Capstone and Mantos Copper Combine to Create Capstone Copper, a Premier Copper Producer With Transformational Near-Term Growth
Summary
I am incredibly passionate about helping to build a Canadian-based copper champion from a solid foundation of long-life assets with a strong presence in South America, having spent over ten years of my professional mining career in Chile. I firmly believe that copper is an essential component of the global economy’s transition to net zero, and Capstone Copper will play an important role in its delivery in a sustainable and responsible manner.” Key strategic, financial and operational advantages for the combination include: Diversified Operating Platform in Prolific Mining Districts with Long-Life Assets in the Americas • High quality operations with a combined 2021 copper production base of over 175,000 tonnes of copper from four mines located in districts with deep mining history • Combined contained copper reserves of 4.9 million tonnes and (additional) contained copper M&I resources of 5.5 million tonnes, on an attributable basis Significant Growth Potential with Robust Pipeline of Fully-permitted, Multi-staged Growth Projects Across the Portfolio • Over 45% production growth by 2024 to ~260,000 tonnes of copper per annum from fully-financed projects with Mantos Blancos currently ramping up and construction underway at Mantoverde • Further transformational growth of approximately 45% to ~380,000 tonnes of copper per annum with the development of Santo Domingo • Additional upside with copper production expansion projects across the combined portfolio and the cobalt opportunities at Mantoverde and Santo Domingo • Pro-forma net cash1 of approximately $220 million and available revolving credit facility of $225 million • Expected to generate cumulative consolidated EBITDA2 of over $1.3 billion over the next two years at $4.00 per pound copper • Fully-financed growth at Mantoverde with commercial sulphide production expected in 2024 A Unique Opportunity to Unlock District Scale Synergies for Mantoverde and Santo Domingo • Mantos’ existing Mantoverde operation is located approximately ~30km southwest of the Santo Domingo project • Infrastructure synergies include opportunities to share critical off-site items including desalination plant, power, roads, pipeline and port facilities, providing economic benefits and a reduced environmental footprint by avoiding unnecessary duplication of water and transportation infrastructure • Excess electrowinning capacity at Mantoverde to potentially process Santo Domingo oxide material and additional low-grade sulphides enabled by Jetti catalytic leach technologies which Capstone has been first to implement on a commercial scale at Pinto Valley • Potential cobalt plant at Santo Domingo also enables additional cobalt production from Mantoverde while by-product sulphuric acid production can be used internally to further lower operating costs Experienced Mine Building and Operational Leadership Team Focused on Value Creation • Combines experienced public company leadership and diverse bench strength in operational and exploration excellence with an experienced mine operating and building team in Chile consisting of 2,500 employees and contractors • Enhancement of executive team with the inclusion of John MacKenzie as CEO and Cashel Meagher as President and COO, both of whom bring significant mine building and operating experience in South America • Value creation at Santo Domingo to benefit from Mantos Copper team’s success in permitting, financing, and constructing Mantos Blancos (construction complete with ramp-up ongoing) and Mantoverde (construction underway) Committed to the Highest Standards of ESG • Committed to creating and preserving value for all stakeholders while safeguarding the health and safety of people, minimizing the impact of our activities on the ecosystem, following the new Global Industry Standard on Tailings Management, respecting the conditions of the natural environment and communities in which we operate to the highest standards of ESG, and seeking further ways to reduce the carbon footprint of our business The Transaction will be effected by way of a plan of arrangement under the Business Corporations Act (British Columbia). • Located in the Antofagasta region of Chile, approximately 45km northeast of Antofagasta • Sulphide and oxide operations with a track record dating back to 1960 • Production of clean, high-grade copper concentrates and +90% LME Grade A cathode copper from a SX-EW plant with a capacity of up to 60,000 tonnes of cathode copper per annum • Currently transitioning to a 20,000 tonne per day sulphide operation via the ongoing MB-CDP; construction complete with ramp-up ongoing • MB-CDP will enable production growth of approximately 25% from 42kt in 2020 to 53kt in 2024 • Studies for a further expansion at Mantos Blancos (Phase II) that would increase mill processing capacity from 20ktpd to 27ktpd are already underway • Located near smelters and ports with secured water supply and power • Located in the Atacama region of Chile, approximately 45km from the coast and approximately 30km southwest of Santo Domingo • Current oxide operations have been in production since 1995, with a current SX-EW plant capacity of 60,000 tonnes of cathode copper per annum • Approval granted in February 2021 to commence construction of the fully-financed MVDP to capitalize on the high grade sulphide reserves • MVDP construction commenced in February 2021 and the project is expected to increase production at Mantoverde