Capstone hits more copper-silver at Cozamin (December 26, 2005)

Vancouver — Underground drilling by Capstone Gold (CSG-T, CSGLF-O) on its Cozamin copper-silver-zinc project, in southern Zacatecas state, Mexico, continues to cut significant silver and copper grades.

Results indicate that copper grades increase with depth in the deposit. Results from recent drilling of the Mala Noche vein at the San Roberto mine Lower zone are as follows:

– hole CG-05-U70 intersected 6.8 metres (true width) grading 113.7 grams silver per tonne and 4.5% copper;

– hole CG-05-U72 cut 3.8 metres (true width) of 190.8 grams silver, 5.4% copper and 1.4% zinc, including a 1.9-metre interval averaging 219.6 grams silver and 8.5% copper; and

– hole CG-05-U75 delivered a true-width intercept of 5.6 metres grading 147.7 grams silver and 8.3% copper.

Mineralization in the Mala Noche vein structure remains open both east-west and downdip. Results from the current phase of underground drilling will be included in an updated resource calculation in 2006.

Capstone’s latest independent resource calculation on Cozamin, by Giroux Consultants, reviews a measured and indicated resource of 3.4 million tonnes grading 73.5 grams silver per tonne, 1.7% copper, 1.4% zinc and 0.3% lead, at a 1.5% copper equivalent cutoff, for 129 million lbs. copper and 8 million oz. silver. An additional 4.2 million tonnes grading 57.7 grams silver, 1.5% copper, 1.5% zinc and 0.3% lead was tabled as an inferred resource (for 140 million lbs. copper and 7.8 million oz. silver), using the same cutoff.

The independent resource calculation was based on over 25,000 metres of drilling from 37 surface and 66 underground holes, plus 48 underground channel samples from the workings. Recent metallurgical testing has shown recovery rates of 94% for copper, 75% for silver and 65% for the zinc.

Capstone is nearing completion of its third phase of underground drilling and anticipates an updated resource estimate in 2006, incorporating the results. The company has now vested its 90% interest in the project from Minero Grupo Bacis, which retains a 10% working interest convertible to a 1.5% net smelter royalty.

The primary mineralized structure on the project is the mesothermal Mala Noche vein, which extends over 5.5 km and ranges from 5-18 metres in width. Copper and silver grades and vein widths show indications of increasing with depth.

An existing 750-tonne-per-day flotation plant, installed in 1997, previously processed about 250,000 tonnes of ore averaging 90 grams silver, 0.5 gram gold per tonne, 1.8% zinc, 1.2% copper and 0.6% lead. The material was extracted mainly from near-surface oxide zones. Mine workings extend from the San Roberto mine in the west to the San Bernabe mine in the east.

San Roberto has been dewatered and rehabilitated to level nine, where previous operations were undertaken. Additional underground development is ongoing in preparation for anticipated mining. Construction of a ramp to access deeper levels has begun. Further, a portal to construct ramp access to underground workings of the San Ernesto mine has begun and will eventually connect with an existing, rehabilitated ramp.

The Cozamin resource calculation failed to sustain recent investor bullishness, with the stock shedding almost 15%, to close down 17 at $1.00 per share, on trading volume of 224,000. With its 43.6 million shares outstanding, the company posts a $44-million market capitalization.