Pinto Valley Property Mineral Resource Estimate...CAPSTONE MINING CORP. Pinto Valley Property Mineral Resource Estimate NI 43-101 Technical Report Qualified Person: Garth Kirkham,

CAPSTONE MINING CORP.

Pinto Valley Property Mineral Resource Estimate

NI 43-101 Technical Report

Qualified Person: Garth Kirkham, P.Geo., Kirkham Geosystems Ltd. Burnaby, BC | 604.529.1070 | [email protected]

Effective Date: February 28, 2013 Release Date: June 12, 2013 Amended Date: December 11, 2013

KIRKHAM GEOSYSTEMS LTD. DECEMBER 2013

CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY TOC I

TABLE OF CONTENTS

1 SUMMARY ......................................................................................................................................... 1-1

2 INTRODUCTION ................................................................................................................................ 2-1

2.1 SOURCE OF DATA ......................................................................................................................... 2-1 2.2 SCOPE OF PERSONAL INSPECTIONS .............................................................................................. 2-1 2.3 UNITS OF MEASURE ...................................................................................................................... 2-1

3 RELIANCE ON OTHER EXPERTS ................................................................................................... 3-1

4 PROPERTY DESCRIPTION AND LOCATION ................................................................................. 4-1

4.1 LOCATION .................................................................................................................................... 4-1 4.2 TENURE, OWNERSHIP AND ENCUMBRANCES .................................................................................. 4-2 4.3 PERMITS ...................................................................................................................................... 4-3

5 ACCESSIBILITY, CLIMATE, INFRASTRUCTURE AND PHYSIOGRAPHY ................................... 5-1

6 HISTORY ........................................................................................................................................... 6-1

7 GEOLOGICAL SETTING AND MINERALIZATION.......................................................................... 7-1

7.1 GEOLOGICAL SETTING .................................................................................................................. 7-1 7.1.1 Mineralization ..................................................................................................................... 7-3 7.1.2 Local Geology and Alteration ............................................................................................. 7-7

7.2 INTRUSIVE PHASES ..................................................................................................................... 7-12 7.2.1 Pre-Mineralization Intrusives ............................................................................................ 7-12 7.2.2 Intra-Mineralization Intrusive Phases ............................................................................... 7-14

7.3 REGIONAL STRUCTURAL FRAMEWORK ......................................................................................... 7-16

8 DEPOSIT TYPES ............................................................................................................................... 8-1

9 EXPLORATION ................................................................................................................................. 9-1

9.1 KOZI PROSPECT ........................................................................................................................... 9-2 9.2 BONDI PROSPECT ......................................................................................................................... 9-4 9.3 MATI PROSPECT ........................................................................................................................... 9-5 9.4 OTHER COPPER OXIDE EXPLORATION ........................................................................................... 9-6

10 DRILLING .................................................................................................................................... 10-1

11 SAMPLE PREPARATION, ANALYSES AND SECURITY ......................................................... 11-1

12 DATA VERIFICATION ................................................................................................................. 12-1

13 MINERAL PROCESSING AND METALLURGICAL TESTING .................................................. 13-1

13.1 PREFACE ................................................................................................................................... 13-1 13.2 PINTO VALLEY PROCESS DESCRIPTION ....................................................................................... 13-1 13.3 RECENT METALLURGICAL TESTWORK .......................................................................................... 13-2 13.4 MINERALOGY OF THE ORE .......................................................................................................... 13-3 13.5 CRUSHABILITY ............................................................................................................................ 13-5 13.6 GRINDABILITY ............................................................................................................................. 13-6 13.7 PINTO VALLEY RECOVERY .......................................................................................................... 13-7 13.8 FLOTATION ................................................................................................................................. 13-8


CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY TOC II

14 MINERAL RESOURCE ESTIMATE ............................................................................................ 14-1

14.1 INTRODUCTION ........................................................................................................................... 14-1 14.2 DATA EVALUATION ...................................................................................................................... 14-1 14.3 COMPUTERIZED GEOLOGIC AND DOMAIN MODELING .................................................................... 14-1 14.4 TOPOGRAPHY ............................................................................................................................. 14-8 14.5 COMPOSITES ............................................................................................................................ 14-10 14.6 OUTLIERS ................................................................................................................................ 14-13 14.7 TONNAGE FACTOR.................................................................................................................... 14-14 14.8 BLOCK MODEL DEFINITION ........................................................................................................ 14-14 14.9 VARIOGRAPHY .......................................................................................................................... 14-15 14.10 MINERAL RESOURCE CLASSIFICATION ................................................................................... 14-19 14.11 MINERAL RESOURCES .......................................................................................................... 14-23 14.12 MODEL VALIDATION .............................................................................................................. 14-28

15 MINERAL RESERVE ESTIMATES ............................................................................................. 15-1

16 MINING METHODS ..................................................................................................................... 16-1

16.1 MINING STRATEGY ..................................................................................................................... 16-1 16.2 MINE PLAN ................................................................................................................................. 16-1 16.3 MINE DESIGN ............................................................................................................................. 16-1

16.3.1 Pit Slope Angles ............................................................................................................... 16-2 16.4 MINING OPERATIONS .................................................................................................................. 16-3

17 RECOVERY METHODS .............................................................................................................. 17-1

17.1 PROCESSING STRATEGY ............................................................................................................. 17-1 17.1.1 Restart Existing Facilities ................................................................................................. 17-1 17.1.2 Primary Crusher ............................................................................................................... 17-1 17.1.3 Fine Crushing Plant .......................................................................................................... 17-1 17.1.4 Grinding Circuit ................................................................................................................. 17-2 17.1.5 Copper-Moly Flotation/Regrind ........................................................................................ 17-3 17.1.6 Moly Plant ......................................................................................................................... 17-3 17.1.7 Concentrate Handling ...................................................................................................... 17-3 17.1.8 Tailings Disposal / Water Reclaim ................................................................................... 17-3

17.2 FEED CHARACTERISTICS ............................................................................................................. 17-4 17.2.1 Predicted Ore and Ore Blends ......................................................................................... 17-4 17.2.2 Impact of Ore Variability and Blending ............................................................................. 17-4

17.3 TEST WORK ............................................................................................................................... 17-4 17.3.1 Extent of Test Work .......................................................................................................... 17-4 17.3.2 Overview of 2006 Test Work ............................................................................................ 17-4 17.3.3 Samples from the Pit Bottom and Core Shed .................................................................. 17-5

17.4 PROCESS PLANT DESIGN CRITERIA ............................................................................................. 17-5

18 PROJECT INFRASTRUCTURE .................................................................................................. 18-1

18.1 LOCATION .................................................................................................................................. 18-1 18.1.1 Battery Limits .................................................................................................................... 18-1

18.2 OVERVIEW OF EXISTING INFRASTRUCTURE .................................................................................. 18-1 18.2.1 Electric Power .................................................................................................................. 18-1 18.2.2 Water ................................................................................................................................ 18-2


CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY TOC III

18.2.3 Sewage ............................................................................................................................ 18-2 18.2.4 Fuels ................................................................................................................................. 18-3 18.2.5 Storm Water Control......................................................................................................... 18-3 18.2.6 Tailings Disposal .............................................................................................................. 18-3 18.2.7 Tailings Dam No. 4 ........................................................................................................... 18-3 18.2.8 Tailings Dam No. 3 ........................................................................................................... 18-4 18.2.9 Buildings and Support Facilities ....................................................................................... 18-4 18.2.10 Maintenance Support and Shop................................................................................... 18-4 18.2.11 Communications........................................................................................................... 18-4 18.2.12 Security ........................................................................................................................ 18-4

18.3 LOGISTICS AND TRANSPORT ........................................................................................................ 18-5 18.4 CONSIDERATIONS FOR INFRASTRUCTURE .................................................................................... 18-5

19 MARKET STUDIES AND CONTRACTS ..................................................................................... 19-1

20 ENVIRONMENTAL STUDIES AND SOCIAL OR COMMUNITY IMPACT ................................. 20-1

21 CAPITAL AND OPERATING COSTS ......................................................................................... 21-1

