This facility amends Capstone's existing senior secured corporate revolving term facility and allowed for the repayment and cancellation of the existing senior secured reducing revolving credit facility. The RCF comprises a committed $440-million plus a $60-million accordion. It has a four-year term maturing in January, 2019 (with extension rights on mutual consent), an interest rate of United States LIBOR (London interbank offered rate) plus 3.0% (adjustable in certain circumstances) and a standby fee of 0.675%, payable on the undrawn balance of the facility. The $60-million accordion may be exercised by Capstone once additional credit is committed from existing and/or new lenders.


Outlook Capstone’s 2015 guidance for 90,000 tonnes (±5%) of copper in concentrates and cathode, at a C1 cash cost1 of $2.00 to $2.10 per pound of payable copper produced net of by-product credits and selling costs, remains unchanged.

Capstone’s 2015 capital guidance of $160.4 million also remains unchanged.

Pinto Valley Cozamin Minto * Total

Milling

Milled (mill ion tonnes) 19.0 1.2 1.4 21.6

Copper grade (%) 0.35 1.59 1.19 0.47

Copper recovery (%) 88.1 93.3 86.4 88.3

Production (contained plus cathode)

Copper (tonnes) 59,000 18,000 13,000 90,000

Zinc (tonnes) - 8,300 - 8,300

Molybdenum (tonnes) 480 - - 480

Lead (tonnes) - 400 - 400

Silver (mill ion ounces) 0.3 1.4 0.1 1.8

Gold (ounces) - - 17,000 17,000

Copper C1 cash cost 1 ($/lb PRODUCED) * $2.00 - $2.10 $1.35 - $1.45 $3.10 - $3.20 $2.00 - $2.10

2015 Production and Cost Guidance

* Copper C1 cash cost per pound produced for Minto includes $0.34/lb of cost allocated from stockpile

which was spent in 2014 and earlier, reducing the actual cash expended during 2015 to $2.75 to $2.85 per

pound of payable copper. The cost profile throughout the year at Minto will have significantly higher costs

per pound at the start of the year, decreasing each quarter as grade improves.

($ millions) Sustaining Stripping Development* Exploration** TOTAL

Pinto Valley 21.9$ 10.7$ 53.5$ -$ 86.1$

Cozamin 15.9 - - 5.6 21.5

Minto 11.2 23.6 - - 34.8

Santo Domingo (70%) - - 11.8 - 11.8

Kutcho - - 0.8 - 0.8

Project Providencia - - - 5.4 5.4

TOTAL 49.0$ 34.3$ 66.1$ 11.0$ 160.4$

2015 Capital Guidance

* Development for Pinto Valley consists of $45.5M for PV2 capital and $8.0M for the PV3 study.

** Exploration is expected to be expensed for Project Providencia in Chile.


Mine Segment Profitability The Company recorded a net loss of $17.4 million Q1 2015 versus a net loss of $4.4 million in Q1 2014. The major differences are outlined in the table below: (all figures $ millions)

Net loss for the period ended March 31, 2014 (4.4)$

2015 differentials on earnings from mining operations

Pinto Valley (9.4)

Cozamin (8.9)

Minto 6.1 (12.2)

2015 differentials on earnings from operations

G&A (including share-based compensation) 1.7

Exploration (0.7) 1.0

2015 differentials on other items

Other income and expenses (6.9)

Net finance costs (0.9)

Income tax expense 6.0 (1.8)

Net earnings for the period ended March 31, 2015 (17.4)$

Three months ended

Pinto Valley Mine Pinto Valley recorded net earnings of $3.2 million for Q1 2015 versus $11.6 million in Q1 2014. The major differences are outlined in the table below: (all figures $ millions)

Net earnings for the period ended March 31, 2014 11.6$


Revenue (20.9)

Production costs 10.5

Depletion and amortization 1.0 (9.4)


Other (2.3)

Income tax expense 3.3 1.0


Three months ended

Revenue decreased quarter-over-quarter, driven by a 17% reduction in the realized copper price ($2.46 vs. $2.96) and a 14% reduction in the sale of payable copper attributable to lower production quarter-over-quarter and the timing of shipments, resulting in an inventory build-up of an additional 9,100 tonnes of concentrate inventory during Q1 2015. The build-up was driven by a shipment that was on the water at quarter end but for which revenue could not be recorded based on the terms of the contractual arrangement with the buyer and when title and risk transfer at discharge port. Production costs decreased quarter-over-quarter, driven almost entirely by the reduction in the sale of payable copper as discussed above, resulting in a build-up of concentrate inventory. Partially contributing to lower production costs was a reduction in the C1 cash cost due to higher grade ore in Q1 2015.


Depletion and amortization decreased in Q1 2015 driven primarily by lower volumes sold. The fluctuation in Other was primarily a function of the additional cost in Q1 2015 associated with a restructure to the organization at the mine site, which will run a leaner operation to drive operational efficiency. Income taxes decreased quarter-over-quarter due to lower profitability, driven by both lower realized prices and lower metal sales. Cozamin Mine Cozamin recorded net earnings of $2.1 million for Q1 2015 versus $8.4 million in Q1 2014. The major differences are outlined in the table below: (all figures $ millions)



Revenue (10.7)


Royalty 0.4

Depletion and amortization (0.4) (8.8)


Other (0.1)

Income tax expense 2.6 2.5


Three months ended

Revenue decreased quarter-over-quarter , driven by a 15% reduction in the realized copper price ($2.55 vs. $3.01) and a 38% reduction in the sale of payable copper, the latter primarily impacted by lower production quarter-over-quarter. Production costs decreased quarter-over-quarter, driven mainly by the reduction in the sale of payable copper as discussed above, but partially offset by an increase in the C1 cash cost due to lower grade ore in Q1 2015. Royalty expense (related to the net smelter royalty) decreased in Q1 2015 based on the decrease in reported revenue. Depletion and amortization increased in Q1 2015 driven by higher unit non-cash costs, partially offset by lower volumes sold. Driving the increase in unit cost was the application of the reduced reserve balance against the capital spend from 2014, the latter of which was heavily weighted toward H2 2014. Income taxes decreased quarter-over-quarter on lower profitability, driven mainly by both lower realized prices and lower metal sales, but also impacted by higher unit production costs.


Minto Mine Minto recorded a net loss of $5.5 million for Q1 2015 versus a net loss of $11.8 million in Q1 2014. The major differences are outlined in the table below:

(all figures $ millions)



Revenue (26.3)


Inventory write-down 7.4

Royalty 0.3

Depletion and amortization 15.1 6.1


Other 0.5

Income tax expense (0.3) 0.2


Three months ended

Revenue decreased quarter-over-quarter, driven by a 21% reduction in the realized copper price ($2.41 vs. $3.01) and a 40% reduction in the sale of payable copper. The latter was partially impacted by lower production quarter-over-quarter and lower payable sales related to the timing of shipments, resulting in an inventory build-up of an additional 2,700 tonnes of concentrate inventory during Q1 2015. Due to the seasonal nature of shipping at Minto, there can be significant swings in the ending inventory balance from quarter to quarter, which is further impacted by grade variation in the mine plan. Production costs decreased primarily on the basis of lower volumes sold, but were also impacted by the weaker Canadian dollar. Inventory write-downs decreased significantly from the prior year on the basis that there was a larger stockpile balance a year ago and the drop in the copper price for valuation purposes was greater. Also impacting the lower write-down is the weaker Canadian dollar and its effect on the Canadian denominated inventory book values. Royalty expense (related to the net smelter royalty) decreased in Q1 2015 based on the decrease in reported revenue. Depletion and amortization decreased in 2014 driven primarily by significantly lower volumes sold combined with lower unit non-cash costs, the latter of which was driven by the complete amortization of the Area 2 deferred stripping asset (mined out entirely in January 2014). The weaker Canadian dollar also contributed to the overall decrease in depletion and amortization with the USD/CAD average dropping from 1.10 in Q1 2014 to 1.24 in Q1 2015. Other expenses increased in Q1 2015 primarily due to stand-by fees for the mining contractor at site when management made the decision to slow down the mining rate while awaiting the water use license. The decrease in income tax expense in Q1 2015 was driven by the weaker copper market and its effect on taxable income.


