Mr. John MacKenzie reports

CAPSTONE COPPER REPORTS FIRST QUARTER 2023 RESULTS

Capstone Copper Corp. has released financial results for the three months and quarter ended March 31, 2023. Q1 copper production totalled 40.7 tonnes at C1 cash costs of $2.96 per payable pound of copper produced. The company reaffirmed its 2023 consolidated production, C1 cash costs and capital (including capitalized stripping) guidance of 170,000 to 190,000 tonnes of copper, $2.50 to $2.70 per payable pound and $620-million, respectively.

John MacKenzie, chief executive officer of Capstone, commented: "We are pleased to report that construction at our transformational Mantoverde development project (MVDP) remains on time and on budget, with nearly three million tonnes of sulphide ore stockpiled to date ahead of our ramp-up commencing late this year. Furthermore, despite a challenging Q1 2023 marked by heavy rainfall at our Pinto Valley mine in Arizona, we are reiterating our 2023 production, cost and capital outlook. We anticipate production to increase sequentially, with a commensurate decrease in costs in the back half of 2023. This year is pivotal for Capstone, as we expect to complete MVDP construction in Q4, setting the stage for a doubling of consolidated cash flow and positioning us well for future growth."

Q1 2023 operational and financial highlights:

• Net loss of $29-million, or (three cents) per share for Q1 2023. Adjusted net income of $8.5-million, or two cents per share for Q1 2023. Q1 2023 results are lower compared with the same quarter last year due to a lower realized copper price, inflationary pressure on costs and an inventory buildup due to a sales lag in the availability of ocean-going vessels for cathode shipments which totalled 2,400 tonnes of copper. Given the strengthening Chilean peso, net income includes a realized foreign exchange loss of $8.5-million.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $65.3-million for Q1 2023 compared with $123.4-million for Q1 2022. The decrease in adjusted EBITDA is driven by a lower realized copper price, a sales lag and inflationary pressure on costs, and realized foreign exchange loss of $8.5-million and realized derivative loss of $8.4-million.
• Operating cash flow before changes in working capital of $41.7-million in Q1 2023 compared with $70.4-million in Q1 2022.
• Consolidated copper production for Q1 2023 of 40,700 tonnes at C1 cash costs of $2.96. Copper production was lower than expected in the first quarter due to unfavourable weather at Pinto Valley and maintenance downtime at Mantos Blancos focused on increasing mill throughput which translated into higher consolidated cash costs.
• The company reiterates the 2023 guidance of 170,000 to 190,000 tonnes of copper production at $2.50 to $2.70 per pound, along with capital guidance (including capitalized stripping) of $620-million. Capstone expects production to be back half weighted, with sequential quarter-over-quarter improvements in copper production, notably at Pinto Valley.
• The Mantoverde development project remains on budget and on schedule. Construction is progressing well on all key areas of the project. Total project spend inception-to-date was approximately $654-million at the end of March, 2023, of a total budget of $825-million.
• Total available liquidity of $529.1-million as at March 31, 2023, composed of $101.1-million of cash and short-term investments, and $428-million of undrawn amounts on the corporate revolving credit facility.
• On March 20, 2023, Capstone Copper announced a new sustainable development strategy and the adoption of greenhouse gases (GHG) emissions reduction targets to support the company's commitment to responsible copper production.
• On March 31, 2023, the company and its largest shareholder, Orion Resource Partners, completed a secondary bought offering of common shares whereby Orion sold an aggregate of 57.5 million common shares at a price of $5.70 per share. Subsequent to the completion of the offering, Orion's shareholding decreased from approximately 32 per cent to approximately 24 per cent.
• Subsequent to quarter-end, the company announced the results of a new technical report and life-of-mine plan for its Cozamin mine. The updated life-of-mine plan includes average annual copper production of 20,000 tonnes of copper and 1.3 million ounces of silver over eight years at average C1 costs of $1.51 per payable pound of copper.

Consolidated production

Q1 2023 copper production of 40,700 tonnes of copper is higher than the 22,500 tonnes in Q1 2022, primarily as a result of the addition of full quarter Mantos Blancos and Mantoverde production.