22 ECONOMIC ANALYSIS .............................................................................................................. 22-3

23 ADJACENT PROPERTIES ......................................................................................................... 23-1

23.1 CARLOTA MINE ........................................................................................................................... 23-1 23.2 MIAMI MINE ................................................................................................................................ 23-2

24 OTHER RELEVANT DATA AND INFORMATION ...................................................................... 24-1

25 INTERPRETATION AND CONCLUSIONS ................................................................................. 25-1

26 RECOMMENDATIONS ................................................................................................................ 26-1

27 REFERENCES ............................................................................................................................. 27-2

28 DATE AND SIGNATURES .......................................................................................................... 28-1


CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY TOC IV

LIST OF TABLES

Table 1.1: Mineral Resources in Imperial Units ......................................................................................... 1-3 Table 1.2: Mineral Resources in Metric Units ............................................................................................ 1-3 Table 2.1: Units of Measure ....................................................................................................................... 2-2 Table 2.2: Frequently Used Acronyms and Abbreviations ......................................................................... 2-3 Table 4.1: Permits, Licenses and Authorizations for the Pinto Valley Project ........................................... 4-3 Table 6.1: BHP JORC Compliant Resources for Pinto Valley as at June 30, 2012 .................................. 6-2 Table 6.2: BHP JORC Compliant Proven and Probable Reserves for Pinto Valley as at June 30, 2012 . 6-2 Table 6.3: BHP JORC Compliant Resource for Pinto Valley as at June 30, 2013 .................................... 6-3 Table 6.4: BHP JORC Compliant Proven and Probable Reserves for Pinto Valley as at June 30, 2013 . 6-3 Table 9.1: Ore Type Summary for Pinto Valley Deposit ............................................................................ 9-2 Table 9.2: Chemical Assays Results for Ruin and Schultze Granite ......................................................... 9-3 Table 11.1: Analytical Results for Standard Reference Materials (2006 Pinto Valley Q/A Program)...... 11-3 Table 11.2: Analytical Results for Replicate Pulp Assays (2006 Pinto Valley Q/A Program) .................. 11-5 Table 11.3: Analytical Results for Duplicate Core Preparation and Assays (2006 Pinto Valley Q/A

Program) .................................................................................................................................................. 11-5 Table 11.4: Total and Stepwise Sampling Estimates and Analytical Variances ..................................... 11-7 Table 13.1: Summary of Testwork ........................................................................................................... 13-3 Table 13.2: Summary of Pinto Valley Ore Types ..................................................................................... 13-4 Table 13.3: Modal Mineralogy of Ruin Granite/Quartz Monzonite ........................................................... 13-5 Table 13.4: SMC Test Results on Pinto Valley Ore ................................................................................. 13-6 Table 14.1: Statistics for Total Copper and Molybdenum Percentages .................................................. 14-6 Table 14.2: Composite Statistics Weighted by Length (by Zone) .......................................................... 14-11 Table 14.3: Correlogram Model Data by Zone....................................................................................... 14-16 Table 14.4: Interpolation Parameters ..................................................................................................... 14-17 Table 14.5: Mineral Resources .............................................................................................................. 14-25 Table 14.6: Mineral Resources .............................................................................................................. 14-26 Table 14.7: Measured Mineral Resources ............................................................................................. 14-27 Table 14.8: Indicated Mineral Resources .............................................................................................. 14-27 Table 14.9: Inferred Mineral Resources ................................................................................................. 14-27 Table 16.1: Mine Equipment Fleet ........................................................................................................... 16-3

LIST OF FIGURES

Figure 4-1: Pinto Valley Mine Location Map (BHP 2013) .......................................................................... 4-1 Figure 5-1: Pinto Valley Mine Location Photo ............................................................................................ 5-1 Figure 7-1: Geological Map of the Western Half of the Gila-Miami District (Creasey, 1980) .................... 7-2 Figure 7-2: Diagrammatic Sketch of the Geologic Relations of the Rock Units in the Globe-Miami District

(Creasey, 1980) ......................................................................................................................................... 7-3 Figure 7-3: Surface Geology Map of the Pinto Valley Mine (Peterson et al, 1951) ................................... 7-6 Figure 7-4: Orebody Cross Section 3000 W looking west (BHP, 2007) .................................................... 7-6 Figure 7-5: Pinto Valley Geology Plan (BHP 2012) ................................................................................... 7-7 Figure 7-6: Generalized Columnar Sections of Sedimentary and Volcanic Rocks, Castle Dome Area

(Peterson et al, 1951) ................................................................................................................................. 7-8 Figure 7-7: Pinto Valley Alteration Plan (BHP 2012) ................................................................................. 7-9 Figure 7-8 Location and Distribution of the Main Structures of the Pinto Valley District ...................... 7-18


CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY TOC V

Figure 8-1: Anatomy of a Telescoped Porphyry System (Sillitoe, 2010) .................................................. 8-2 Figure 8-2: Generalized Alteration-Mineralization Zoning Pattern for Telescoped Porphyry Copper

Deposits (Sillitoe, 2010) ............................................................................................................................. 8-3 Figure 8-3: Pinto Valley Alteration and Mineralization Plan Map (BHP, 2012) .......................................... 8-4 Figure 9-1: Intensity Mapping of Mineralization to Define Dominant Ore-Types. ...................................... 9-1 Figure 10-1: Drill Hole Section Showing Current Topography and Preliminary Optimized Pit ................ 10-2 Figure 10-2: Drill Hole Plan ...................................................................................................................... 10-3 Figure 10-3: All Drill Hole Collars ............................................................................................................. 10-3 Figure 11-1: Analytical Results from Standard Reference Materials ...................................................... 11-3 Figure 11-2: Relative Half Differences in Replicate Pulp Analyses (compares original PVO copper assays

with Skyline Laboratories repeats) ........................................................................................................... 11-4 Figure 11-3: Comparison of 15 Field Duplicate Samples (2006 Pinto Valley Q/A Program) .................. 11-6 Figure 11-4: Condensed Sample Handling and Chain of Custody Stream ............................................. 11-8 Figure 13-1: Ruin Granite / Quartz Monzonite Modified Bond Work Index (kWh/mt) .............................. 13-7 Figure 13-2: Pinto Valley Copper Recovery (1990 to 1998) .................................................................... 13-8 Figure 14-1: Plan View Showing Drill Holes Used in Resource Estimate ............................................... 14-1 Figure 14-2: Plan View Showing Mineralized Solids ............................................................................... 14-3 Figure 14-3: Plan View Showing Major Faults ......................................................................................... 14-3 Figure 14-4: Plan View Drill Holes with Domain Solids ........................................................................... 14-4 Figure 14-5: Drill Hole Database Showing Grades and Lithology Codes ................................................ 14-5 Figure 14-6: Contact Plots for Copper ..................................................................................................... 14-7 Figure 14-7: Contact Plots for Molybdenum ............................................................................................ 14-8 Figure 14-8: Plan View of Topographic Solids with Drill Holes ................................................................ 14-9 Figure 14-9: Plan View 3D Gridded Topography by Contour Range ...................................................... 14-9 Figure 14-10: Box Plot for Copper Composites by Zone ....................................................................... 14-12 Figure 14-11: Box Plot for Molybdenum Composites by Zone .............................................................. 14-12 Figure 14-12: Cumulative Frequency Plot for Copper (45-ft Composites) ............................................ 14-13 Figure 14-13: Cumulative Frequency Plot for Molybdenum (45-ft Composites) .................................... 14-13 Figure 14-14: Block Model Bounds ........................................................................................................ 14-14 Figure 14-15: Location of Grid and Model Limits ................................................................................... 14-15 Figure 14-16: Plan View of Block Model Showing Copper Grade Model at 3230 Elevation > 0.1% ..... 14-18 Figure 14-17: Plan View of Block Model Showing Molybdenum Grade Model at 3230 Elevation > 0.003%

