A Leading Intermediate Copper Producer Q4/YE 2016 Conference Call/Webcast Presentation February 16, 2017 1
Cautionary Note On Forward Looking Information This presentation, and the documents incorporated by reference herein, 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 -loo king statements”). These forward -looking statements are made as of the date of this document and Capstone 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 belief s 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 sta tem ents 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 docume nt, certain forward-looking statements are identified by words including “guidance”, “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 mineral resources; possible variations in ore reserves, grade or recovery rates; accidents; assumptions related to geotechnical conditions of tailings facilities; 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; counterparty risks associated with sales of our metals; increased operating and capital costs; operating in foreign jurisdictions with risk of changes to governmental regulation; impact of climatic conditions on our Pinto Valley, Cozamin and Minto operations; 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 interi m a nd 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.sed ar.com. Although the Company has attempted to identify important factors that could cause our actual results, performance or achievements to differ materially from those described in our forward- looking statements, there may be other factors that cause our results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that our forward- looking statements will prove to be accurate, as our actual results, performance or achievements could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on our forward-looking statements. Alternative Performance Measures “C1 cash cost”, “cash cost”, “all - in cost”, “fully -loaded all- in cost”, “adjusted net income/loss”, “operating cash flow before changes in working capital” and “net debt” are Alternative Performance Measures. Alternative performance measures are furnished to provide additional information. These non-GAAP performance measures are included in this presentation because these statistics 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 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 included in the Company’s unaudited condensed interim consolidated financial statement s prepared in accordance with IFRS. Currency All amounts are in US$ unless otherwise specified. 2
Participants Darren Pylot Cindy Burnett Jim Slattery Gregg Bush President, CEO & VP IR & SVP & CFO SVP & COO Director Communications 3
Q4 and 2016 Financial Highlights Q4 and 2016 net loss of $182.4 million and $197.4 million, respectively Included $189.2 million non-cash write down of Santo Domingo property in Q4 Q4 and 2016 adjusted net income of $30.7 million and $29.4 million, respectively Q4 and 2016 operating cash flow before changes in working capital of $75.0 million and $156.9 million, respectively All three operating mines generated positive net earnings for the year 4
Focused on De-leveraging Repaid $40 million on RCF from 2016 free cash flow Reduced drawn debt to $308.9 million and net debt to $198.6 million In addition, reduced credit available by $40 million to $400 million Total Net Debt/EBITDA of 1.15:1 at December 31, 2016 Targeting debt reduction in the range of $100 to $150 million over next few years Short term hedging to meet 2017 debt reduction targets Secured pricing for Q4 2016 and 2017 to provide greater cash flow certainty and mitigate risk going into a period of lower grades at Pinto Valley Remain levered to the upside on a significant portion of H2 2017 production Only approx. 50% of production hedged H2 2017 and no hedging beyond 2017 Remain significantly levered to upside in H2 2017 and beyond 5
Financial & Operating Performance Pinto Valley (Arizona, US) Q4 2016 2016 Copper Production (tonnes) 17,051 68,850 C1 Cash Cost (1) ($/lb Cu produced) $1.70 $1.61 C1 Cash Cost (1) ($/lb Cu sold) $1.66 $1.70 All-in Cost (1) ($/lb Cu produced) $2.06 $1.95 Fully-loaded All-in Cost (1) ($/lb Cu produced) $2.17 $1.99 Cozamin (Zacatecas, Mexico) Copper Production (tonnes) 4,001 14,307 C1 Cash Cost (1) ($/lb Cu produced) $1.40 $1.48 C1 Cash Cost (1) ($/lb Cu sold) $1.36 $1.50 All-in Cost (1) ($/lb Cu produced) $2.06 $1.88 Fully-loaded All-in Cost (1) ($/lb Cu produced) $2.17 $1.98 Minto (Yukon, Canada) Copper Production (tonnes) 8,801 31,426 C1 Cash Cost (1) ($/lb Cu produced) $0.33 $1.03 C1 Cash Cost (1) ($/lb Cu sold) $0.49 $1.14 All-in Cost (1) ($/lb Cu produced) $0.43 $1.12 Fully-loaded All-in Cost (1) ($/lb Cu produced) $0.29 $1.15 1. These are Alternative Performance Measures. See Forward-Looking Statements slide. 6
Operating Results Mine Operating Results Throughput averaged above 56,000 tpd for quarter and year, both above target Ongoing optimization work (throughput expansion into low 60’s) Pinto Valley Upgrading the secondary and fine crushing plants and adding two additional haul trucks Transitioning from the wide-veined Mala Noche zone to the narrower Footwall zone Driving higher operating and development costs Cozamin Silver stream expires in April 2017 Aim to start mining the zinc in the Mala Noche zone in the latter part of 2017 and drilling off the separate San Rafael zinc zone Q4 costs fell significantly on benefit from processing stockpile material with no surface mining costs Advancing another stage of mining in the Area 2 pit Minto Operations scheduled through 2017 Continuing to develop mine plans that could take us beyond 2017 7
Looking Ahead Near term: Intend to further reduce debt Continue optimization work targeting higher throughput at Pinto Valley Plan to bring more zinc to the mill at Cozamin Area 2 Stage 3 open pit mining at Minto commenced January 2017 Beyond 2017: Regional opportunities at Pinto Valley Developing mine plans that could further extend operations at Minto At Santo Domingo, completed scoping study to evaluate economics of combining with another copper deposit; Evaluating next steps Fully levered to copper price upside Short term downside protection with significant leverage to rising copper prices 8
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