Q1 2023 C1 cash costs of $2.96/pound are a mix of sulphide and cathode business units compared with Q1 2022, which was predominately sulphide production. Cash costs are higher than guidance for the quarter due to lower production and inflationary pressure on costs, which included some carryover of higher-cost sulphuric acid inventory.

Q1 2023 consolidated sulphide C1 cash costs of $2.61/lb were 13 per cent higher than in Q1 2022, primarily due to inflationary price increases on main consumables.

Cathode production is from copper oxide ore that requires sulphuric acid leaching, solvent extraction and electrowinning (SX-EW) to produce copper cathodes, which are a finished copper product for the market. Sulphide production requires a mill that utilizes a grinding and flotation process to recover sulphide minerals in a copper concentrate saleable as an intermediate product to smelters and refiners. Capstone's low-cost sulphide production is growing significantly with the MVDP to be completed late in 2023.

Pinto Valley mine

Q1 2023 production was 10 per cent lower than Q1 2022 mainly due to lower mill throughput (52,207 tpd (tonnes per day) in Q1 2023 versus 58,412 tpd in Q1 2022) driven by heavy rainfall, including flooding, which resulted in plugged chutes and screens; in addition, there was unplanned maintenance on the secondary crusher. The mill feed grade was 6 per cent lower (0.30 per cent in Q1 2023 versus 0.32 per cent in Q1 2022) due to mining sequence, which was partially offset by higher recoveries as a result of lower mill throughput.

Q1 2023 C1 cash costs of $3.09/lb were 49 cents/lb higher compared with the same period last year of $2.60/lb, primarily due to lower production (30 cents/lb), increased mining costs due to inflationary pressures on diesel prices, explosives, grinding media, and higher spend on rental equipment, mining equipment tools and contractors (24 cents/lb), higher 2022 bonus payout (five cents/lb), and lower capitalized stripping (five cents/lb), partially offset by higher byproduct credits on higher molybdenum production. The cash costs are expected to trend down as result of higher production but will be at the high end of the cost guidance range for Pinto Valley.

Mantos Blancos mine

Q1 2023 production was 14,100 tonnes, comprising 10,800 tonnes from the sulphide operations and 3,300 tonnes of cathode from the oxide operations. Sulphide concentrate production increased by 9 per cent quarter-over-quarter, driven by higher throughput (16,023 tpd versus 15,246 tpd in Q4 2022) and higher recoveries (80.2 per cent versus 75.1 per cent in Q4 2022). Copper grades remained strong at 0.94 per cent (compared with 0.94 per cent in Q4 2022). During Q1 2023, the focus was on preventative maintenance in order to increase reliability and improve on-line time. The quarter included 18 days operating at 20,000 tpd, and an average throughput rate of 19,000 tpd in February.

Combined Q1 2023 C1 cash costs were $2.68/lb ($2.46/lb sulphides and $3.36/lb cathodes). The cathode costs were significantly impacted by high sulphuric acid prices that averaged $212/tonne in Q1 2023, including inland transport costs and 11,300 tonnes of high-cost acid inventory ($240/tonne) as of the end of 2022. Recently, sulphuric acid prices have significantly decreased with contract prices of approximately $130/tonne for 2023. In addition, for the rest of 2023 Capstone expects a reduction in combined C1 cash costs as the production mix will have a higher ratio of concentrates to cathodes with the ramp-up in sulphide production during the year. Cash costs in Q4 2022 were lower as a result of a stockpile adjustment that was recorded.

Mantoverde mine Q1 2023 production was 8,500 tonnes. Heap operations grade was 0.31 per cent and recoveries were 69.0 per cent. Dump operations grade was 0.17 per cent and recoveries were 39.9 per cent. The heap operations will have a lower grade during 2023 in range of 0.31 per cent to 0.33 per cent as a result of mine sequence as the company transitions toward the sulphide ore for MVDP. As a result of 30-per-cent-lower grade, the cash costs for 2023 will be higher than 2022 and then subsequently decline in 2024 with the commencement of sulphide production.