............................................................................................................................................................... 14-18 Figure 14-18: Section of Block Model with Copper Grades > 0.1% Shown with Geology, Topography, and

Drill Holes ............................................................................................................................................... 14-19 Figure 14-19: Relative Confidence Limits for the 52,000 stpd Production Rate .................................... 14-21 Figure 14-20: Digitized Boundary Based on Distance to Nearest Composite (shown as dashed green

polyline) .................................................................................................................................................. 14-23 Figure 14-21: Optimized Pit with Block Model ....................................................................................... 14-24 Figure 14-22: Pit Optimization for Block Model...................................................................................... 14-25

_Toc374381923 Figure 14-24: Comparison of Ordinary Kriging (OK), Inverse Distance (ID

2) and Nearest Neighbour (NN)

Models .................................................................................................................................................... 14-32 Figure 14-25: Swath Plots ...................................................................................................................... 14-33 Figure 14-26: Copper Swatch Plots ....................................................................................................... 14-34 Figure 14-27: Molybdenum Swath Plots ................................................................................................ 14-35 Figure 16-1: Safety Berm Design Change ............................................................................................... 16-3 Figure 17-1: Sulphide Process Flow sheet .............................................................................................. 17-2


CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY TOC VI

Figure 23-1: Pinto Valley Mine and Adjacent Properties ......................................................................... 23-1


CAPSTONE MINING CORP. NI 43-101 TECHNICAL REPORT PINTO VALLEY PROPERTY PAGE 1-1

1 SUMMARY

This Technical Report was prepared by Garth Kirkham, P.Geo., Kirkham Geosystems Ltd. The

report was commissioned by Capstone Mining Corp. (Capstone) in support of the sale by BHP

Copper Inc. (BHP) and Capstone's subsequent acquisition of the Pinto Valley Mine. In addition, the

resources reported herein will form the basis for ongoing advanced studies, such as a Feasibility

Study which will address the mine restart.

This report is based primarily on data compiled and generated by BHP and drilling programs

conducted in 2011 and 2012, internal reports, and the JORC-compliant report, June 2012 Mineral

Resource & Ore Reserve Competent Persons Report: Pinto Valley (Preece and Baird, 2012).

Garth Kirkham, P. Geo., visited the property on May 14, 2013, and the laboratory facilities on May

15, 2013. The site visit included an inspection of the mine site infrastructure, core logging facilities,

offices, pit, core storage facilities, core receiving area, core sawing stations and a tour of the major

population centres and surrounding towns.

The Pinto Valley Mine and Concentrator are located at the west end of the Globe-Miami district,

approximately six miles west of the town of Miami in Gila County, Arizona at an elevation of

approximately 4,000 ft. Access to the mine is via U.S. Highway 60, approximately 80 miles east of

Phoenix to the Pinto Valley Mine Road, then approximately 1.5 miles north.

On April 28, 2013, Capstone entered into a purchase agreement (Purchase Agreement) with BHP

Copper Inc. (BHP Copper) pursuant to which Capstone proposed to purchase, through a wholly-

owned U.S. subsidiary, 100% interest in the Pinto Valley Mine and associated railroad operations for

US$650 million.

The Globe-Miami district is one of the oldest and most productive mining districts in the United

States. The first recorded production from the district was in 1878. Since that time, over 15 billion

pounds of copper have been produced.

Pinto Valley Mining Division originated as Miami Copper Company in 1909. In 1960, the Tennessee

Corporation took over Miami Copper Company, and, in 1969, Cities Service Company merged with

the Tennessee Corporation. In late 1982, Occidental Petroleum Corporation (Occidental) acquired

Cities Service Company. In February 1983, Occidental sold the Miami operations to Newmont

Mining Corporation. At this time, the company's name was changed to Pinto Valley Copper

Corporation (Pinto Valley Copper). In November 1986, Newmont merged the Pinto Valley Copper

assets into Magma Copper Company holdings, and Pinto Valley Copper became the Pinto Valley

Mining Division of Magma Copper Company. In December 1995, Broken Hill Proprietary Company

Limited (BHP) purchased Magma Copper Company. With the merger of BHP and Billiton, the Pinto

Valley Mining Division became the Pinto Valley Operations of BHP Copper Inc.



The Pinto Valley Mining Division is located within the Globe-Miami mining district of central

Arizona. Several mines and numerous prospects have been developed in the area. Larger mines in

the district are porphyry copper deposits associated with Paleocene granodiorite to Granite Porphyry

stocks. The porphyry copper deposits have been dismembered by faults and affected by later erosion

and minor oxidation. Vein deposits and possible exotic copper deposits are also found within the

district.

The Globe-Miami district contains igneous, metamorphic, and sedimentary rocks of Precambrian,

Paleozoic, Tertiary, and Quaternary age. Precambrian basement rocks largely consist of Early

Proterozoic Pinal Schist intruded by granites correlative with peraluminous two-mica granite

batholiths that comprise the Proterozoic basement rocks throughout southern Arizona and New

Mexico. The Late Proterozoic Apache Group consists of (from oldest to youngest): the Pioneer

Formation, including the basal Scanlan Conglomerate; the Dripping Spring Quartzite, including the

Barnes Conglomerate; the Mescal Limestone; and, minor basalt closely associated with the Mescal.

These units are intruded by Apache Diabase sills of various thicknesses.

Paleozoic rocks in the district are the Cambrian Troy Quartzite, Devonian Martin Limestone,

Mississippian Escabrosa Limestone, and Pennsylvanian to Permian Naco Formation.

A large pluton of Schultze Granite was intruded into the Precambrian and Paleozoic wall rocks. Near

the northern-most exposures at the Inspiration mineral deposit, it has various textures and

compositions that have been called Granodiorite, Quartz Monzonite, and Porphyritic Quartz

Monzonite. A separate, Granite Porphyry has been mapped at Pinto Valley, Copper Cities, Diamond

H, and Miami East, and is seen near the vein-controlled mineralization at Old Dominion.

Tertiary sedimentary and volcanic rocks cover the mineralized units. The Whitetail Conglomerate

was formed as a result of regional uplift which contains weathered clasts of older rocks in a red iron

oxide-rich, very fine-grained matrix. A Miocene ash-flow tuff, known as the Apache Leap Tuff,

covered the area following the Whitetail Conglomerate, and further Basin and Range faulting and

subsequent erosion produced the Tertiary to Quaternary Gila Conglomerate from all older rocks. On

the west side of the Pinto Valley open pit, the Gila Conglomerate contains a basalt sill.

The hydrothermal ore deposits in the district comprise vein deposits and typical porphyry copper

deposits. On the basis of predominant metals, the vein deposits can be further divided into copper

veins, zinc-lead veins, zinc-lead-vanadium-molybdenum veins, manganese-zinc-lead-silver veins,

gold-silver veins, and molybdenum veins. The primary minerals of the porphyry copper deposits are

chiefly pyrite and chalcopyrite with minor amounts of molybdenite; gold and silver are recovered as

by-products. Sphalerite and galena occur locally in very small amounts. Silicate alteration

associated with the deposits includes potassic, argillic, sericitic, and propylitic alterations.

The Pinto Valley Mine has previously been in production and preliminary metallurgical and

geometallurgical work has already been completed; however, a more detailed and advanced program

is currently underway to augment this previous work which will eventually form the basis of a Pre-



feasibility Study planned for late 2013. To-date, a broad characterization of recoveries exists for

copper and molybdenum at 88% and 50%, respectively.

The mineral resources are shown in Table 1.1 for Cu% and Mo%. These mineral resources are listed

at a base case cut-off grade of 0.25% Cu.

TABLE 1.1: MINERAL RESOURCES IN IMPERIAL UNITS

Total Cut-Off Ore Cu% Mo%

Cu% (tons)

Measured 0.25 443,030,204 0.384 0.010

Indicated 0.25 623,458,863 0.331 0.008

Measured & Indicated 0.25 1,066,489,067 0.353 0.009

Inferred 0.25 49,285,298 0.326 0.009

Note: This estimate has not been adjusted for the three months of mining

from date of start-up to February 28, 2013.

