Ms. Cindy Burnett of Capstone reports

CAPSTONE MINING TO ACQUIRE FAR WEST MINING AND FORM STRATEGIC PARTNERSHIP AND JOINT VENTURE WITH KOREA RESOURCES CORPORATION

Capstone Mining Corp. and Far West Mining Ltd. have entered into a definitive agreement pursuant to which Capstone will acquire all of the issued and outstanding common shares of Far West, by way of a court-approved plan of arrangement. Under the terms of the agreement, Far West shareholders will be entitled to elect to receive, in exchange for each Far West share held, 1.825 shares of Capstone and $1 in cash. The consideration implies a total transaction value of approximately $725-million. The consideration represents a total of $9.19 per Far West share, based on the volume-weighted average price of Capstone shares on the Toronto Stock Exchange for the 30 trading days ended April 15, 2011, and a premium of 30 per cent to the volume-weighted average price of Far West shares on the TSX for the same period.

Far West's 100-per-cent-owned Santo Domingo project is a large-scale copper-iron-gold development project located in Region III, Chile. Santo Domingo has the potential to be a long-lived significant copper and iron ore producer, based on an indicated mineral resource of 486 million tonnes at a copper equivalent grade of 0.57 per cent and an additional inferred mineral resource of 61 million tonnes at a copper equivalent grade of 0.46 per cent. The project is strategically located near key infrastructure (highway, rail, power, port, smelter and airport) in a prolific, established mining district with several significant copper and iron mining and smelting operations. A preliminary economic assessment (PEA) completed in May, 2008, using indicated and inferred resources, projected life of mine average annual production of 65,000 tonnes of copper and four million tonnes of iron concentrate. Since completion of the PEA, the indicated mineral resource has more than doubled. The prefeasibility study, which the company anticipates completing in third quarter 2011, is currently under way based on the updated mineral resource estimate. If warranted by the prefeasibility study, the company may also consider higher throughput rates, which could potentially increase copper production significantly.

Kores partnership

Capstone has also entered into agreements with Korea Resources Corp. (Kores) to form a long-term strategic partnership for the development of Far West's Santo Domingo project, subject to completion of the Far West transaction. Under these agreements:

• Upon completion of the Far West acquisition, Kores will acquire a 30-per-cent interest in Santo Domingo for cash consideration of approximately $210-million to Capstone.
• Kores will arrange for a debt financier to offer to provide financing, on then-prevailing market terms, for 65 per cent of the capital costs of the project and finance 30 per cent of the balance of the capital requirements at the project.
• Kores will enter into an offtake agreement for 50 per cent of all copper concentrate and iron concentrate produced from the project over the life of the Santo Domingo mine, on then-prevailing market terms (at the appropriate time).
• Upon completion of the acquisition, Kores will subscribe for an approximate 11-per-cent interest in Capstone to become Capstone's largest shareholder. The private placement will represent approximately 39 million Capstone shares, and Capstone will receive proceeds of approximately $170-million, based on the volume-weighted average price of Capstone shares on the TSX for the five trading days ended April 15, 2011.
• Kores will appoint one representative to Capstone's board of directors upon completion of the acquisition.
• The agreements between Capstone and Kores are subject to a number of conditions, including completion of the acquisition of Far West by Capstone.

Transaction benefits

• Highly compelling transaction delivering fully financed growth from Santo Domingo;
• Santo Domingo is favourably located with access to nearby infrastructure, and continuing studies continue to demonstrate the potential for significant copper and iron ore production;
• Consistent with Capstone's strategy of building a mid-tier copper producer focused in the Americas forming a combined portfolio of high-quality operating mines and a strong pipeline of copper production growth in mining-friendly jurisdictions;
• Over 200-per-cent growth in anticipated copper production from 2011 to 2016 and over 125-per-cent increase in measured and indicated copper contained in mineral resources;
• Further asset diversification in a preferred mining geography;
• Robust cash flow generation in a company with a strong pro forma balance sheet and a strategic partnership with Kores to finance a leading copper production growth profile;
• No future share dilution to finance Santo Domingo as Capstone expects to finance its portion of Santo Domingo capital requirements through pro forma balance sheet and continuing cash flow from operations;
• Enhanced capital markets profile through increased market capitalization, which should further improve trading liquidity for shareholders of Capstone.

Compelling offer for Far West shareholders

• Immediate premium to current share price;
• Opportunity to participate in the future potential of an Americas-based mid-tier copper producer with a fully financed growth pipeline;
• Santo Domingo project derisking through Capstone's and Kores's development and operational expertise and financing capabilities;
• Exposure to a diverse portfolio of producing and development assets in a robust commodity price environment;
• A platform through which to participate in future industry consolidation;
• Increased trading liquidity through ownership of Capstone shares;
• Tax-free rollover option for Canadian shareholders, upon election of share consideration.

Darren Pylot, Capstone's president and chief executive officer, commented: "The proposed acquisition of Far West is consistent with Capstone's strategy of building a growth-focused mid-tier copper producer in the Americas and represents an excellent value opportunity for our shareholders. Santo Domingo is a robust development opportunity that will substantially increase Capstone's leverage to copper and long-term growth profile. Our strategic partnership with Kores brings significant financial support and mitigates risk for all shareholders."