Q1 2023 C1 cash costs were $4.02/lb and were significantly impacted by high energy costs, averaging 25.6 c/kilowatt-hour due to high coal prices included in the pricing formula of the energy contract, and high sulphuric acid prices, averaging $177/tonne for the quarter, including inland transport costs and 17,600 tonnes of high-cost acid inventory as of the end of 2022. The impact of higher-cost sulphuric acid in opening inventory was approximately $1.3-million. For the rest of 2023, energy costs are expected to gradually decrease and in 2024 the coal price element will be eliminated from the pricing formula. In addition, sulphuric acid prices have significantly decreased with contract prices in the $140/tonne range for 2023.

Cozamin mine

Q1 2023 production was lower than Q1 2022 due to lower throughput as a result of change in mining method (cut-and-fill) (3,410 tpd in Q1 2023 versus 3,704 tpd in Q1 2022) and lower grades (1.77 per cent in Q1 2023 versus 1.84 per cent in Q1 2022). Recoveries were consistent quarter-over-quarter.

Q1 2023 C1 cash costs were 54 per cent higher than the same period last year primarily due to the change in mining method which resulted in an increase in employee head count, higher power rates, planned higher spend on contractors and mechanical parts to increase equipment availability and reliability (20 cents/lb). In addition, cash costs were impacted by lower production (17 cents/lb) and lower zinc byproduct credits due to planned lower zinc production, as well as lower silver prices (15 cents/lb).

Mantoverde development project

Construction of the MVDP located at the existing Mantoverde (oxide) operation continues to progress well. The MVDP is expected to enable the mine to process 235 million tonnes of copper sulphide reserves over a 20-year expected mine life, in addition to existing oxide reserves. The MVDP involves the addition of a sulphide concentrator (12.3 million tonnes per year) and tailings storage facility, and the expansion of the existing desalination plant.

Upon completion, the company expects the MVDP to increase production from approximately 36,000 to 40,000 tonnes of copper (cathodes only) in its current guidance for 2023 to approximately 110,000 to 120,000 tonnes of copper (copper concentrate and cathodes) postproject completion. In parallel, C1 cash costs are expected to decrease from a range of $3.50/lb to $3.70/lb in the current guidance for 2023 to below $2/lb after project completion and ramp-up. The decline in expected costs will be driven by the mine's transition to becoming a primary producer of copper concentrate. Upon completion of the MVDP, approximately 75 per cent of Mantoverde's production will come from the lower-cost sulphide copper. The mine will also benefit from the production of approximately 31,000 ounces of gold per year that will generate byproduct credits.

MVDP is progressing under a lump sum turnkey engineering, procurement and construction (EPC) contract with Ausenco Ltd., a multinational EPC management company, with broad international experience in the design and construction of copper concentrator projects of this scale in the international market. The execution plan includes a Capstone Copper owner's team working with the contractors during the execution phase.

The Mantoverde development project is progressing well and remains on track for commissioning and feeding first ore to the mill in late 2023. Areas of focus in Q1 2023 were:

• Third electric rope shovel assembly and commissioning completed;
• Stockpiled nearly three million tonnes of sulphide ore grading approximately 0.6 per cent copper;
• Structural and mechanical assembly completed in the primary crusher, while services facilities are progressing according to plan;
• Installed critical equipment such as the SAG and ball mill, flotation cells, conveyor belts, and other components in the final position and electromechanical assembly is progressing according to the planned schedule.

As of March 31, 2023, the cost of the different components of the project, including the lump sum turnkey EPC, continues on track and on target. The total project capital remains at $825-million and inception-to-date project spend, excluding finance costs, totals $654-million.

The majority of the total project capital cost of $825-million is fully encompassed by the turnkey contract with Ausenco. The EPC contract total budget is approximately $525-million of which $413-million has been spent as of March 31, 2023. In addition, major mining equipment for approximately $140-million was price-fixed prior to the elevated inflationary pressures observed this year.