Consolidated Results of Operations The Company recorded a net loss of $17.4 million in Q1 2015 compared with a net loss of $4.4 million in Q1 2014. Several factors contributed to the increased loss, including:

Smaller operating margins from mining operations:

Impairment of available-for-sale securities of $3.6 million (2014 – gain of $0.3 million);

Restructuring charges at the operational level of $2.2 million (2014 – $nil);

Contractor stand-by fees of $1.1 million (2014 – $nil) at Minto for reduced open pit mining rates;

Additional exploration spend related to greenfield activities in Chile; and

incremental interest on long-term debt associated with the credit facilities put in place to finance the acquisition of Pinto Valley; partially offset by

A lower write-down of Minto inventory ($2.6 million vs. $10.0 million in Q1 2014); and,

A decrease in taxes based on a weaker copper market and lower taxable profit. Revenue Revenue of $102.9 million in Q1 2015 generated earnings from mining operations of $4.9 million compared with revenue of $160.8 million in Q1 2014 that generated earnings from mining operations of $17.1 million. Revenue decreased quarter-over-quarter as a result of both lower copper volumes sold (on the back of lower production at each operating mine) as well as lower realized copper prices ($2.47 per pound vs. $2.99 in Q1 2014). Sales Overview

Q1 Total Q4 Q3 Q2 Q1

Copper (tonnes)

Pinto Valley 13,289 64,085 15,398 17,522 15,735 15,430

Cozamin 2,921 18,968 3,954 5,098 5,208 4,708

Minto 3,872 20,894 4,399 6,412 3,620 6,463

Total 20,082 103,947 23,751 29,032 24,563 26,601

Zinc (tonnes)

Cozamin 1,515 5,700 1,100 1,345 1,441 1,814

Lead (tonnes)

Cozamin 368 1,081 143 179 363 396

Molybdenum (tonnes)

Pinto Valley 49 97 31 38 28 -

Gold (ounces)

Minto 3,009 29,884 10,005 6,093 5,482 8,304

Pinto Valley * 81 1,232 309 923 - -

Total 3,090 31,116 10,314 7,016 5,482 8,304

Silver (000s ounces)

Cozamin 282 1,387 265 359 384 379

Minto 12 212 76 45 31 61

Pinto Valley 56 304 73 85 76 70

Total 350 1,903 414 489 492 509

* Pinto Valley gold production will be payable from time to time, resulting in reported gold revenue in the period received.

20142015


Gross Revenue by Metal Change

$ millions % $ millions % $ millions

Copper 109.3 91% 175.4 94% (66.1)

Zinc 3.1 3% 3.6 2% (0.5)

Lead 0.7 1% 0.8 0% (0.1)

Molybdenum 0.8 1% - 0% 0.8 Silver 3 3.4 3% 4.8 3% (1.4) Gold 3 1.5 1% 2.7 1% (1.2) Total 4 118.8 100% 187.3 100% (68.5)

Q1 2015 2 Q1 2014

2 The current and subsequent periods may include final settlement quantity and/or price adjustments from prior shipments. 3 Gold and silver revenue include non-cash amounts for deferred revenue amortization related to the precious metal stream sales 4 Treatment and selling costs of $15.9 million (2014 – $26.5 million) are deducted from gross revenue of $118.8 million (2014 – $187.3 million) for revenue of $102.9 million (2014 – $160.8 million) as per the Consolidated Statements of Earnings.

Reconciliation of Realized Copper Price

Q1 2015 Q1 2014

$ mill ions $ mill ions

Gross copper revenue on new shipments 122.2 177.1

Provisional adjustments on prior shipments (12.7) (2.1)

Foreign currency translation (0.1) 0.4

Gross copper revenue 109.4 175.4

Plus: gross revenue from other metals 9.4 11.9

Less: treatment and selling costs (15.9) (26.5)

Revenue 102.9 160.8

Payable copper sold (000s pounds) 44,274 58,646

$/lb $/lb

Gross copper revenue on new shipments 2.76$ 3.02$

Provisional adjustments on prior shipments (0.29) (0.04)

Foreign currency translation - 0.01

Realized copper price 2.47$ 2.99$

LME average copper price 2.64$ 3.19$ Revenue by Mine

Change

$ millions % $ millions % $ millions

Pinto Valley 63.6 62% 102.2 55% (38.6)

Cozamin 24.4 24% 38.7 21% (14.3)

Minto 14.9 14% 46.4 25% (31.5)

Total 102.9 100% 187.3 100% (84.4)

Q1 2015 2 Q1 2014

2 The current and subsequent periods may include final settlement quantity and/or price adjustments from prior shipments.


At March 31, 2015, certain quantities of provisionally priced copper were included in gross sales revenue. The provisional prices are subject to change on final price settlement at the end of the applicable quotational period:

Pinto Valley Cozamin Minto Total

April 11.1 0.4 - 11.5 2.75$

May 6.8 0.2 - 7.0 2.75

June 6.3 0.1 - 6.4 2.74

July 6.2 - 6.6 12.8 2.74

TOTAL 30.4 0.7 6.6 37.7 2.74$

Millions of Pounds of Copper Provisional Price

($/pound)

Quotational

Period

Continuity Schedule of Concentrate and Cathode Inventories

Minto

Copper Cathode Molybdenum Copper Zinc Lead Copper

(dmt) (tonnes) (dmt) (dmt) (dmt) (dmt) (dmt)

Dec 31, 2013 23,637 401 36 11,464 2,992 484 12,893

Production 55,672 621 100 20,675 3,531 819 13,539

Sales (52,176) (739) - (22,047) (4,757) (821) (17,815)

Mar 31, 2014 27,133 283 136 10,092 1,766 482 8,617

Production 55,670 526 80 20,125 3,625 392 13,322

Sales (54,388) (460) (120) (21,664) (3,757) (619) (9,009)

Jun 30, 2014 28,415 349 96 8,553 1,634 255 12,930

Production 51,280 650 66 19,160 3,364 342 12,324

Sales (58,860) (700) (122) (20,120) (3,495) (352) (17,330)

Sep 30, 2014 20,835 299 40 7,593 1,503 245 7,924

Production 49,084 617 98 17,775 3,579 397 10,915

Sales (52,530) (699) (90) (16,669) (3,076) (291) (11,753)

Dec 31, 2014 17,389 217 48 8,699 2,006 351 7,086

Production 53,594 620 98 14,611 3,534 457 11,663

Sales (44,507) (400) (98) (16,267) (4,024) (650) (8,942)

Mar 31, 2015 26,476 437 48 7,043 1,516 158 9,807

CozaminPinto Valley

Operating Costs Production costs in Q1 2015 were $73.1 million or 71% of revenue compared with $102.4 million or 64% of revenue in Q1 2014. Also included in the current quarter’s production costs were non-cash charges related to Minto Mine inventory write-downs of $2.6 million (2014 – non-cash charge of $10.0 million). Royalties at Cozamin and Minto were lower in Q1 2015 at $1.1 million compared with $1.8 million in Q1 2014 as a direct result of lower revenue for each mine. Pinto Valley’s revenue is not subject to a royalty. Depletion and amortization was lower in Q1 2015 at $23.8 million compared with $39.5 million in Q1 2014. The decrease was driven primarily by Minto, where significantly lower volumes sold combined with lower unit non-cash costs, the latter of which was driven by the complete amortization of the Area 2 deferred stripping asset (mined out entirely in January 2014).


(all figures in $ millions) Pinto Valley Cozamin Minto Total

Dec 31/14 non-cash cost in inventory 4.9$ 2.1$ 16.5$ 23.5$

Capitalization of non-cash cost to inventory 2 13.4 5.0 7.7 26.1

Non-cash cost released to the income statement 3 (11.2) (5.0) (7.6) (23.8)

Currency translation adjustment - - (1.4) (1.4)

Mar 31/15 non-cash cost in inventory 7.1$ 2.1$ 15.2$ 24.4$

Q1 2015 Continuity of Non-Cash Cost in Inventory

2 Total non-cash cost capitalized to inventory of $26.1 million reconciles to “Depletion and amortization” of $26.3 million per the continuity schedule of Mineral properties, plant and equipment in Note 5 of the March 31, 2015 interim financial statements. The reconciling difference of $0.2 million represents the amortization of equipment at non-mining operations (i.e. Corporate office), where amortization is treated as a period cost and expensed through G&A as opposed to the mine operations where amortization is treated as a production cost and capitalized to inventory. 3 Total non-cash cost of $23.8 million released to the income statement represents the non-cash portion of inventory sold during Q1 2015, which reconciles directly to the line “Depletion and amortization” on the statement of earnings.