As Capstone is a Canadian issuer and BHP (the seller) is an Australian company, the author is also

reporting the resources in metric units for tonnage and contained copper. Molybdenum, however, is

reported in pounds, its most common unit. The mineral resources (in metric units) are shown in

Table 1.2 for Cu% and Mo%. These mineral resources are listed at a base case cut-off grade of

0.25% Cu.

The purpose of this Technical Report was to present the resource estimate for the Pinto Valley

Deposit. Therefore, the primary interpretations and conclusions of this report are related to the data,

analysis and methods related to the calculation of the resource estimate.

TABLE 1.2: MINERAL RESOURCES IN METRIC UNITS

Metric Copper Molybdenum Contained Contained

Tonnes (%) (%) Copper Molybdenum

(M) (k Tonnes) (M lbs)

Measured 402 0.38 0.010 1,544 89

Indicated 566 0.33 0.008 1,870 99

Measured & Indicated 968 0.35 0.009 3,414 188

Inferred 45 0.33 0.009 146 9

Notes: Mineral Resource Estimate, February 28, 2013, at a 0.25% COG. Any discrepancies in the

totals are related to rounding. This estimate has not been adjusted for the three months of mining

from date of start-up to February 28, 2013.

Mineral resources are not mineral reserves until they have demonstrated economic viability. Mineral

resource estimates do not account for a resource’s mineability, selectivity, mining loss, or dilution.

These estimates include Inferred mineral resources that are normally considered too geologically



speculative for the application of economic considerations; therefore, they are unable to be classified

as mineral reserves. Also, there is no certainty that these Inferred mineral resources will someday be

converted into Measured or Indicated resources as a result of future drilling or after applying

economic considerations.

The Pinto Valley Mine has no declared mineral reserve estimates as per CIM definitions. All

previous mineral reserve estimates for Pinto Valley are considered to be historical in nature.

The objective of the proposed mining strategy is to deliver maximum value, with acceptable risk.

The restart provides immediate access to more than a 4-year’s supply of available mineralization

within the bottom of the current pit. The mine configuration, infrastructure, and site logistics

required to mine the exposed ore in the pit are the same as they were under previous operations and

it only pertains to the available resources at the bottom of the existing open pit. Operations at Pinto

Valley are established; processing facilities, shops, fuel bays, and other support functions are all

operational. Ramping-up capacities while further stabilizing these operations are both critical

measures for the success of the mining operation. The main risks to the mine plan are related to pit

slope stability.

The mining is executed as an owner/operator operation with a truck/loader fleet. The haulage fleet

consists of 15 haul trucks. The waste dump design places material as close to the pit rim as possible,

directly south of the leach dumps.

The planned mine production rate for ore and waste is 20.4 million mtpy, and 18.5 million mtpy of

ore to the concentrator. This aligns with the average concentrator production of 18.2 million mtpy

before sulphide operations were suspended in 2009. The waste/ore strip ratio for the mine is 0.1:1.

The mill ore cut-off is variable, nominally set at 0.25% TCu. Stockpile (leach) material-grade cut-off

ranges from 0.10% to 0.20% TCu. Material between 0.20% and 0.25% will be stockpiled for future

processing.

The existing concentrator process equipment and instrumentation will be refurbished; therefore, no

process flow sheet changes are anticipated. The flow process is conventional and consists of three

crushing stages (primary, secondary, and tertiary), three copper flotation stages (rougher, cleaner,

and scavenger), a molybdenum flotation circuit, and associated thickeners to control the density of

concentrates and tailings.

The Pinto Valley concentrator is an existing facility that will be refurbished and restarted without

any substantial modifications to the design criteria. The original plant design was for 36,300 mtpd.

Because of past modifications to increase throughput, the current target throughput is 50,800 mtpd

(dry) post ramp-up. The target concentrate grade is 28% with a total copper recovery of 87.5%.

The proposed project involves restarting the existing facility located at Pinto Valley, Arizona. All

environmental permits are in place; there is adequate tailings disposal capacity, electric power, and

water.



Capstone will perform all marketing and sales administration.

No additional environmental or social impact assessments are required, other than those already in

place as a result of past operations.

Capstone has invested a total of $650 million toward the purchase of the Pinto Valley Operation

from BHP Copper. In addition, BHP Copper has invested approximately $192 million in capital

improvements in preparation for start-up.

At the closing of the acquisition by Capstone on October 11, 2013, the Pinto Valley Operations was

approximately 10 months into its re-commissioning by BHP Copper after the January 20, 2009

shutdown. As part of the re-start of operations, BHP Copper had completed a refurbishment

program to prepare for the restart of operations.

As at December 6, 2013, Capstone has owned the operation for approximately eight weeks and has

not yet completed the first full monthly close of the financial statements for the Pinto Valley

Operations under its ownership. As such, Capstone does not yet have information that it can report

on operating expenses. Additionally, the company does not have access to cost or operating data

predating its ownership. Even if that information were available, throughout 2013, the Pinto Valley

Operation has been in a start-up phase, with costs affected by transitional administrative support

arrangements with the former owner, production levels and efficiencies below name-plate levels, and

normal commissioning-related contractor costs. As a result, actual operating costs realized to date

are either not available or are not representative of the sustainable performance of the operations.

Capstone is currently in the process of compiling accurate and reliable cost estimates and sustaining

capital estimates in preparation for the completion of a current pre-feasibility study.



In order to further evaluate the resource potential of the Pinto Valley Project and advance the project

by evaluating its economic viability, the following recommendations should be considered in 2013:

Incorporate remaining assay data from 2012-2013 drilling campaign.

To increase confidence and upgrade resource classification.

Continue with the QA/QC of the master database.

Continue density measurements and analysis.

Revise solids based on the most current assay data.

Documentation and project map of all drill data.

Improve documentation of procedures and protocols.

Continue with advanced metallurgical studies.

Continue environmental studies.

Continue with activities related to and completion of Pre-feasibility Study.



2 INTRODUCTION

This Technical Report was prepared by Garth Kirkham, P.Geo., Kirkham Geosystems Ltd. The

report was commissioned by Capstone Mining Corp. (Capstone) in support of the sale by BHP

Copper Inc. (BHP) and Capstone's subsequent acquisition of the Pinto Valley Mine. In addition, the

resources reported herein will form the basis for ongoing advanced studies, such as a Pre-feasibility

study which will address the mine restart. This Technical Report was written in compliance with

disclosure and reporting requirements set forth in the Canadian Securities Administrators National

Instrument 43-101, Companion Policy 43-101CP, and Form 43-101F1 (collectively referred to as NI

43-101).

2.1 SOURCE OF DATA

This report is based primarily on data compiled and generated by BHP, drilling programs

conducted in 2011 and 2012, internal reports, and the JORC-compliant report, June 2012 Mineral

Resource & Ore Reserve Competent Persons Report: Pinto Valley (Preece and Baird, 2012).

2.2 SCOPE OF PERSONAL INSPECTIONS

Garth Kirkham, P. Geo., visited the property on May 14, 2013, and the laboratory facilities on

May 15, 2013. The site visit included an inspection of the mine site infrastructure, core logging

facilities, offices, pit, outcrops, core storage facilities, core receiving area, core sawing stations

and a tour of the major population centres and surrounding towns.

2.3 UNITS OF MEASURE

The units of measure used in this report are shown in Table 2.1. All currency quoted in this

report refers to U.S. dollars, unless otherwise noted. All distances and linear measurements are

given in feet and miles, unless otherwise noted. Frequently used abbreviations and acronyms are

shown in Table 2.2.