Mantoverde-Santo Domingo district integration plan

The company is focused on creating a world-class mining district in the Atacama region of Chile, targeting over 200,000 tonnes per year of low-cost copper production with the potential to also become one of the largest and lowest-cost battery-grade cobalt producers in the world. Capstone Copper has the opportunity to unlock a total of $80-million to $100-million per year in operating cost synergies, while also enabling additional copper and cobalt production, infrastructure capital savings, and the potential for significant tax synergies.

The district integration synergies include the following:

• Water and power infrastructure -- a plan to expand the existing Mantoverde desalination plant to 840 litres per second, utilization of existing water pipelines and upgraded energy transmission capacity to Santo Domingo.
• Port infrastructure -- opportunity to reduce Mantoverde's concentrate trucking costs by $10-million per year by using the planned Santo Domingo port, located 65 kilometres from Mantoverde. This will also lower GHG emissions associated with transporting concentrate to customers.
• Integrated operations -- potential to lower district operating costs by $20-million to $30-million by streamlining the organizational chart across both operations, increasing purchasing power given district scale, and standardizing equipment to promote productivity gains.
• Santo Domingo oxides -- potential addition of 8,000 to 10,000 tonnes per annum (tpa) of copper production over the first 10 years of production, by leaching copper oxides at Santo Domingo and processing the concentrated solutions at Mantoverde's underutilized SX-EW facility.
• Cobalt opportunity -- ability to reduce operating costs by approximately $45-million per year by building the cobalt and sulphuric acid production facility at Mantoverde that will process cobaltiferous pyrite produced by both Mantoverde and Santo Domingo. The benefits would be realized through the byproduct production of sulphuric acid as well as the elimination of related sulphuric acid port and trucking costs.

Santo Domingo

Santo Domingo has started the flowsheet optimization process previously announced by awarding Ausenco a prefeasibility study (PFS) subsequently followed by a feasibility study (FS) scope which explores betterments identified through the development of several technical assessments conducted by subject matter experts. Taking into consideration the previous feasibility study, Ausenco will put together a new technical report to update the market with the Santo Domingo current business case. The press release associated with the technical report is expected in December, 2023. Also, project debottlenecking activities have continued to maintain Capstone Copper's shovel-ready position by advancing permitting and formalizing agreements with third parties.

Mantoverde optimization and phase II

The company is currently analyzing the next expansion of the sulphide concentrator. Capstone has identified that the desalination plant capacity and major components of the comminution and flotation circuits of the Mantoverde development project are capable of sustaining average annual throughput of between 40,000 and 45,000 tonnes per day with no major capital equipment upgrades. Capstone continues to work with Ausenco's engineering team to develop the optimized Mantoverde development project (MVDP optimized), including evaluating the costs and timelines of debottlenecking the minor components of the plant to meet the potential throughput target. The conceptual engineering study is expected to be completed in Q2 and the feasibility study is on track for completion late in H2 2023.

Given the above, the Mantoverde phase II study will evaluate the addition of an entire second processing line, possibly a duplication of the first line, to process some of the additional 77 per cent of resources not utilized by the optimized MVDP. Current activities are focused on understanding the optimum concentrator capacity and mine plan, along with the implications to the timing and permitting for the project.

Mantoverde-Santo Domingo cobalt feasibility study update

A district cobalt plant for Mantoverde-Santo Domingo may also unlock cobalt production from Mantoverde while producing a byproduct of sulphuric acid which can then be consumed internally to further significantly lower operating costs in the leaching process at Mantoverde.

The cobalt recovery process consists of a concentration step, an oxidation step and a cobalt recovery step. The concentration step considers a conventional froth flotation circuit treating copper flotation tails to produce a cobaltiferous pyrite concentrate which is expected to contain between 0.5 per cent and 0.7 per cent Co. Two cobalt processes are under evaluation, roasting and heap leaching-ion exchange. In both cases, the technology is proven and is expected to deliver low-cost cobalt production and GHG savings. The roasting case requires higher capital and would need a longer timeline for permitting and construction, while the heap leaching-ion exchange process is expected to have lower cobalt production but with a quicker timeline to production, and lower risk due to the use of heap leach infrastructure already in place at Mantoverde.