General and administrative expenses in Q1 2015 were flat at $6.4 million compared with Q1 2014. Exploration expense in Q1 2015 was $1.8 million compared with $1.1 million in Q1 2014. The increase in the Company’s greenfield activities that are prospective in nature and not yet supported by an internal economic assessment relates entirely to Project Providencia in Chile. Stock-based compensation was $1.1 million in Q1 2015 compared to $2.8 million in Q1 2014. The decrease was driven by the decline in Capstone’s share price and the corresponding impacts on the fair value movement of the Deferred Share Units (“DSUs”), Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”) as well as the fair value associated with option grants. Other Income and Expense Other expenses of $7.4 million in Q1 2015 related primarily to the impairment of available-for-sale securities of $3.6 million, restructuring costs at the operational level of $2.2 million, and contractor stand-by fees of $1.1 million for the reduction of open pit mining rates at Minto. This is compared to an expense of $0.5 million in Q1 2014, which related primarily to a foreign exchange loss of $0.8 million. Net finance costs were $3.8 million in Q1 2015 compared to $2.9 million in Q1 2014. The increase was driven primarily by higher pricing on outstanding debt facilities but also was impacted by larger balances. Taxes ($ millions) Q1 '15 Q1 '14

Pinto Valley 0.3$ 3.6$

Cozamin 1.8 4.5

Minto (0.1) (0.4)

Other (0.3) 0.1

Expense (recovery) 1.7$ 7.8$ Pinto Valley - Taxes decreased $3.3 million from the prior year, driven primarily by lower taxable income on lower realized metal prices and lower metal sold. Cozamin – Taxes decreased $2.7 million from the prior year, driven primarily by lower taxable income on lower realized metal prices and lower metal sold.


Selected Quarterly Financial Information ($ millions, except share data) Q1 2015 Q1 2014Revenue 102.9 160.8

Operating costsProduction costs (73.1) (102.4) Royalties (1.1) (1.8) Depletion and amortization (23.8) (39.5)

Earnings from mining operations 4.9 17.1 General and administrative expenses (6.4) (6.4) Exploration expenses (1.8) (1.1) Stock-based compensation (1.1) (2.8) Earnings from operations (4.4) 6.8

Other (expense) income (7.4) (0.5) Net finance costs (3.8) (2.9) Earnings before income taxes (15.6) 3.4

Income tax expense (1.7) (7.8) Net (loss) earnings (17.4) (4.4)

Cashflow statementOperating cashflow (6.6) 45.2 Capital expenditures 45.1 17.5

Balance sheetTotal assets 1,844.9 1,882.0 Shareholders' equity 1,248.9 1,299.2

Weighted average shares outstandingBasic 380,044,066 380,483,867 Diluted 382,044,066 380,483,867

($ millions, except per share data) Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013Revenue 102.9 139.5 183.9 171.7 160.8 136.8 79.3 58.3 Earnings from mining operations 4.9 10.8 31.4 45.5 17.1 13.2 13.6 13.5 Net (loss) earnings (17.4) (34.4) (0.1) 16.6 (4.4) (23.4) (4.6) 9.2 Earnings (loss) per share - basic (0.04) (0.09) 0.00 0.04 (0.01) (0.06) (0.01) 0.02 Earnings (loss) per share - diluted (0.04) (0.09) 0.00 0.04 (0.01) (0.06) (0.01) 0.02 Operating cashflow before changes

in non-cash working capital1 16.5 30.7 59.0 59.5 50.2 22.9 13.6 28.6 Capital expenditures 45.1 35.3 21.4 15.6 17.5 34.3 38.2 33.3


Mining Operations Production Overview


Copper (tonnes)

Pinto Valley 15,809 65,129 15,223 16,000 17,013 16,893

Cozamin 3,773 19,813 4,573 4,948 5,191 5,101

Minto 4,095 18,411 3,299 4,762 5,129 5,221

Total 23,677 103,353 23,095 25,710 27,333 27,215

Zinc (tonnes)

Cozamin 1,671 6,509 1,632 1,517 1,728 1,632

Lead (tonnes)

Cozamin 281 1,148 213 190 229 516

Molybdenum (Mo) (tonnes)

Pinto Valley 49 113 49 15 24 25

Gold (ounces)

Minto 2 3,792 19,909 3,397 6,199 5,185 5,128

Silver (000s ounces)

Cozamin 286 1,615 348 393 422 452

Pinto Valley 3 72 286 66 69 75 75

Minto 38 171 24 39 51 58

Total 396 2,072 438 501 548 585

20142015

2 Gold is not assayed on site, resulting in a significant lag time in receiving this data. As such, this figure is an estimate. 3 Silver is not assayed on site, resulting in a significant lag time in receiving this data. As such, this figure is an estimate.


Pinto Valley Mine The Pinto Valley Mine is a copper mine located near Miami, Arizona. Operating Statistics


Production (contained metal) 2

Copper (tonnes) 15,809 65,129 15,223 16,000 17,013 16,893

Molybdenum (Mo) (tonnes) 49 113 49 15 24 25

Silver (000s ounces) 72 286 66 69 75 75

Mining

Waste (000s tonnes) 2,058 932 130 247 555 1

Ore (000s tonnes) 4,705 20,931 4,962 5,500 4,862 5,606

Total (000s tonnes) 6,763 21,863 5,092 5,747 5,417 5,607

Milling

Milled (000s tonnes) 4,038 17,231 4,359 4,498 4,162 4,211

Tonnes per day 44,863 47,209 47,385 48,895 45,244 46,789

Copper grade (%) 0.43 0.41 0.37 0.39 0.46 0.45

Molybdenum grade (%) 0.01 0.01 0.01 0.01 0.01 0.01

Recoveries

Copper (%) 88.6 88.9 88.8 90.3 89.1 87.7

Concentrate Production

Copper (dmt) 53,593 211,709 49,087 51,280 55,670 55,672

Copper (%) 28.4 29.6 27.1 30.8 30.3 30.0

Molybdenum (dmt) 98 344 98 66 80 100

Site operating costs 1 ($/t milled) $11.82 $12.27 $9.91 $11.15 $14.65 $13.57

Payable copper produced (tonnes) 55,282 62,986 14,716 15,479 16,467 16,324

Copper C1 cash cost 1,3 ($/lb produced) $1.93 $2.03 $1.82 $1.96 $2.18 $2.12

Copper C1 cash cost 1 ($/lb sold) $1.87 $2.05 $1.91 $1.95 $2.21 $2.15

20142015

2 Adjustments based on final settlements will be made in future quarters. 3 Based on the production adjustment described in footnote number 3 above, there was a corresponding adjustment to the C1 cash cost per pound of payable copper produced for Q1, Q2 and Q3 2014.

Operational Update The key operational issue that Pinto Valley continues to focus on is reliability enhancement related to mill stability at the targeted throughput level of 52,000 tonnes per day. Ongoing work needed to reliably sustain that rate in 2015 is focused around implementing a systematic maintenance program, including monitoring activities to address equipment reliability, to reduce unplanned downtime. Identification and prioritization of key issues has taken place with the development of working plans, systems, tracking tools along with the audit and update of all plant documentation including drawings, master lists, manuals and critical spares inventory. Third party maintenance reliability specialists were engaged in Q1 2015 to supplement the internal maintenance manpower and expertise at Pinto Valley. During Q1 2015 Pinto Valley completed a reorganization to improve operational efficiency and accountability. As part of the redesign, approximately 40 salaried staff left the organization and a further 30 people changed roles, resulting in an reduction to the salaried workforce of 15% and restructuring costs of $2.2 million recognized in the quarter. Total salaried staff and total Pinto Valley workforce following the reorganization are 183 and 630, respectively, with no changes made to the hourly staffing levels.


Production and C1 Cash Costs Pinto Valley copper production for Q1 2015 met plan, with the decrease in throughput offset by the increase in grade. Compared to the prior year, production decreased due to both lower grade (0.43% vs. 0.45%) and throughput.

Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013

Payable copper produced (000s lbs) 33,690 32,444 34,124 36,304 35,987 30,033

Production costs ($/lb) 1.49$ 1.43$ 1.58$ 1.78$ 1.59$ 1.64$

TSA costs ($/lb) - - - - 0.09 0.20

By-product credits ($/lb) (0.05) (0.06) (0.08) (0.05) (0.05) (0.05)

Treatment and selling costs ($/lb) 0.49 0.45 0.46 0.45 0.49 0.47

C1 cash cost ($/lb produced) 1.93$ 1.82$ 1.96$ 2.18$ 2.12$ 2.26$

Pinto Valley’s C1 cash cost1 per pound produced decreased in Q1 2015 year-over-year based on better operating efficiencies. However, C1 cash cost1 per pound produced increased marginally from Q4 2014, impacted both by slightly higher site costs as well as higher treatment and refining costs due to the higher benchmark figure for 2015. Investing Activities Capital spending (excluding capitalized deferred stripping of $1.2 million) totaled $25.7 million, broken down as sustaining capital of $2.1 million, PV2 expansion spend of $20.8 million and PV3 study costs of $2.9 million. The bulk of expenditures were related to PV2 capital, including a second hydraulic shovel and three additional haul trucks. Outlook Pinto Valley forecasts production of 56,300 tonnes of contained copper and 2,700 tonnes of copper cathode (±5%), 480 tonnes of molybdenum, and 0.3 million ounces of silver for 2015. Copper C1 cash cost1 is projected at $2.00 to $2.10 per pound of payable copper produced. Sustaining capital expenditures of $21.9 million are forecast for 2015, which includes $6.9 million for mining fleet component replacement and $2.5 million for water management. A further $45.5 million has been forecast for the PV2 expansion capital and tailings management along with additional development capital of $8.0 million to advance two internal cases to the PV3 PFS level. At March 31, 2015, $13.0 million of the 2015 capital guidance is potentially discretionary and could be deferred or cancelled should low copper prices persist for an extended period. Pinto Valley’s current mine plan to 2026 considers only 16% of the total Pinto Valley Measured and Indicated Mineral Resource. Capstone believes that considerable potential exists to upgrade the existing measured and indicated mineral resources into mineral reserves, potentially extending the operation beyond the current reserve life. An internal scoping study was completed in 2014 that evaluated the resources not included in the mine plan. As a result, two cases will be advanced to the Pre-Feasibility study level. A preliminary feasibility study (“PV 3 PFS”) is underway, which will target all remaining measured and indicated mineral resources for potential conversion to mineral reserves. The PV3 PFS base case will include a 10% to 15% increase in throughput and the possibility of a mine life extension beyond 2026 and a second case will evaluate a throughput increase to 90,000 tonnes per day combined with a potential mine life extension. The PV3 PFS is expected to be completed in Q3 2015, at which time we will evaluate the two alternatives and the best use of capital.


Cozamin Mine The Cozamin Mine is a copper-silver mine located in Zacatecas, Mexico.

Operating Statistics



Copper (tonnes) 3,773 19,813 4,573 4,948 5,191 5,101

Zinc (tonnes) 1,671 6,509 1,632 1,517 1,728 1,632

Lead (tonnes) 281 1,148 213 190 229 516

Silver (000s ounces) 286 1,615 348 393 422 452

Mining

Ore (000s tonnes) 288 1,216 302 302 303 310

Milling

Milled (000s tonnes) 287 1,228 305 302 314 308

Tonnes per day 3,184 3,365 3,316 3,279 3,446 3,421

Copper grade (%) 1.42 1.74 1.61 1.76 1.79 1.79

Zinc grade (%) 0.83 0.85 0.83 0.78 0.94 0.87

Lead grade (%) 0.17 0.18 0.14 0.13 0.16 0.28

Silver grade (g/t) 44.0 57.8 50.7 57.7 59.5 63.0

Recoveries

Copper (%) 92.9 92.7 92.8 93.0 92.7 92.3

Zinc (%) 70.1 62.0 64.8 64.7 58.7 60.6

Lead (%) 56.3 52.5 49.5 48.5 44.7 60.5

Silver (%) 70.4 70.8 70.0 70.2 70.4 72.5


Copper (dmt) 14,611 77,734 17,774 19,160 20,125 20,675

Copper (%) 25.8 25.5 25.7 25.8 25.8 24.7

Silver (g/t) 516 583 558 586 604 583

Zinc (dmt) 3,534 14,100 3,580 3,364 3,625 3,531

Zinc (%) 47.3 46.2 45.6 45.1 47.7 46.2

Lead (dmt) 456 1,950 397 342 392 819

Lead (%) 61.5 58.8 53.6 55.4 58.4 63.0

Silver (g/t) 2,949 2,504 2,298 2,904 2,471 2,454

Site operating costs 1 ($/t milled) $41.40 $43.01 $41.72 $44.50 $43.20 $42.62


Copper C1 cash cost 1 ($/lb produced) $1.51 $1.29 $1.30 $1.29 $1.23 $1.23

Copper C1 cash cost 1 ($/lb sold) $1.46 $1.28 $1.38 $1.23 $1.23 $1.29

20142015

2 Adjustments based on final settlements will be made in the future quarters.

Operational Update During the early part of Q1 2015, development activity at Cozamin fell behind plan, impacting access to planned ore grade and consequently throughput. New ground support procedures and jumbo drilling precision were identified as the root causes of the issue. Additional training provided the benefit of improved development performance in March, with the current mine plan forecasting Cozamin to make up the production shortfall from the first quarter throughout the remainder of 2015.


Production and C1 Cash Costs Copper production for Q1 2015 decreased quarter-over-quarter, impacted by decreases in grade (1.42% vs. 1.79%) and throughput, partially offset by slightly higher recovery. Grade was impacted by weaker development rates, which limited access to higher grade stopes that were within the mine plan. C1 cash cost1 of $1.51 per pound of payable copper produced in Q1 2015 increased quarter-over-quarter from $1.23 in Q1 2014, driven primarily by the decrease copper production due to lower grade and throughput. Investing Activities Capital spending at Cozamin totaled $1.2 million for Q1 2015, spent primarily on mine development. Capitalized exploration expenditures totaled $0.4 million for Q1 2015, spent primarily on underground drilling on the Mala Noche Footwall Zone but also on underground access for Mala Noche vein resource drilling in Q3 2015. Drilling for Q1 2015 totaled 3,120 metres over 8 holes. Outlook Cozamin forecasts production of 18,000 tonnes of contained copper, 8,300 tonnes of zinc, 400 tonnes of lead, and 1.4 million ounces of silver for 2015. Copper C1 cash cost1 is projected at $1.35 to $1.45 per pound of payable copper produced, which remains unchanged from previous guidance for 2015. The majority of the ore will continue to come from the San Roberto blocks in 2015, with the Mala Noche footwall zone contributing approximately 37% of ore production in 2015 at an average copper grade of 1.78%. Cost per tonne of ore milled1 is budgeted to decrease slightly; however, C1 cash cost1 per pound of payable copper produced is expected to increase over 2014 due to the lower grade of 1.59% for the year. A total capital program of $15.9 million has been approved for 2015, with major items of spend as follows: $4.6 million for underground development, $5.1 million for infrastructure and communications, $2.9 million on the construction of a paste fill plant, and $2.5-million in underground and surface equipment. At March 31, 2015, $6.7 million of the 2015 capital guidance is potentially discretionary and could be deferred or cancelled should low copper prices persist for an extended period. An exploration program of $5.6 million has been approved for 2015, with plans for 18,900 metres of underground infill drilling to add certainty to the block model with the goal to potentially recover some reserve losses identified in the 2014 Pre-Feasibility Study, as well as step-out on both the Mala Noche vein and Mala Noche footwall zone mineral resource areas. The continuation of surface drilling, which began in 2014 targeting Mala Noche splays that had not previously been tested, will continue in 2015 with 12,000 metres of surface drilling budgeted.


