Capstone Upgrades Kutcho Resource

VANCOUVER — Every little increase in grade helps at current copper prices.

With its drills turning at the Kutcho property this summer, Capstone Mining (CS-T, CSFFF-O) aimed to squeeze more tonnage at higher grades out of a better defined copper, zinc, gold and silver deposit, about 300 km north of Smithers, B. C.

In the Main zone, for which the company developed an open-mining scenario in a June 2008 scoping study, Capstone reported an indicated resource estimate of 10.5 million tonnes grading 1.73% copper, 2.35% zinc, 0.27 gram gold per tonne and 26.3 grams silver.

Additional drilling, however, has boosted close to 60% of the resource estimate to the measured category and increased grades and tonnage at a 1.5% copper cutoff.

Copper and silver grades are 8% higher, zinc grades rose 10%, and gold grades were 12% better. Copper tonnage is 5% higher.

The new measured and indicated resource estimate comes in at 9.5 million tonnes grading 2.1% copper, 2.72% zinc, 0.34 gram gold and 31.3 grams silver.

The most conservative scenario in the June scoping study forecasted 93¢-per-lb. copper production costs net of byproduct credits assuming metal prices of US$2.24 per lb. copper, US94¢ per lb. zinc, US$600 per oz. gold and US$10 per oz. silver.

That scenario revealed a $183-million preproduction capital cost and gave an after-tax net present value of $31 million discounted at 10%, and an after-tax internal rate of return of 16%.

Clearly, however, those assumptions were made under different economic conditions.

Capstone president and chief operating officer Stephen Quin said in a statement that the definition of a higher-grade resource will help the company re-evaluate its options for developing Kutcho.

“We believe there is an excellent opportunity to define a smaller, lower capital cost, low operating cost project generating robust economics in the current environment,” he said.

The company is now looking at a variety of mining scenarios, which include an open-pit mine in the Main zone, but also underground ones in the nearby higher-grade deposits, Esso and Sumac.

For instance, the latest resource estimate pegged indicated resources at Esso at 951,000 tonnes grading 2.6% copper, 4.1% zinc, 0.56 grams gold and 43.4 grams silver.

On news of the resource upgrade, Capstone’s share price held steady at $1.30.