For the roasting case, the pyrite concentrate, which contains between 0.5 per cent and 0.7 per cent Co, is oxidized in a fluidized bed roaster to produce a cobalt calcine and a concentrated sulphuric acid byproduct. The calcine is then subjected to various leaching, precipitation, solvent extraction and crystallization steps to produce battery-grade cobalt sulphate heptahydrate. Capstone is also evaluating alternatives that may include the direct sale of some or all the cobalt as intermediate product, such as mixed hydroxide precipitate, to a partner, joint venture or an independent third party refiner. At a combined MV-SD target of 6,000 to 6,500 tonnes of cobalt production per year, this would be one of the largest and lowest-cost cobalt producers in the world. Additional benefits of this project include the generation of carbon-free energy from waste heat emitted by the roaster, and the production of byproduct sulphuric acid which can be used for heap or dump leaching to produce low-cost copper cathodes at Mantoverde, Mantos Blancos or sold to other consumers within the district. Exploratory test work has started at Mantoverde to confirm suitability of the Santo Domingo cobalt circuit flowsheet to process an integrated cobaltiferous pyrite feed.

For the heap leaching-ion exchange case, the pyrite concentrate from Mantoverde and Santo Domingo would be recovered and added to the oxide heap leach feed agglomerate drums. The pyrite would oxidize in the heap, producing byproduct sulphuric acid in situ and solubilizing a significant fraction of the cobalt. A bleed stream containing cobalt in solution will then be directed to a recovery plant consisting of various steps of impurity removal, continuous ion exchange and hydroxide precipitation to produce a cobalt hydroxide precipitate. It is believed that this approach would require significantly less capital expenditure and could potentially accelerate the production of cobalt from the district. Test work has commenced as planned, including cobaltiferous pyrite roasting and leaching tests for Santo Domingo, column leaching and selective flotation tests using Mantoverde ore, and ion exchange separation tests using Mantoverde raffinates.

Mantos Blancos phase II

Mantos Blancos is currently evaluating the potential to increase throughput of the Mantos Blancos sulphide concentrator plant from 7.3 million tonnes per year to 10 million tonnes per year using existing underutilized ball mills and process equipment. As part of the Mantos Blancos phase II project, Capstone is also evaluating the potential to extend the life of copper cathode production. The Mantos Blancos phase II feasibility study is expected to be released in H2 2023, and the environmental DIA application was submitted in August, 2022.

PV4 study

The PV4 PFS aims to maximize the conversion of approximately one billion tonnes of mineral resources to mineral reserves, significantly extending Pinto Valley's mine life, and increasing the mine's copper production profile. Given the company's review of district consolidation potential, the release of the PV4 study will be deferred while it investigates the incorporation of district opportunities, including a potential mill expansion and increased leaching capacity supported by optimized water, heap and dump leach, and tailings infrastructure. This could unlock significant ESG (environmental, social, governance) opportunities and may transform Capstone's approach to surface value for all stakeholders in the Globe-Miami district.

Cozamin updated technical report

The company is pleased to announce the results of a new technical report for its Cozamin mine in Zacatecas, Mexico. As at Jan. 1, 2023, probable mineral reserves stood at 10.2 million tonnes grading 1.65 per cent copper, 43 grams per tonne silver, 0.54 per cent zinc and 0.29 per cent lead. Measured and indicated mineral resources were 19.7 million tonnes grading 1.58 per cent copper, 47 g/t silver, 1.08 per cent zinc and 0.41 per cent lead. Inferred resources were 12.3 million tonnes grading 0.72 per cent copper, 38 g/t silver, 1.97 per cent zinc and 0.83 per cent lead.

The updated life-of-mine plan includes average annual copper production of 20,000 tonnes of copper and 1.3 million ounces of silver production over eight years at average C1 costs of $1.51 per payable pound of copper. Over the next five years, from 2023 to 2027, average projected annual production is higher at 24,000 tonnes of copper and 1.7 million ounces of silver, at lower average projected C1 costs of $1.46 per payable pound of copper.