Rick Zimmer, Far West's president and chief executive officer, commented: "The proposed transaction delivers an immediate premium to our shareholders. Moreover, it provides our shareholders with the opportunity to participate in the future potential of the combined portfolio of producing and development assets. We are pleased to be announcing this transaction with Capstone. Their financial strength and current base of operations, combined with the Kores partnership, provide a clear path forward for the funding and development of Santo Domingo. This transaction has the potential to unlock the full value of Santo Domingo for all shareholders."

Transaction overview

The proposed transaction will be carried out by way of a court-approved plan of arrangement whereby Capstone will acquire all of the issued and outstanding common shares of Far West, and Far West would be held through a newly formed subsidiary of Capstone, to be owned 70 per cent by Capstone and 30 per cent by Kores. Far West shareholders will be entitled to elect to receive, in exchange for each Far West share held: (i) 1.825 shares of Capstone and $1 in cash, (ii) 2.047 shares of Capstone and 0.1 cent in cash, or (iii) $9.19 cash, subject to pro ration on the basis of an aggregate maximum cash amount of approximately up to $79-million and provided that no Far West shareholder that elects option (iii) above will receive less than $1 in cash per Far West share. The proposed transaction is subject to certain customary conditions including the approval of not less than 66-2/3 per cent of the votes cast at a special meeting of Far West security holders that is expected to be held in June, 2011, and not less than a majority of the votes cast at a special meeting of Capstone shareholders that is expected to be held at approximately the same time. The Far West annual general meeting will be rescheduled and may be combined with the special meeting for Far West security holders. Pursuant to the terms of the agreement, the proposed transaction is also subject to applicable regulatory approvals and the satisfaction of certain closing conditions customary for transactions of this nature. The arrangement agreement also provides for, among other things, customary board support and non-solicitation covenants from Far West (subject to customary fiduciary out provisions that entitle Far West to consider and accept a superior proposal and a five-business-day right to match in favour of Capstone). The arrangement agreement also provides for the payment of a break fee of $20-million to Capstone and to Far West in certain specified circumstances.

The boards of directors of Capstone and Far West have each unanimously determined that the proposed transaction is in the best interest of their respective companies and fair to their respective shareholders and recommend that their respective shareholders vote in favour of the proposed transaction, other than those directors who were recused from meetings regarding the agreement. Scotia Capital provided a fairness opinion to Capstone's board of directors that the transaction is fair, from a financial point of view, to Capstone. The Far West board's determinations are based on the recommendations of a special committee of independent Far West directors. BMO Capital Markets, financial adviser to Far West and its board of directors, and National Bank Financial, fairness opinion provider to the special committee of the board of directors of Far West, have each provided an opinion to the effect that the consideration to be received by Far West shareholders is fair, from a financial point of view, to Far West shareholders. Far West's directors, senior management, Quadra FNX Mining Ltd. and certain other shareholders, representing, in aggregate, approximately 38 per cent of Far West's fully diluted shares outstanding, have entered into customary voting support agreements pursuant to which, among other things, they have agreed to vote their Far West shares in favour of the proposed transaction. Capstone's directors and senior management have entered into customary voting support agreements pursuant to which, among other things, they have agreed to vote their Capstone shares in favour of the proposed transaction.

If it is approved by security holders of Far West and shareholders of Capstone, the proposed transaction is expected to be completed in July, 2011, and is subject to certain customary conditions, including receipt of all necessary court, TSX and security holder approvals. Upon completion of the proposed transaction, a Far West nominee will be appointed to the board of directors of Capstone. In order to accommodate the appointment of the Far West and Kores nominees to the Capstone board, Stephen Quin has agreed to resign from the board of Capstone upon the effective date.

The terms and conditions for the proposed transaction will be summarized in the respective management information circulars to be mailed to Far West security holders and Capstone shareholders in May, 2011. Copies of the agreement, the agreements between Capstone and Kores, the management information circulars, and certain related documents and agreements will be filed with Canadian securities regulators and will be available at the SEDAR website under Capstone's and Far West's profiles, as applicable.

Advisers

Scotia Capital is acting as lead financial adviser to Capstone and its board of directors, and a finder's fee is payable upon closing of the transaction to RCI Capital Group in respect of the Kores agreement. Scotia Capital has provided a fairness opinion to Capstone's board of directors. Capstone's legal counsel is Blake, Cassels & Graydon LLP.

BMO Capital Markets is acting as financial adviser to Far West and its board of directors, and National Bank Financial is acting as fairness opinion provider to the special committee of the board of directors of Far West. Far West's legal counsel is Davis LLP, and Borden Ladner Gervais LLP is acting as legal counsel to the special committee of the board of directors of Far West.

Gryphon Partners acted as financial adviser to Kores with respect to the Capstone private placement. Kores's legal counsel is Stikeman Elliott LLP.

Conference call

Capstone and Far West will hold a conference call at 8:30 a.m. Eastern Standard Time (5:30 a.m. Pacific Standard Time) on April 18, 2011, to allow shareholders, securities analysts and investors the opportunity to hear management discuss the transaction outlined herein. The call can be accessed by dialling (toll-free) 888-231-8191 or international 647-427-7450. The call will also be webcast.

The webcast and presentation can be accessed at Capstone's or Far West's websites. The call will also be available for replay by dialling (toll-free) 1-800-642-1687 or international 1-416-849-0833 -- password: 61244676 -- for 14 days. A slide presentation will be available on Capstone's and Far West's websites before the conference call.

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