TABLE 2.1: UNITS OF MEASURE

Type Unit Unit Abbreviation Si Conversion1

area acre acre 4,046.86 m2

area hectare ha 10,000 m2

area square kilometre km2 100 ha

area square mile mi2 259.00 ha

concentration grams per metric ton g/t 1 part per million

concentration troy ounces per short ton oz/ton 34.28552 g/t

length foot ft 0.3048 m

length metre m Si base unit

length kilometre km Si base unit

length centimetre cm Si base unit

length mile mi 1,609.34 km

length yard yd 0.9144 m

mass gram g Si base unit

mass kilogram kg Si base unit

mass troy ounce oz 31.10348 g

mass metric ton t, tonne 1,000 kg

mass short ton T, ton 2,000 lbs

time million years Ma million years

volume cubic yard cu yd 0.7626 m3

temperature degrees Celsius °C Degrees Celsius2

temperature degrees Fahrenheit °F °F=°C x 9/5 +32

Note: 1 Si refers to International System of Units.

2 Degrees Celsius in not an SI unit, but is the standard for temperature.



TABLE 2.2: FREQUENTLY USED ACRONYMS AND ABBREVIATIONS

AA Atomic absorption spectrometry Ag silver APP Aquifer Protection Permit As arsenic Au gold Ba barium BLM Bureau of Land Management C Celsius CIM Canadian Institute of Mining cm centimetre COG cut-off grade Cu copper DDH diamond drill hole

DWi drop weight index

E east

EA Environmental Assessment

ft feet g/t grams per tonne JORC Joint Ore Reserves Committee K potassium kg kilogram = 2.205 pounds km kilometre = 0.6214 mile kWh/m

3 kilowatt-hour per cubic meter

L litre LoM Life of Mine m metre = 3.2808 feet M million Ma million years old MLP Mined Land Reclamation Plan mm millimetre Mo molybdenum mT or mt metric tonne mtpd metric tonnes per day mtph metric tonnes per hour mtpy metric tonnes per year MVA megavolt ampere µm micron = one millionth of a metre N north Na sodium NSR Net Smelter Royalty oz troy ounce (12 oz to 1 pound)

Pb lead PIMA Portable Infrared Mineral Analyzer ppm parts per million ppb parts per billion PVO Pinto Valley Operations QA/QC Quality Assurance/Quality Control QEMSCAN Quantitative Evaluation of Minerals by SCANning electron microscopy RC reverse-circulation drilling method

RHD relative half difference

RQD rock quality designation

S south



SEM scanning electron microscope SMC SAG Mill Comminution SRP Salt River Project SX-EW Solvent Extraction and Electrowinning t metric tonne

T short ton

U.S. United States

UTM Universal Transverse Mercator

W west

Zn zinc



3 RELIANCE ON OTHER EXPERTS

This Technical Report was prepared by Garth Kirkham, P.Geo., of Kirkham Geosystems Ltd.

To prepare this report, the author relied on exploration reports and data from previous exploration

programs, internal reports, and consultants’ reports, including the JORC-compliant report, June 2012

Mineral Resource & Ore Reserve Competent Persons Report: Pinto Valley, (Preece and Baird, 2012)

The author believes that the combined information, conclusions, and recommendations are accurate

and reliable. The author also believes that the drilling, geological, and geochemical data reported by

the companies and government agencies regarding the project and its environment are accurate and

reliable and have been performed by competent professionals operating to industry standards and

best practices.

This Technical Report was prepared using public and private information provided by BHP and

information from papers and previous technical reports listed in Section 19 of this report. The current

report also relies on the work and opinions of non-QP (qualified person) experts and non-

independent QPs. However, the author believes that the information provided and relied on for the

preparation of this report was accurate at the time of reporting, and that the interpretations and

opinions expressed by these individuals are reasonable and based on a current understanding of the

deposit. Each contributing QP has made a reasonable effort to verify the accuracy of the data used to

develop this report and takes full responsibility for the information contained in this report.

BHP Copper denied the author certain information relating to its business matters that were deemed

confidential and industry-sensitive. BHP Copper, through legal counsel, determined what material

was sensitive and unavailable for release. Although it is believed that all information relevant to the

creation of this Technical Report has been disclosed, unrestricted and free access was not given to

the author due to constraints under the U.S. laws.

The results and opinions expressed in this report are conditional on the aforementioned information

being current, accurate, and complete as of the date of this report, and provided with the

understanding that no information has been withheld that could affect the conclusions made in this

report. The author reserves the right to revise, but is not obliged to revise, this report and its

conclusions if and when additional information becomes available, subsequent to the date of this

report.



4 PROPERTY DESCRIPTION AND LOCATION

4.1 LOCATION



approximately 4,000 ft. Access to the mine is via U.S. Highway 60, approximately 80 miles east

of Phoenix to the Pinto Valley Mine Road, then approximately 1.5 miles north (Figure 4-1).

FIGURE 4-1: PINTO VALLEY MINE LOCATION MAP (BHP 2013)

The Pinto Valley Mine is currently an operating open pit operation that consists of a single

truck/loader pit that is approximately 340 m deep, 1.5 km wide, and 2.1 km long. The pit is L-

shaped and is near the on-site infrastructure. There are suitable maintenance facilities for large

Pinto ValleyN

Pinto ValleyN

Pinto ValleyN



pieces of earth-moving equipment, and for the mill and general personnel. Two previous tailings

dams have been rehabilitated and two tailings dams are currently operational. There is a Solvent

Extraction and Electro-winning (SX-EW) facility located on the eastern edge of the property,

opposite the leach dump.

4.2 TENURE, OWNERSHIP AND ENCUMBRANCES

On April 28, 2013, Capstone entered into a purchase agreement (Purchase Agreement) with BHP

Copper Inc. (BHP Copper) pursuant to which Capstone proposed to purchase, through a wholly-

owned U.S. subsidiary, 100% interest in the Pinto Valley Mine and associated railroad operations

for US$650 million.

Pinto Valley is a combination of fee land, patented mining and mill site claims, and unpatented

mining and mill site claims. As a whole, the land can support open pit mining, ore processing,

tailings storage, waste rock disposal, and the operation of milling equipment. The unpatented

mining claims and mill sites are accessible under the provisions of the U.S. federal Mining Law

of 1872, subject to approval from the U.S. Forest Service after the completion of an

environmental impact analysis under the National Environmental Policy Act (NEPA) in

connection with a proposed plan of operations (POO) governing portions of the property. The

NEPA review process includes interagency consultation on project alternatives and the mitigation

of environmental impacts. Use of the fee lands and patented mining claims and mill sites are

governed by a Mined Land Reclamation Plan (MLRP) and an Aquifer Protection Permit (APP),

both issued by the Arizona Department of Environmental Quality. To use the project's surface

rights and mine on the property requires the owner to obtain or transfer the plan of operations, the

MLRP and APP, and a number of other federal, state, and local permits and approvals; some of

these have been completed, and others are still in progress, but will be obtained or transferred

before or concurrent with the transfer of the Pinto Valley mine to Capstone. (Note: A complete

list of permits can be found in Appendix A).The core of the Pinto Valley property consists of 69

patented lode mining claims. Also included in the property are 53 patented mill sites. Adjacent to

and nearby the patented claims are 329 unpatented lode mining claims and mill sites. Most of the

unpatented mining claims and mill sites were staked on federal land administered by the U.S.

Forest Service, but a limited number of the unpatented mining claims and mill sites are on federal

land administered by the Bureau of Land Management (BLM). Seven parcels of fee (private) land

are associated with the property. A list of the unpatented mining claims and mill sites, patented

mining claims and mill sites, and fee lands can be found in Appendix B.

BHP Copper owns the patented mining claims and fee land parcels, which are private lands that

provide the owner with both surface and mineral rights. BHP Copper also owns the patented mill

sites. The patented mining claim block, located in the core of the property, is indicated in the field

by surveyed brass caps on short pipes cemented into the ground. The fee lands are located by

legal description and recorded at the Gila County Recorder’s Office. The patented mining claims,

mill sites, and fee lands are subject to annual property taxes. As long as the property taxes are

paid annually on these claims, there is no expiration date.



BHP Copper also owns the unpatented lode mining claims and mill sites that are adjacent to and

nearby the patented claims. Wooden posts and stone cairns mark the unpatented mining claim

corners, end lines, and discovery monuments; all of these have been surveyed. The unpatented

mining claims and mill sites have no expiration date and can be maintained by filing the required

documents with the BLM, providing the required records to Gila County, and paying an annual

maintenance fee to the BLM of $140 per claim.