Based on Capstone's experience mining the Mala Noche footwall zone (MNFWZ) orebody at Cozamin to date, management believes the combination of mining methods outlined in the technical report will result in optimal mine performance, particularly in ore extraction. Furthermore, as Cozamin builds its skill set in paste backfill and cut-and-fill mining, there are several possibilities to extend the mine life and improve mining productivity and dilution. Specifically, the technical report outlines a number of opportunities to expand the mine that are not included in the life-of-mine plan and are not reflected in the mineral reserve estimate as of Jan. 1, 2023, including: through exploration on drill targets open to the southeast, northwest and down dip (at depth); by converting material classified as inferred with additional drilling and studies; through the implementation of selective mining techniques to decrease dilution and lower mining costs; and through enhanced pillar recovery, leveraging the benefits of the paste backfill plant.

The company has filed on SEDAR a technical report titled "NI 43-101 Technical Report on the Cozamin Mine, Zacatecas, Mexico" that has an effective date of Jan. 1, 2023. The technical report was prepared in accordance with the Canadian Securities Administrator's National Instrument 43-101 Standards of Disclosure for Mineral Projects, and is available for review under the company's profile on SEDAR and the company's website.

Corporate exploration update

Cozamin: Q1 2023 focused on infilling the Mala Noche Main vein West target with one underground rig from the west exploration crosscut station. Development of the proposed lower-elevation mine crosscut will allow for additional infill drilling starting in late Q3 2023 to develop an updated mineral resource estimate in 2024.

Copper Cities, Arizona: On Jan. 20, 2022, Capstone Mining announced that it had entered into an 18-month access agreement with BHP Copper Inc. to conduct drill and metallurgical test work at BHP's Copper Cities project, located approximately 10 kilometres east of the Pinto Valley mine. An amendment to the agreement was completed in March, 2023, extending the term by another six months. Drilling with two surface rigs twinning historical drill holes was completed in 2022 with metallurgical testing continuing in 2023. As explained in the PV4 study section, district consolidation opportunities are being evaluated.

Planalto, Brazil: Stepout drilling at the Planalto iron ore-copper-gold prospect in Brazil, under an earn-in agreement with Lara Exploration Ltd., was completed in Q1 2023. During Q1 Capstone and Lara amended the Planalto option agreement, extending the time frame to complete the feasibility study until 2026, and Capstone now plans to complete 10,000 metres of exploration drilling during 2023.

2023 outlook

The company reiterates the 2023 consolidated production, C1 cash costs and capital guidance (including capitalized stripping) of 170,000 to 190,000 tonnes of copper, $2.50 to $2.70 per payable pound and $620-million, respectively. The company expects production to be back half weighted, with sequential quarter-over-quarter improvements in copper production, notably at Pinto Valley.

MVDP remains on track and on budget for commissioning and feeding first ore to the mill in late 2023.

Conference call and webcast details

Capstone will host a conference call and webcast on Wednesday, May 3, 2023, at 8 a.m. PT/11 a.m. ET.

Dial-in numbers for the audio-only portion of the conference call are below. Due to an increase in call volume, please dial-in at least five minutes prior to the call to ensure placement into the conference line on time.

Toronto: 1-416-764-8650

Vancouver: 1-778-383-7413

North America toll-free: 888-664-6383

A replay of the conference call will be available until May 10, 2023. Dial-in numbers for Toronto: 1-416-764-8677 and North America toll-free: 888-390-0541. The replay code is 844836 followed by the pound key. Following the replay, an audio file will be available on Capstone's website.

The disclosure of scientific and technical information in this document was reviewed and approved by Clay Craig, PEng, director, mining and strategic planning (technical information related to mineral reserves at Pinto Valley and Cozamin), and Cashel Meagher, PGeo, president and chief operating officer (technical information related to project updates at Santo Domingo and mineral reserves and resources at Mantos Blancos and Mantoverde), all qualified persons under NI 43-101.

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