Minto Mine The Minto Mine is a copper mine located in Yukon, Canada. Operating Statistics



Copper (tonnes) 4,095 18,411 3,299 4,762 5,129 5,221

Gold (ounces) 3 3,792 19,909 3,397 6,199 5,185 5,128

Silver (000s ounces) 38 171 24 39 51 58

Mining - Open Pit

Waste (000s tonnes) 58 2,858 88 873 1,064 833

Ore (000s tonnes) 80 517 40 89 133 255

Total (000s tonnes) 139 3,376 128 962 1,197 1,088

Mining - Underground

Ore (000s tonnes) 96 301 69 135 79 18

Milling

Milled (000s tonnes) 335 1,439 350 360 375 353

Tonnes per day 3,722 3,942 3,809 3,916 4,124 3,918

Copper grade (%) 1.42 1.37 1.04 1.41 1.45 1.58

Gold grade (g/t) 3 0.48 0.56 0.42 0.65 0.55 0.60

Silver grade (g/t) 4.5 4.7 3.1 4.4 5.1 6.3

Recoveries

Copper (%) 85.9 93.2 90.4 93.8 94.2 93.6

Gold (%) 3 73.9 77.5 71.8 82.3 77.6 75.9

Silver (%) 77.9 78.5 68.4 77.1 81.7 81.5


Copper (dmt) 11,663 50,246 10,916 12,470 13,322 13,538

Copper (%) 35.1 36.6 30.2 38.2 38.5 38.6

Gold (g/t) 3 10.1 12.3 9.7 15.5 12.1 11.8

Silver (g/t) 101 106 67 97 118 133

Site operating costs 1,4 ($/t milled) $60.20 $59.16 $52.21 $58.49 $68.50 $60.11


Copper C1 cash cost 1,4 ($/lb produced) $2.58 $2.33 $2.94 $2.18 $2.46 $1.94

Copper C1 cash cost 1,4 ($/lb sold) $2.58 $1.96 $2.15 $2.26 $1.80 $1.60

20142015

2 Adjustments based on final settlements will be made in future quarters. 3 Gold is not assayed on site, resulting in a significant lag time in receiving this data. As such, this figure is an estimate. 4 Minto’s operating costs are adjusted to exclude mining of ore and waste not related to concentrate produced in the quarter, these costs are capitalized or inventoried in the financial statements, and then expensed when the associated ore is processed.

Operational Update Open pit activity during Q1 2015 was focused on retreat mining of the Area 2 switchback to extract the remaining ore underneath the former ramp as well as in the pillar between M-zone and the pit wall. The deepest portion of this activity was completed in March, when the pit was then required for tailings and water storage. Additional retreat mining from the upper portions of A2 pit has been added into the mine plan and is expected to take place during Q2 2015. Underground mining in Area 118 continued throughout the quarter, with multiple ore faces on the development headings allowing for over achievement on tonnes mined. Modelled grade has exceeded budget with good dilution control.


Production and C1 Cash Costs Copper production in Q1 2015 decreased quarter-over-quarter, driven primarily by the decrease in grade (1.42% vs. 1.58%), but also impacted by lower recovery (85.6% vs. 93.6%) and lower average daily throughput (3,722 tpd vs. 3,918 tpd). A general decrease in ore grade was expected as part of the 2015 mine plan; however, this decrease was partially mitigated by two unplanned developments, namely higher grade ore from Area 118 underground as well as successfully mining a switchback in the Area 2 Stage 2 pit, which was not expected in advance of the pit being required for water storage. C1 cash cost1 of $2.58 per pound of payable copper produced in Q1 2015 increased quarter-over-quarter from $1.94 in Q1 2014, a function of higher unit mining costs (primarily due to the costs associated with underground mining) and lower production. Investing Activities Capital spending at Minto totaled $4.9 million during Q1 2015, with major categories of spend including underground development and a ventilation system for the 118 zone. Permitting Update On February 6, 2015, the Yukon Water Board requested additional information after the public comment period closed. Minto responded to this Information Request on February 16, 2015. The hearing with the Yukon Water Board on the Water Use Licence Amendment subsequently took place in the first week of March and the Company continues to await receipt of the licence. The current plan has the mill continuing to process underground and stockpiled ore, with surface mining on hold until receipt of the required licence, which is expected in Q2 2015. Outlook Minto’s 2015 base case guidance called for production of 13,000 tonnes of contained copper at C1 cash cost1 of $3.10 to $3.20 per pound of payable copper produced. The 2015 C1 cash cost1 guidance includes $0.34 per pound of cost allocated from stockpile which was spent in 2014 and earlier, bringing actual cash expended during 2015 to $2.75 to $2.85 per pound of payable copper produced. A total capital program of $11.2 million has been approved for 2015 (excluding $23.6 million for capitalized stripping of Minto North), with major items of spend as follows: $7.5 million in underground development and equipment, $2.6 million for various improvement projects and $1.1 million for permitting and environmental activities. At March 31, 2015, $4.7 million of the 2015 capital guidance is potentially discretionary and could be deferred or cancelled should low copper prices persist for an extended period. Santo Domingo Project The Company owns a 70% interest in the Santo Domingo copper-iron project, which is located 130 kilometres north north-east of Copiapó in Region III, Chile, near the town of Diego de Almagro. Elevation at the site ranges from 1,000 to 1,280 metres above sea level, with relatively gentle topographic relief. Access to the project is via paved highway and a network of generally well-maintained gravel roads. Regional infrastructure is good and highways connect main towns and cities. A Feasibility Study (“FS”) for the Santo Domingo Project announced on June 4, 2014, indicated average annual LOM copper production of 58,100 tonnes with 4.2 million tonnes of iron concentrate and 16,000 ounces of gold. The after-tax net present value, discounted at 8%, was $797 million and the unlevered after-tax internal rate of return was 17.9% with a payback period of 4.2 years based on capital costs of $1.7 billion. The C1 cash cost1 is estimated to be negative $0.06 per pound of payable copper LOM.


Tax Tax reform in Chile became law in Q3 2014. The law contemplates two alternative tax regimes, with Santo Domingo having a higher first tier corporate tax rate of 27% versus the 20% that was in the FS. Environmental Impact Assessment (“EIA”) Capstone submitted the EIA for the Santo Domingo project on October 29, 2013, initiating the formal environmental assessment process, which was expected to take approximately 15 to 18 months. The Company has responded to several information requests to date, with the presentation of its third addendum expected in Q2 2015. Under the current timetable the EIA is now expected to be received during Q2 2015. Engineering, Procurement and Construction (“EPC”) Capstone Mining has selected POSCO E&C (“POSCO”) as the preferred EPC fixed price lump sum contractor for the Santo Domingo project. On the basis of the fixed price lump sum bid received, the total capital cost of the project is expected to be at or below the previously estimate $1.7 billion, with approximately 70% covered under the fixed price contract. The Santo Domingo project continues to be advanced in a measured and disciplined manner, with a number of steps in the stage-gate process to be completed prior to large capital expenditure commitments.

While the final EPC contract has not yet been negotiated or concluded, Capstone has awarded POSCO a Limited Notice to Proceed to the end of Stage-Gate 1, which will include confirmation of completeness of the engineering and contractual performance guarantee parameters. This award totals approximately $4.6 million and is part of Capstone’s previously announced 2015 base case budget of $16.9 million (of which Capstone’s 70% share is $11.8 million). The engineering due diligence portion of this work is anticipated to be completed before the end of Q2 2015. Following Stage-Gate 1 next steps will be determined and communicated. Power Supply Capstone remains optimistic about the availability of economically priced power in the region to supply the Santo Domingo project within the expected development timeline, having received several indicative term sheets for power in the cost range considered within the FS. While formal Power Purchase Agreement discussions continue to advance with third parties, the execution of a contract to secure power for the project is no longer critical path. Port Development Capstone has selected a greenfield port location located approximately 110 kilometres from the Santo Domingo project. Santo Domingo’s port concession was approved by the Coastal Land Use Commission in Q4 2013, with the final step in the process for the Chilean Armed Forces to issue the formal concession, which is still expected in Q2 2015. Investing Activities Capital spending on a 100% basis at Santo Domingo totaled $7.0 million during Q1 2015 (Capstone’s 70% share was $4.9 million), spent primarily on both basic and detailed engineering and the EIA as well as de-risking the project. Outlook In light of current copper market conditions, projected base case spending on the Santo Domingo project during 2015 is estimated at $16.9 million, of which Capstone’s 70% share is $11.8 million, to advance permitting, social license, and sustain the owners’ team. Capstone is advancing the project using a stage-gate project management process, with the expectation that the EIA will be received (Stage-Gate 1) during late Q2 2015, at which time the Company plans to evaluate the status of the project and communicate the next steps to the market.