As Capstone is purchasing an operating mine, the property is subject to ongoing environmental

liabilities and reclamation obligations.

A 2% net smelter return (NSR) royalty applies to 26 of the unpatented mining claims.

4.3 PERMITS

The following sections list the permits that were required by Pinto Valley (detailed in Table 4.1):

TABLE 4.1: PERMITS, LICENSES AND AUTHORIZATIONS FOR THE PINTO VALLEY PROJECT



5 ACCESSIBILITY, CLIMATE,

INFRASTRUCTURE AND PHYSIOGRAPHY



approximately 4,000 ft. Access to the mine is via U.S. Highway 60, approximately 80 miles east of

Phoenix to the Pinto Valley Mine Road, then approximately 1.5 miles north (Figure 5-1).

FIGURE 5-1: PINTO VALLEY MINE LOCATION PHOTO

The Pinto Valley Mine is currently an open pit operation that consists of a single truck/loader pit that

is approximately 340 m deep, 1.5 km wide, and 2.1 km long. The pit is L-shaped and is near the on-

site infrastructure. There are suitable maintenance facilities for large pieces of earthmoving

equipment, and for mill and general personnel infrastructure. Two previous tailings dams have been

rehabilitated and two tailings dams are currently operational. There is a Solvent Extraction and

Electro-winning (SX-EW) facility located on the eastern edge of the property, opposite the leach

dump.

The Pinto Valley Mine is located on Pinto Valley Road (FR 287). The site is approximately 4.8 km

(3 miles) north of U.S. Highway 60. The site can be accessed from Phoenix, Arizona, approximately

80 miles to the west), by traveling east on U.S. Highway 60. The site can also be accessed from

Tucson, Arizona (100 miles to the south) by traveling north on State Route (SR) 77 and then west on



U.S. Highway 60. The mine property can be accessed using existing mine roads and the

southernmost segment of FR 287.

A large network of roads has been built to serve the Pinto Valley Mine. The primary access, FR 287,

is a paved road; all other roads are unpaved. Some roads are well-maintained to accommodate daily

traffic, whereas others are not maintained and require four-wheel drive vehicles. Although FR 287 is

a public road that passes through the mine property, public access to the mine facilities is restricted

and managed by gates and Pinto Valley Mine security personnel.

The regional climate is semi-arid. The average annual precipitation in the region is 58.4 cm and falls

in a bimodal pattern. Most of the rainfall occurs during the winter and summer months, with dry

periods in the spring and fall. Precipitation during the winter months (December through March)

usually occurs as long, steady storms. Although snow may occur at higher elevations, it does not

typically accumulate. Rain events during the summer months (July to early September) are typically

short with greater intensity due to the convective nature of thunderstorms. May and June are

typically the driest months of the year and can commonly result in drought conditions. For

approximately one year out of every four, the region may experience little to no precipitation for an

entire month.

The National Oceanic and Atmospheric Administration’s Climate Atlas of the United States and the

Western Regional Climate Center records include data from a station in Miami, Arizona

approximately 6 miles east of the site. The period of record for the Miami station is from 1914 to

2005. The average annual maximum temperature for the period of record at this station is 25°C . July

is the warmest month with an average maximum temperature of 36°C. The average annual minimum

temperature for the coolest month is 1°C in January.

The town of Miami, located 13 km (8 miles) east of the mine, had approximately 1,800 residents in

2011, and the town of Globe (the County seat), located 21 km (13 miles) east of the mine, had

approximately 7,500 residents in 2011. Copper mining provides the largest number of jobs in the

area. And because of a long-standing mining tradition in the area, local services are already in place

to supply the project's needs. The current level of community services is deemed to be adequate for

the needs of the mine. Medical facilities are available at the Cobre Valley Community Hospital

located in Miami. Fire, police, public works, transportation, and recreational facilities are in place

and fully functioning. The community has an adequate supply of permanent housing and temporary

housing to accommodate the Pinto Valley Mine's current workforce.

The Pinto Valley Mine is located in east-central Arizona in the structural transition zone between the

Sonoran section of the Basin and Range physiographic province to the south-southwest, and the

Colorado Plateau to the north. The terrain surrounding the mine property is generally mountainous,

dominated by sharp landforms and prolific exposures of the variety of bedrock formations present in

the region. The Pinto Valley Mine is entirely within the Pinto Creek watershed, where local

elevations range from about 1,067 m to 1,524 m above mean sea level.



The Pinto Valley Mine lies entirely along the eastern flank of Pinto Creek, with numerous southwest-

trending to northwest-trending, ephemeral Pinto Creek tributaries crossing the property. Most of the

headwaters of these tributaries originate along a regional surface water divide that runs north to south

near the eastern Pinto Valley Mine property line. All surface water runoff from the site ultimately

flows into Pinto Creek, just west of the western boundary of the property. Pinto Creek flows from the

south to the north and flows into Roosevelt Lake and the Salt River.

Two types of hydrogeologic units are present at the site. The first and uppermost is the alluvial

system: this is a near-surface groundwater system consisting of shallow-circulating water moving in

the alluvium and the upper weathered portions of the underlying bedrock. The second is the bedrock

system: this consists of deeply-circulating groundwater moving through fractures and joints in the

consolidated bedrock underlying the area. Some units/sections of the bedrock system act more like

the alluvial system, including deeper weathered portions of the fractured bedrock and the Gila

Conglomerate.

The Pinto Valley Mine is near the boundary of areas mapped as the Interior Chaparral biotic

community and the Arizona Upland subdivision of Sonoran desertscrub biotic community. Plant

species on the property that are characteristic of the Arizona Upland community include saguaro,

blue palo verde, velvet mesquite, catclaw, four-wing saltbush, ocotillo, and Engelmann prickly-pear.

Plant species more characteristic of the Interior Chaparral community include Arizona white oak,

shrub live oak, one-seed juniper, point-leaf manzanita, sugar sumac, skunkbush, and canotia.

A variety of mammals, birds, reptiles, and amphibians comprise the wildlife community at the Pinto

Valley Mine. Because the property is located on the ecotone between two major plant communities,

wildlife diversity on the site also represents species adapted to both communities. Common wildlife

species that have been observed on site include rock squirrel, coyote, mule deer, Gambel’s quail,

Cooper’s hawk, mourning dove, Bell’s vireo, western scrub-jay, phainopepla, and canyon towhee.

Most of the species observed have wide environmental tolerances and are present in both plant

communities on the property.

The southwestern parts of the mine are near the perennial reach of Pinto Creek. The Pinto Creek

riparian zone is dominated by Fremont cottonwood, Goodding willow, Arizona sycamore, Arizona

cypress, and seep willow.



6 HISTORY

The Globe-Miami district is one of the oldest and most productive mining districts in the United

States. The first recorded production from the district was in 1878. Since that time, over 15 billion

pounds of copper have been produced.

Pinto Valley Mining Division originated as Miami Copper Company in 1909. In 1960, the Tennessee

Corporation took over Miami Copper Company, and, in 1969, Cities Service Company merged with

the Tennessee Corporation. In late 1982, Occidental Petroleum Corporation (Occidental) acquired

Cities Service Company. In February 1983, Occidental sold the Miami operations to Newmont

Mining Corporation. At this time, the company's name was changed to Pinto Valley Copper

Corporation (Pinto Valley Copper). In November 1986, Newmont merged the Pinto Valley Copper

assets into Magma Copper Company holdings, and Pinto Valley Copper became the Pinto Valley

Mining Division of Magma Copper Company. In December 1995, Broken Hill Proprietary Company

Limited (BHP) purchased Magma Copper Company. With the merger of BHP and Billiton in 2001,

the Pinto Valley Mining Division became the Pinto Valley Operations of BHP Copper Inc.