by over 230% from 37kt (oxide-only) in 2020 to 120kt in 2024 (majority sulphide production) • MVDP is based on a conventional sulphide concentrate flowsheet with a 32,000 tonne per day concentrator producing clean copper concentrates • Importantly, the MVDP is a brownfield expansion that has been significantly de-risked and has a lump-sum turn-key EPCM contract in place with Ausenco • The wholly-owned desalination plant provides 100% of the water required and will be expanded to fully meet the needs of MVDP • Studies on a potential further expansion in throughput at Mantoverde have commenced (Phase II would follow after the completion of MVDP); additional optionality exists around the potential recovery of cobalt and magnetite • Extensive exploration potential with a significant land package of 39,485 hectares and a 23km strike length in the Atacama Fault System A full review of input data, methodology, and results supporting the work done by Mantos Copper was completed by NCL and Carlos Guzmán (RM CMC, FAusIMM of NCL Ingeniería y Construcción SpA. • Ronald Turner, MAusIMM CP(Geo), Golder Associates, is a Qualified Person for the purpose of NI 43-101 for the portions of a technical report relating to geology and mineral resources (chapter numbers 4 to 12,14 and 23) that is being prepared for the Mantos Blancos and Mantoverde deposits. Such factors include, amongst others, risks related to failure to receive approval by Capstone’s shareholders, the required court, regulatory and other consents and approvals to effect the Transaction, the potential of a third party making a superior proposal to the Transaction, the possibility that the Agreement could be terminated as a result of a superior proposal, inherent hazards associated with mining operations and closure of mining projects, future prices of copper and other metals, compliance with financial covenants, surety bonding, our ability to raise capital, Capstone’s ability to acquire properties for growth, counterparty risks associated with sales of our metals, use of financial derivative instruments and associated counterparty risks, foreign currency exchange rate fluctuations, market access restrictions or tariffs, changes in general economic conditions, availability of water, accuracy of mineral resource and mineral reserve estimates, operating in foreign jurisdictions with risk of changes to governmental regulation, compliance with governmental regulations, compliance with environmental laws and regulations, reliance on approvals, licenses and permits from governmental authorities and potential legal challenges to permit applications, contractual risks including but not limited to; our ability to meet certain closing conditions under the precious metals purchase agreements with Wheaton Precious Metals with respect to both the Cozamin mine and the Santo Domingo project, as applicable; acting as indemnitor for Minto Exploration Ltd.’s surety bond obligations post divestiture, impact of climate change and changes to climatic conditions at our Pinto Valley and Cozamin operations and Santo Domingo project, changes in regulatory requirements and policy related to climate change and greenhouse gas emissions, land reclamation and mine closure obligations, risks relating to widespread epidemics or pandemic outbreak including the COVID-19 pandemic; the impact of COVID-19 on our workforce, suppliers and other essential resources and what effect those impacts, if they occur, would have on our business, including our ability to access goods and supplies, the ability to transport our products and impacts on employee productivity, the risks in connection with the operations, cash flow and results of the Company relating to the unknown duration and impact of the COVID-19 pandemic, uncertainties and risks related to the potential development of the Santo Domingo project, increased operating and capital costs, increased cost of reclamation, challenges to title to our mineral properties, increased taxes in jurisdictions the Company operates or is subject to tax, changes in tax regimes we are subject to and any changes in law or interpretation of law may be difficult to react to in an efficient manner, maintaining ongoing social license to operate, dependence on key management personnel, potential conflicts of interest involving our directors and officers, corruption and bribery, limitations inherent in our insurance coverage, labour relations, increasing energy prices, competition in the mining industry including but not limited to competition for skilled labour, risks associated with joint venture partners, our ability to integrate new acquisitions and new technology into our operations, cybersecurity threats, legal proceedings, the volatility of the price of the common shares of the Company, the uncertainty of maintaining a liquid trading market for the common shares of the Company, risks related to dilution to existing shareholders if stock options or other convertible securities are exercised, the history of Capstone with respect to not paying dividends and anticipation of not paying dividends in the foreseeable future, and sales of common shares of the Company by existing shareholders can reduce trading prices, and other risks of the mining industry as well as those factors detailed from time to time in the Company’s interim and annual financial statements and management’s discussion and analysis (MD&A) of those statements and annual information form, all of which are filed and available for review under the Company’s profile on SEDAR at www.sedar.com.