The decisions related to the Santo Domingo project continue to be targeted at maximizing the value of the project to Capstone shareholders in a manner that ensures financial flexibility for continued growth and security for the Company's existing operations. The decision to proceed to Stage-Gate 2 will reflect, among other factors, ongoing social license, long-term power availability, receipt of the port concession, awarding of the project execution contract, general and project specific market conditions, the financing market, project economics and alternatives available to the Company at that time. Should economic conditions improve and the fundamentals of the project continue to warrant it, the budget for Santo Domingo could be increased to up to $33.7 million (Capstone’s 70% share would be $23.6 million) for the full year. Greenfield Exploration Exploration is an integral part of Capstone's growth strategy. In addition to its own exploration properties, Capstone has made investments in partnerships with exploration-focused companies and is evaluating additional opportunities on a continuing basis. Capstone’s largest greenfield project is Project Providencia in Region II, Chile, where the Company has an option agreement with Sociedad Química y Minera de Chile S.A. (“SQM”) to earn up to a 70% interest. The initial option was on 350,000 hectares (3,500 square kilometres) and would be reduced over time to a maximum of 50,000 hectares if a joint venture was ultimately formed. During March 2015, an amended agreement with SQM was signed, dropping just under half of the original land package and extending the term from 7.5 years to 8.5 years, with an additional spend requirement of $1.0 million in the final year. Exploration activity during Q1 2015 included the following:

infill soil sampling , and some trenching to detail better anomalies before drill testing;

prospect scale geological mapping,

drilling of 496 metres on one of four targets for testing in Phase 1 of a two phase drill program. The budget for 2015 involves 15,000 metres of drilling on a minimum of four principal copper porphyry and IOCG prospects identified to date. A number of less advanced targets will be further evaluated and may also be considered for drill testing. In addition to current targets, analysis of all datasets is ongoing and additional targets are anticipated. Capstone is the operator of the project and may earn up to a 70% interest in the property over 8.5 years in incremental steps through expenditure on exploration and land holding costs, with three options that may be exercised at Capstone's sole discretion. During the term of the agreement, Capstone has the right to withdraw from the project at any time, whereby the agreement will terminate and management of the project will return to SQM. Exploration Expense Greenfield exploration expense totaled $1.8 million during Q1 2015 on the Providencia Project in Chile. Outlook Greenfield exploration is principally focused on Project Providencia in Chile, Capstone's earn-in project with SQM, where the 2015 budget of $5.4 million encompasses 15,000 metres of drill testing, sampling and geochemistry work on Project Providencia as well as on one adjacent property. The minimum expenditure required in 2015 under the SQM agreement is $1.5 million.


Kutcho Project The Company owns a 100% interest, subject to certain third party rights, in the Kutcho Project, a high grade copper-zinc property in British Columbia. Following the purchase of Pinto Valley, Kutcho’s production profile and mine life no longer fit within Capstone’s growth strategy and alternatives are being evaluated. As such, the assets and liabilities of Kutcho are classified as held for sale as at March 31, 2015 and a sale process is underway. As part of Kutcho’s classification as held for sale, management is required to monitor its fair value and ensure that it is carried at the lesser of cost or fair value less cost to sell. Based on the deterioration in market conditions, a non-cash impairment charge of $8.6 million was recorded against the project’s carrying value in 2014. Outlook Capital spending for 2015 of $0.8 million consists primarily of ongoing environmental baseline studies as well as some operational costs related to the camp.

Liquidity and Financial Position Review Working Capital Working capital was $193.6 million at March 31, 2015 compared with $106.5 million at December 31, 2014. The major components of working capital at March 31, 2015 included $122.6 million of cash and cash equivalents, $106.1 million of inventories, and $26.6 million of receivables, offset by $79.9 million of current liabilities. Most of the increase was due to the refinancing of the reducing term credit facility, eliminating the previously required amortization of $88.9 million in debt that had been classified as current at December 31, 2014. Current Assets Current assets increased $5.0 million to $273.5 million at March 31, 2015 compared with $268.5 million at December 31, 2014. Mineral Properties, Plant and Equipment Mineral properties, plant and equipment increased to $1,471.6 million at March 31, 2014 from $1,467.1 million at December 31, 2014. This increase of $4.4 million comprised the following:

Additions of $40.6 million o Deferred stripping at Pinto Valley - $1.2 million o Exploration and development of mineral properties - $8.5 million

Santo Domingo - $7.0 million Cozamin - $1.6 million

o Plant, equipment and construction in progress - $30.8 million Pinto Valley - $25.7 million Minto - $5.0 million Corporate - $0.1 million

Depletion and amortization of $26.3 million o Pinto Valley - $13.4 million o Minto - $7.7 million o Cozamin - $5.0 million o Other - $0.2 million

Disposals of $0.1 million

A foreign currency translation decrease of $9.8 million on the weakening Canadian dollar


Assets Classified as Held-for-Sale Following the acquisition of Pinto Valley in 2013, Kutcho’s production profile and mine life no longer fit within Capstone’s growth strategy and strategic alternatives are being evaluated. Given management’s intention to dispose of the asset, the assets and liabilities of Kutcho have been classified on the balance sheet as held-for-sale. Due to recent British Columbia government reviews around tailings facility regulations, the sale of Kutcho has been delayed. Current Liabilities Current liabilities decreased by $82.1 million to $79.9 million at March 31, 2015 from $162.0 million at December 31, 2014. The decrease is due to the reduction in the current portion of the long term debt from $89.9 million to nil as a result of the amendment to the credit facility described below. Finance Lease Obligations During Q2 2013, the Minto Mine acquired mobile equipment for its underground mining operations. These assets were financed through finance lease arrangements, resulting in a balance of $1.3 million at March 31, 2015 ($1.7 million at December 31, 2014). Deferred Revenue The Company’s deferred revenue at March 31, 2015 of $12.1 million ($14.0 million at December 31, 2014) relates to two precious metal sales agreements with Silver Wheaton Corp. This amount is amortized to revenue as the related delivery obligations under these agreements are met. During Q1 2015, a total of $1.4 million (2014 – $2.3 million) was amortized to revenue. Credit Facilities On January 16, 2015, Capstone entered into an amended senior secured corporate revolving credit facility (“RCF”) for up to $500 million, with a committed $440 million plus a $60 million accordion, the latter of which may be exercised once additional credit is committed from existing and/or new lenders. This new RCF facility amended Capstone's existing senior secured corporate revolving term facility and allowed for the repayment and cancellation of the existing senior secured reducing revolving credit facility. As a result, the senior secured corporate revolving term facility balance of $142.2 million and the senior secured reducing revolving corporate credit facility balance of $133.3 million (both as at December 31, 2014) were repaid using approximately $265 million of new drawings from the RCF. During Q1 2015, the Company incurred $2.4 million (2014 - $0.2 million) of fees associated with the RCF, which were capitalized and are being amortized to the statement of earnings over the respective terms of the facilities. During Q1 2015, a total of $0.4 million (2014 – $0.2 million) was amortized and recorded in other interest expense. The RCF is secured against the present and future real and personal property, assets and undertakings of Capstone (excluding certain assets, which include Acquisition Co., Far West, Santo Domingo, Far West Exploration S.A. and Far West Australia and subject to certain exclusions for Capstone Mining Chile SpA and Capstone Exploraciones, S. A. de C. V.). The credit facility requires certain financial ratios relating to debt and interest coverage. Failure to meet these covenants would result in a default under the facilities. Capstone is in compliance with these covenants as at March 31, 2015. At March 31, 2015, the available credit under the RCF was $136.1 million. At March 31, 2015 there were four Surety Bonds totaling $125.2 million to support various reclamation obligation bonding requirements. This comprises C$42.0 million securing reclamation obligations at the Minto mine and $92.0 million securing reclamation obligations at Pinto Valley. These bonds are excluded from the definition of debt for covenant compliance calculations.