Development of the Pinto Valley open pit began in 1972, and the mine and concentrator went into

production in 1974. Previously, a chalcocite-enriched zone of the deposit was mined from 1943 until

1953, as the Castle Dome Mine. Sulphide ore from the Pinto Valley open pit operation was

processed at the unit's concentrator, which produced a copper concentrate containing approximately

28% copper and a molybdenum disulphide by-product. The copper concentrate was then trucked to

a smelter and refinery in San Manuel, Arizona. In February 1998, sulphide mining and milling was

suspended due to depressed copper prices. The concentrator was placed under care and maintenance

and the mining equipment fleet was sold. Operating and environmental permits were maintained

during the suspension of sulphide operations, as were the water and electrical systems, although

these were maintained at lower usage rates than during mining and milling operations. Cathode

copper production continued during the suspension of sulphide operations at the Pinto Valley and

Miami SX-EW facilities.

In April 2006, a study was completed to determine the feasibility of rehabilitating the mill and

flotation plant and restart mining activities; it concluded with an Independent Peer Review in

September 2006. A provisional approval for restart was granted in December 2006 and final

approval was granted in early 2007. The resource and reserve estimates made in 1996 were reviewed

and validated during the Feasibility Study, and these estimates were restated in June 2007. The Pinto

Valley Mine operated for 18 months before depressed copper prices forced it to be placed under care

and maintenance again. The notice and cessation of the operation occurred on January 20, 2009.

In 2011, a new study was commissioned to restart the mine; it was peer reviewed and approved by

BHP Copper Inc. in January 2012 and the mill was restarted in December 2012.

The declared resource and reserve statement (JORC compliant) for Pinto Valley by BHP Copper Inc.

are published in “BHP Annual Report 2013”. Capstone has not completed the work necessary to



verify the classification of the resource and reserve statement. Capstone is not treating the resource

and reserve statement as NI 43-101 defined mineral resources and mineral reserves verified by a

qualified person. The historical estimates should not be relied upon. The Pinto Valley Operation will

require considerable further evaluation which Capstone’s management and consultants intend to

carry out in due course. Capstone does not have a copy of the report that includes the resource and

reserve statement signed by a professional geologist. Therefore, Capstone cannot verify the resource

or reserves or comment on whether the estimate was made in compliance with the current standards.

Capstone is not relying on these estimates.

As at June 30, 2012 the Pinto Valley copper resources and reserves are as reported as follows:

TABLE 6.1: BHP JORC COMPLIANT RESOURCES FOR PINTO VALLEY AS AT JUNE 30, 2012

TABLE 6.2: BHP JORC COMPLIANT PROVEN AND PROBABLE RESERVES FOR PINTO VALLEY AS AT JUNE 30,

2012

Note that the resources listed in Table 6.1 are inclusive of reserves. Also note that Sulphide

resources and reserves are reported at a 0.25% TCu cut-off grade whilst the Low Grade Leach

resources and reserves are reported at a 0.10% TCu cut-off grade. BHP Copper did not publish or

report molybdenum resources or reserves.

Pinto Valley resumed mining in November of 2012 and resources were recalculated and published in

“BHP Annual Report 2013”. As at June 30, 2013 the Pinto Valley copper resources are reported as

follows:



TABLE 6.3: BHP JORC COMPLIANT RESOURCE FOR PINTO VALLEY AS AT JUNE 30, 2013

TABLE 6.4: BHP JORC COMPLIANT PROVEN AND PROBABLE RESERVES FOR PINTO VALLEY AS AT JUNE 30,

2013

Note that the resources listed in Table 6.3 are inclusive of reserves. Also note that Sulphide resources

and reserves are reported at a 0.25% TCu cut-off grade whilst the Low Grade Leach resources and

reserves are reported at a 0.10% TCu cut-off grade.

During financial year ending June 30, 2013, sulphide mining resumed at Pinto Valley with

production for financial year ending June 30, 2013 of 16.6 kt of copper concentrate and 4.9 kt of

copper cathode.



7 GEOLOGICAL SETTING AND

MINERALIZATION

7.1 GEOLOGICAL SETTING

The Pinto Valley Mining Division is located within the Globe-Miami mining district of central

Arizona. Several mines and numerous prospects have been developed in the area. Larger mines in

the district are porphyry copper deposits (Creasey, 1980) associated with Paleocene (59 to 63 Ma)

Granodiorite to Granite Porphyry stocks. The porphyry copper deposits have been dismembered

by faults and affected by later erosion and minor oxidation. Vein deposits and possible exotic

copper deposits are also found within the district.

The Globe-Miami district contains igneous, metamorphic, and sedimentary rocks of Precambrian,

Paleozoic, Tertiary, and Quaternary age. Figure 7-1 shows a simplified geological map of the

western half of the district. Figure 7-2 shows a diagrammatic sketch that indicates the age and

spatial relationships of the major rock units.

Precambrian basement rocks largely consist of Early Proterozoic Pinal Schist (~1700 Ma)

intruded by granites correlative with 1450 Ma peraluminous two-mica granite batholiths that

comprise the Proterozoic basement rocks throughout southern Arizona and New Mexico. The

Late Proterozoic Apache Group consists of (from oldest to youngest): the Pioneer Formation,

including the basal Scanlan Conglomerate; the Dripping Spring Quartzite, including the Barnes

Conglomerate; the Mescal Limestone; and, minor Basalt closely associated with the Mescal.

These units are intruded by 1100 Ma Apache Diabase sills of various thicknesses.

Paleozoic rocks in the district are the Cambrian Troy Quartzite, Devonian Martin Limestone,

Mississippian Escabrosa Limestone, and Pennsylvanian to Permian Naco Formation.

During the Eocene (60 to 62 Ma), a large pluton of Schultze Granite was intruded into the

Precambrian and Paleozoic wall rocks. Near the northern-most exposures at the Inspiration

mineral deposit, it has various textures and compositions that have been called Granodiorite,

Quartz Monzonite, and Porphyritic Quartz Monzonite (Olmstead and Johnson, 1966). Creasey

(1980) refers to this as the porphyry phase of the Schultze Granite. A separate, Granite Porphyry

has been mapped at Pinto Valley, Copper Cities, Diamond H, and Miami East, and is seen near

the vein-controlled mineralization at Old Dominion. Rocks identical to this Granite Porphyry are

seen in the Miami-Inspiration mineral deposit, but they have not been systematically mapped as a

separate unit.

Tertiary sedimentary and volcanic rocks cover the mineralized units. The Whitetail Conglomerate

was formed as a result of regional uplift approximately 32 Ma. Rocks of the Whitetail

Conglomerate contain weathered clasts of older rocks in a red iron oxide-rich, very fine-grained



matrix, and detrital to exotic copper mineralization is not unknown. A Miocene ash-flow tuff,

known as the Apache Leap Tuff, covered the area following the Whitetail Conglomerate (21 Ma).

Further Basin and Range faulting and subsequent erosion produced the Tertiary to Quaternary

Gila Conglomerate from all older rocks. On the west side of the Pinto Valley open pit, the Gila

Conglomerate contains a basalt sill.

FIGURE 7-1: GEOLOGICAL MAP OF THE WESTERN HALF OF THE GILA-MIAMI DISTRICT (CREASEY, 1980)



Note: Abbreviations used for Figure 7-2 are as follows: AG, Apache Group; AL, Apache Leap Tuff; DB, Diabase

EL, Escabrosa Limestone; GC, Gila Conglomerate; GM, granite of Manitou Hill; LG, Lost Gulch Monzonite; MD,

Madera Diorite; MF, Martin Limestone; NL, Naco Limestone; PS, Pinal Schist; RG, Ruin Granite; SG, Schultze

Granite; SOG, Solitude Granite; TQ, Troy Quartzite; WS, Willow Spring Granodiorite; WT, and Whitetail

Conglomerate.