Deferred Income Tax Liability The deferred income tax liability of $53.0 million at March 31, 2015 relates primarily to the excess of accounting values over tax basis resulting from the merger between Capstone and Sherwood Copper Corp. in 2008. In addition, the excess of accounting values over the tax basis of the inventory as well as mineral properties, plant and equipment contributed to the deferred income tax liability. Retirement Benefit Liabilities The balance of $7.2 million at March 31, 2015 ($7.0 million at December 31, 2014) is attributable to the Pinto Valley operation. Provisions Provisions of $145.5 million at March 31, 2015 include the following:

$140.9 million for reclamation and closure cost obligation at Capstone’s operating mines;

$3.0 million related other long term provisions at the Cozamin mine; and

$2.4 million for the share-based payment obligation associated with the cash-settled DSUs, RSUs and PSUs ($0.8 million of which are classified as current liabilities and recorded within accounts payable and accrued liabilities).

Equity Total equity at March 31, 2015 decreased to $1.248.7 million from $1,277.2 million at December 31, 2014. The $28.5 million decrease was due to:

Reserve for equity settled share based transactions showed an increase of $1.8 million related to stock-based compensation expense

Foreign currency translation reserve decreased by $13.2 million driven by the weakening of the Canadian dollar and its effect on Canadian denominated cash and mineral properties, plant and equipment (primarily related to Minto)

Retained earnings decreased by $17.0 million due to the net loss attributable to common shareholders

Non-controlling interest decreased by $0.4 million, related to the 30% interest in the net assets of Far West owned by Korea Resources Corporation (“KORES”)

Financial Capability

The Company’s ability to service its ongoing obligations and cover anticipated corporate, exploration and development costs associated with its existing operations is dependent on the Cozamin, Minto and Pinto Valley mines continuing to generate positive cash flow, the cash and cash equivalent balance of $122.6 million at March 31, 2015 as well as the renegotiated revolving credit facility. Based on reasonable expectation for our operating performance and flexible capital plan, we believe we have ample financial capacity to manage our current requirements for the foreseeable future, even with a continuation of current challenged market conditions. Capital Management The Company’s capital management objectives are intended to safeguard the Company’s ability to support its normal operating requirements on an ongoing basis as well as continue the development and exploration of its mineral properties and support any expansion plans. As part of the Company’s treasury policy, the Company will only invest in Canadian Tier 1 banks with a AA rating or greater or international commercial banks with a rating of A or greater. The RCF contains various financial covenants, including interest coverage, leverage and a tangible net worth requirement. As at March 31, 2015, the Company was in compliance.


Precious Metals Streams Minto Mine During Q1 2015, the Company delivered 3,100 ounces of gold (2014 – 6,600 ounces) and 12,500 ounces of silver (2014 – 46,000 ounces) to Silver Wheaton Corp. Cozamin Mine During Q1 2015 the Company delivered 0.3 million ounces of silver (2014 – 0.4 million ounces) for a total of 10.5 million ounces delivered against the contract since inception. Effective April 2015 and for a period of one year, the price ceiling was adjusted for inflation to $4.20 per ounce of silver.

Risks and Uncertainties For full details on the risks and uncertainties affecting the Company, please refer to the Company’s audited annual consolidated financial statements and notes, annual MD&A and annual information form for the year ended December 31, 2014.

Transactions with Related Parties Capstone’s key management personnel have both the authority and the responsibility for planning, directing and controlling the activities of the Company and consists of its Directors, Chief Executive Officer and Senior Vice Presidents. Compensation of Key Management Personnel

($ millions) Q1 2015 Q1 2014

Salaries and short-term benefits 1.5$ 2.1

Share-based payments 0.5 1.6

2.0$ 3.7

Off Balance Sheet Arrangements At March 31, 2015, the Company had no off-balance-sheet arrangements other than the following:

Those disclosed under Contractual Obligations in the 2014 audited financial statements; Those disclosed in the section Contractual Obligations and Commitments in the 2014 MD&A;

and Four surety bonds totaling $125.2 million.

Accounting Changes The Company has not applied the following revised or new IFRS that have been issued but were not yet effective at March 31, 2015:

IFRS 7, Financial Instruments Disclosures (effective January 1, 2018) requires new disclosures resulting from the amendments to IFRS 9.

IFRS 9, Financial Instruments (effective January 1, 2018) introduces new requirements for the classification and measurement of financial assets and liabilities.

IFRS 15, Revenue from Contracts with Customers (effective January 1, 2017) establishes a single five-step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer.

The Company is currently evaluating the impact that IFRS 15 is expected to have on its consolidated financial statements. IFRS 7 and IFRS 9 are not expected to have a significant effect on the Company’s accounting policies or financial statements.


Alternative Performance Measures and Reconciliations Alternative performance measures are key performance measures that management uses to monitor performance, to assess how the Company is performing, to plan and to assess the overall effectiveness and efficiency of mining operations. These performance measures do not have a standard meaning within IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Reconciliation of net debt:

Mar 31, 2015 Mar 31, 2014

Cash and cash equivalents (per financials, $M) (122.6)$ (135.7)$

Less: long term debt (per financials, $M), excl. deferred financing costs of $X.XM and $4.1M 298.5 308.7

Less: finance lease obligations (per financials, $M) 1.3 2.5

Net debt 177.2$ 175.5$

Reconciliation of C1 cash cost per pound of payable copper produced:

Pinto Valley Cozamin Minto Total Pinto Valley Cozamin Minto Total

Payable copper produced (000s lbs) 33,690 7,957 8,735 50,382 35,987 10,737 11,136 57,860

Production costs of metal produced (per financials, $M) 46.3$ 14.0$ 12.8$ 73.1$ 56.8$ 15.8$ 29.8$ 102.4$

Transportation cost to point of sale ($M) (6.0) (1.0) (0.8) (7.8) - (1.8) - (1.8)

Inventory write-down ($M) - - (2.6) (2.6) - - (10.0) (10.0)

Reversal of write-down on concentrate sales ($M) - - 5.5 5.5 - - - -

Inventory working capital adjustments ($M) 9.9 (1.1) 5.3 14.1 3.7 (0.9) 0.2 3.0

Cash production costs of metal produced ($M) 50.3$ 11.8$ 20.2$ 82.3$ 60.5$ 13.1$ 20.0$ 93.6$

Production costs ($/lb)

Mining 0.37$ 0.79$ 0.98$ 0.54$ 0.36$ 0.60$ 0.54$ 0.44$

Milling/Processing 0.85 0.43 0.65 0.75 0.79 0.39 0.56 0.68

G&A 0.27 0.27 0.68 0.34 0.53 0.23 0.70 0.50

C1P sub-total 1.49 1.49 2.31 1.63 1.68 1.22 1.80 1.62

By-product credits ($/lb) (0.05) (0.39) (0.14) (0.12) (0.05) (0.37) (0.15) (0.13)

Treatment and selling costs ($/lb) 0.49 0.41 0.41 0.46 0.49 0.38 0.29 0.43

C1 cash cost ($/lb PRODUCED) 1.93$ 1.51$ 2.58$ 1.97$ 2.12$ 1.23$ 1.94$ 1.92$

Q1 2015 Q1 2014

Reconciliation of C1 cash cost per pound of payable copper sold:


Payable copper sold (000s lbs) 29,297 8,537 6,440 44,274 34,018 10,380 14,248 58,646

Production costs of metal sold (per financials, $M) 46.3$ 14.0$ 12.8$ 73.1$ 56.8$ 15.8$ 29.8$ 102.4$

Transportation cost to point of sale ($M) (6.0) (1.0) (0.8) (7.8) - (1.8) - (1.8)

Inventory write-down ($M) - - (2.6) (2.6) - - (10.0) (10.0)

Reversal of write-down on concentrate sales ($M) - - 5.5 5.5 - - - -

Cash production costs of metal sold ($M) 40.4$ 12.9$ 14.9$ 68.2$ 56.8$ 14.0$ 19.8$ 90.6$

Production costs ($/lb)

Mining 0.34$ 0.81$ 0.98$ 0.51$ 0.36$ 0.66$ 0.41$ 0.42$

Milling/Processing 0.79 0.43 0.65 0.71 0.79 0.43 0.44 0.64

G&A 0.25 0.27 0.68 0.32 0.52 0.26 0.54 0.48

C1P sub-total 1.38 1.51 2.31 1.54 1.67 1.35 1.39 1.54

By-product credits ($/lb) (0.07) (0.58) (0.17) (0.18) (0.04) (0.58) (0.15) (0.16)

Treatment and selling costs ($/lb) 0.56 0.53 0.44 0.53 0.52 0.52 0.36 0.48

C1 cash cost ($/lb SOLD) 1.87$ 1.46$ 2.58$ 1.89$ 2.15$ 1.29$ 1.60$ 1.86$

Q1 2015 Q1 2014


Breakdown of All-in sustaining cost, All-in cost and Fully-loaded All-in cost per pound of payable copper sold: (all figures in $/lb sold)


Production costs 1.38$ 1.51$ 2.31$ 1.54$ 1.67$ 1.35$ 1.39$ 1.54$

By-product credits (0.07) (0.58) (0.17) (0.18) (0.04) (0.58) (0.15) (0.16)

Treatment and selling costs 0.56 0.53 0.44 0.53 0.52 0.52 0.36 0.48

C1 cash cost ($/lb SOLD) 1.87$ 1.46$ 2.58$ 1.89$ 2.15$ 1.29$ 1.60$ 1.86$

NSR royalties - 0.09 0.05 0.02 - 0.11 0.05 0.03

Non-cash deferred revenue - (0.13) (0.05) (0.03) - (0.14) (0.06) (0.04)

Production-phase capitalized stripping 0.04 - - 0.02 - - - -

Capitalized brownfield exploration - 0.05 - 0.01 - 0.02 0.01 -

Sustaining capital 0.07 0.14 0.77 0.18 0.06 0.14 0.63 0.22

Accretion of reclamation obligation 0.02 0.01 0.02 0.02 0.02 0.01 0.01 0.01

Amortization of reclamation asset 0.02 0.03 0.11 0.04 0.01 0.02 0.05 0.02

Corporate G&A 0.15 0.11

Share-based compensation 0.02 0.05

Greenfield exploration 0.04 0.02

All-in sustaining cost adjustments 0.15 0.19 0.90 0.47 0.09 0.16 0.69 0.42

All-in sustaining cost ($/lb SOLD) 2.02$ 1.65$ 3.48$ 2.36$ 2.24$ 1.45$ 2.29$ 2.28$

PV2 development 0.71 - - 0.47 - - - -

PV3 development 0.10 - - 0.06 - - - -

Santo Domingo development 0.16 0.05

All-in cost adjustments 0.81 - - 0.69 - - - 0.05

All-in cost ($/lb SOLD) 2.83$ 1.65$ 3.48$ 3.05$ 2.24$ 1.45$ 2.29$ 2.33$

Income taxes at operating mines 0.01 0.21 (0.01) 0.05 0.11 0.43 (0.03) 0.13

Income taxes (excluding operating mines) (0.01) -

Interest on long term debt 0.06 0.04

Fully-loaded All-in cost adjustments 0.01 0.21 (0.01) 0.10 0.11 0.43 (0.03) 0.17

Fully-loaded all-in cost ($/lb SOLD) 2.84$ 1.86$ 3.47$ 3.15$ 2.35$ 1.88$ 2.26$ 2.50$

Q1 2015 Q1 2014

NOTE: Items that are greyed out in the table above represent cost categories that have not been allocated across the mine operations but rather applied against the consolidated

total for pounds SOLD.

Reconciliation of cash cost per tonne of mill throughput:

Q1 2015 Q1 2014 Q1 2015 Q1 2014 Q1 2015 Q1 2014

Mill throughput (000's tonnes) 4,038 4,211 287 308 335 353

Production costs of metal sold (per financials, $M) 46.3$ 56.8$ 14.0$ 15.8$ 12.8$ 29.8$

Transportation cost to point of sale ($M) (6.0) - (1.0) (1.8) (0.8) -

Cathode production costs during quarter ($M) (2.5) (3.2) - - - -

Inventory write-down ($M) - - - - (2.6) (10.0)

Reversal of write-down on concentrate sales ($M) - - - - 5.5 -

Inventory adjustment ($M) 9.9 3.6 (1.1) (0.9) 5.3 0.2

Cash production costs of metal produced ($M) 47.7$ 57.2$ 11.9$ 13.1$ 20.2$ 20.0$

Cash cost of mill throughput ($/tonne) 11.82$ 13.57$ 41.40$ 42.62$ 60.20$ 56.82$

Cozamin MintoPinto Valley


Reconciliation of adjusted EBITDA: ($ millions, except share and per share amounts) Q1 2015 Q1 2014

Net loss (per financials) (17.4)$ (4.4)$

Net finance costs 3.8 2.9

Taxes 1.7 7.7

Depletion and amortization 24.4 39.7

EBITDA 12.5$ 45.9$

Inventory write-down 2.6 10.0

Share-based compensation 1.1 2.8

Deferred revenue (1.4) (2.3)

Other expense 3.3 -

Loss (gain) on investments 3.6 (0.3)

Unrealized gain on foreign exchange 2.6 0.3

Adjusted EBITDA 24.3$ 56.4$

Weighted average common shares - basic (per financials) 382,044,066 370,073,733

Adjusted EBITDA per common share - basic 0.06$ 0.15$

Reconciliation of operating cash flow before working capital changes per common share: ($ millions, except share and per share amounts) Q1 2015 Q1 2014

Operating cash flow (per financials) (6.6)$ 45.2$

Adjustment for changes in working capital (per financials) 23.1 5.0

Operating cash flow before working capital changes 16.5$ 50.2$


Operating cash flow before working capital changes per share 0.04$ 0.14$

Reconciliation of adjusted net loss: ($ millions, except share and per share amounts) Q1 2015 Q1 2014

Net loss (per financials) (17.4)$ (4.4)$

Impairment on available-for-sale securities 3.6 -

Impairment on available-for-sale securities 2.6 -

Pinto Valley restructuring costs 2.2 -

Contractor stand-by fees at Minto 1.1 -

Tax effect of the above adjustments (1.0) -

Adjusted net loss (8.9)$ (4.4)$


Adjusted net loss per common share - basic (0.02)$ (0.01)$

Outstanding Share Data and Dilution Calculation The Company is authorized to issue an unlimited number of common shares, without par value. The Company’s common shares and securities convertible into common shares as at April 28, 2015:

Issued and outstanding 382,044,066

Share options outstanding at a weighted average exercise price of $2.45 26,697,942

Fully diluted 408,742,008


Management’s Report on Internal Controls Disclosure Controls and Procedures (“DC&P”) Capstone’s management, with the participation of its President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, has designed DC&P which provide reasonable assurance that material information related to Capstone is identified and communicated in a timely manner. Internal Control over Financial Reporting Capstone’s management, with the participation of its President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. Capstone’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”). Capstone uses the 2013 Internal Control – Integrated Framework published by The Committee of Sponsoring Organizations of the Treadway Commission (“2013 COSO framework”) as the basis for assessing the Company’s ICFR. There were no changes in Capstone’s ICFR that has materially affected, or is reasonably likely to materially affect, ICFR during the three month period ended March 31, 2015.

Other Information Approval The Board of Directors of Capstone approved the disclosure contained in this MD&A. A copy of this MD&A will be provided to anyone who requests it from the Company. Additional Information Additional information is available for viewing at the Company’s website at www.capstonemining.com or on the Company’s profile on the SEDAR website at www.sedar.com.

National Instrument 43-101 Compliance Unless otherwise indicated, Capstone has prepared the technical information in this MD&A (“Technical Information”) based on information contained in the technical reports and news releases (collectively the “Disclosure Documents”) available under Capstone Mining Corp.’s company profile on SEDAR at www.sedar.com. Each Disclosure Document was prepared by or under the supervision of a qualified person (a “Qualified Person”) as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (“NI 43-101”). Readers are encouraged to review the full text of the Disclosure Documents which qualifies the Technical Information. Readers are advised that mineral resources that are not mineral reserves do not have demonstrated economic viability. The Disclosure Documents are each intended to be read as a whole, and sections should not be read or relied upon out of context. The Technical Information is subject to the assumptions and qualifications contained in the Disclosure Documents. The disclosure of Technical Information in this MD&A was reviewed and approved by Brad Skeeles, P. Eng., Vice President, North American Operations (Technical Information related to mining and production), and Brad Mercer, P. Geol., Senior Vice President, Exploration (Technical Information related to mineral exploration activities) and Gregg Bush, P. Eng., Senior Vice President and Chief Operating Officer, all Qualified Persons under NI 43-101.

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