FIGURE 7-2: DIAGRAMMATIC SKETCH OF THE GEOLOGIC RELATIONS OF THE ROCK UNITS IN THE GLOBE-MIAMI

DISTRICT (CREASEY, 1980)

7.1.1 Mineralization

The hydrothermal ore deposits in the district comprise vein deposits and typical porphyry copper

deposits. On the basis of predominant metals, the vein deposits can be further divided into copper

veins, zinc-lead veins, zinc-lead-vanadium-molybdenum veins, manganese-zinc-lead-silver veins,

gold-silver veins, and molybdenum veins (Peterson, 1962). The primary minerals of the porphyry

copper deposits are chiefly pyrite and chalcopyrite with minor amounts of molybdenite; gold and

silver are recovered as by-products. Sphalerite and galena occur locally in very small amounts.

Silicate alteration associated with the deposits includes potassic, argillic, sericitic, and propylitic

alterations.



The Pinto Valley is a hypogene orebody with chalcopyrite, pyrite, and minor molybdenite as the

only significant primary sulphide minerals. It is the underlying protore of the chalcocite-enriched

Castle Dome deposit exhausted in 1953 (Peterson et al., 1951).

Host rock for the Pinto Valley porphyry copper deposit is the Precambrian age Lost Gulch Quartz

Monzonite, which is equivalent to the Oracle or Ruin Granite (Breitrick and Lenzi, 1987).

Formation of the deposit was associated with the intrusion of small bodies and dikes of Granite

Porphyry and Granodiorite that are of similar composition and age as the Schultze Granite, at

about 61.2 Ma. Copper mineralization has been dated at 59.1 Ma (Creasey, 1980).

Primary sulphide ore minerals consist of pyrite, chalcopyrite, and minor molybdenite that occur

in veins and microfractures, and less abundantly as disseminated grains predominantly in biotite

sites. The ore zone grades outward into a pyritic zone with higher total sulphide content and the

ore zone grades inward toward the low-grade core which has lower total sulphides. Molybdenum

distribution generally reflects copper distribution, with higher molybdenum values usually found

in the higher-grade copper zones.

Sulphide deposition at Pinto Valley is controlled to some extent by the host rock. For the most

part, the host is Lost Gulch Quartz Monzonite and Porphyritic Quartz Monzonite, which are

similarly altered and mineralized. The sulphide content decreases in Precambrian Aplite

intrusions. Aplite usually contains less than 0.25% copper, whereas adjacent Quartz Monzonite

may have as much as 0.6% copper. The deficiency of copper in Aplite is probably due to the

absence of biotite, which makes up about 7% of Quartz Monzonite. Disseminated chalcopyrite

shows an affinity for biotite, where it is seen to be disseminated through the biotite or partially

replacing it. Additional chalcopyrite is also present in veins which cut both rock types.

Small intrusions of Granite Porphyry extend beyond the main mapped unit shown in Figure 7-3

as mimicking the pit outline. Where Quartz Monzonite constitutes ore (more than 0.3% copper),

and the Granite Porphyry does not usually contain ore grades (about 0.15% to 0.2% copper).

Granite Porphyry contains sulphide veins but generally lacks disseminated sulphides in biotite

sites.

The shell has the appearance of a hook in plan view (Figure 7-3) and mimics the pit outline. Rock

located south of the ore has decreasing sulphide content and numerous barren quartz veins. This

area has been interpreted as a low-grade core, and this low-grade zone corresponds spatially with

the Granite Porphyry, which is seen as a poor lithologic host for ore-grade mineralization

elsewhere in the deposit. Rock located north of ore has progressively more abundant, late-stage

quartz-pyrite-sericite veins.

Cross section 3000 West (Figure 7-4) shows drill holes and sulphide copper block model contours

based on BHP’s JORC-compliant 2007 block model. The section is drawn through the "hook" in

Quartz Monzonite west of the large granodiorite and Granite Porphyry exposures. It shows a

central low-grade zone surrounded by an ore shell. The core of the shell dips steeply to the north.



The South Hill fault cuts the ore shell and associated alteration to the south. The shallow dipping

Flat Fault cuts off the ore beneath the southern limb of the grade shell.

The sections suggest that the original configuration of the copper zone was that of a distorted,

inverted bowl with its long axis striking approximately N80E.

The deposit is bound by post-mineral faults. The South Hill fault is on the south side, the Jewel

Hill fault is on the east side, and the Gold Gulch fault is on the west side. Minor post mineral

normal displacement has taken place on the Dome fault, a pre-mineral structure that strikes north-

easterly across the north limb of the deposit.

Diabase forms thin dikes in pit exposures. These dikes commonly contain higher copper content

than surrounding Quartz Monzonite. In the eastern part of the deposit, a Diabase sill lies at the top

of the ore. Diabase west of the Gold Gulch fault is mineralized by pyrite and chalcopyrite veins

with abundant magnetite near mineralized Granite Porphyry.

A geological mapping exercise of Pinto Valley was conducted in early 2012 using the Anaconda

method producing three, GIS-registered layers showing geology, alteration style and

mineralization.

A total of 45 rock samples were submitted for analysis using Iogas geostatistics. Both transmitted

and reflected-light thin sections were prepared for petrographic analysis of select samples.

Spectral analysis of clays and micas from select sites was performed to determine if clay species

were of hydrothermal origin.

Mapping the regional Pinto Valley tenement has identified a number of new mineral

occurrences. Copper mineralization was observed at a number of contacts between two

genetically different granitic bodies. Surface exposure of porphyry breccia systems were also

found bearing pyrite and chalcopyrite in a jarosite-dominated oxide precipitate. These sites were

analyzed with field portable TerraSpec which detected dickite, indicating hydrothermal

alteration. A number of massive magnetite/hematite seams bearing manganese, pyrite, and

copper were mapped in skarn contacts around the fringe of limestone bodies. A skarn

occurrence was found in contact with an intrusive Diabase unit bearing a stockwork of sulphide-

rich "D" veins. Also a number of old workings were found throughout the area, testing a range

of copper-bearing geological settings, such as porphyry stock, pegmatitic intrusive, mineralized

skarn, intrusive contact, and oxide occurrence under tertiary cover.



FIGURE 7-3: SURFACE GEOLOGY MAP OF THE PINTO VALLEY MINE (PETERSON ET AL, 1951)

FIGURE 7-4: OREBODY CROSS SECTION

3000 W LOOKING WEST (BHP, 2007)



7.1.2 Local Geology and Alteration

The following sections describe the main rock, alteration, and mineralization types on site as

shown in Figures 7-5, 7-6, and 7-7.

FIGURE 7-5: PINTO VALLEY GEOLOGY PLAN (BHP 2012)



FIGURE 7-6: GENERALIZED COLUMNAR SECTIONS OF SEDIMENTARY AND VOLCANIC ROCKS, CASTLE DOME

AREA (PETERSON ET AL, 1951)



FIGURE 7-7: PINTO VALLEY ALTERATION PLAN (BHP 2012)



Pinal Schist

Lower Precambrian Pinal Schist is a fine-grained, well-bedded sediment dominated by biotite

lesser muscovite and quartz, and in some areas, such as south of the south hill fault, bears

garnet and chlorite. Grain sizes range from coarse quartz sericite schist to fine-grained

quartz, sericite, and chlorite schist which at times displays magmatic segregation of biotite

and quartz-rich seams up to 15 cm wide. The rock is extensively deformed bearing tight to

isoclinal folding and faulted extensively by various intrusive events.

Dripping Spring Quartzite

Precambrian Dripping Spring Quartzite contains a range of internal variation from upper

coarse to medium-grained quartzite with cross bedding to lower thinly laminated fine-

grained, well-sorted sediments at the base. This unit is typified by variably-coloured beds of fine

sediment that display the well sorted nature of the rock which preserves current direction and

energy regimes. Beds range from red-brown to red-purple to purple-black alternating with thin

beds of arenatious shale.

Mescal Limestone

Mescal Limestone, a sedimentary unit, was observed mainly in the northwestern part of the study

area. It is comprised of limestones, dolomites, and large amounts of chert. This Precambrian

unit overlies the Pinal Schist and is overlaid by the Precambrian Basalt.

Precambrian Basalt

Precambrian Basalt, a basic volcanic unit, was recognized in the northern limit of the Pinto

Valley tenements. This rock has a black colour, with vesicles and some calcite-calcedonic

amygdales. This unit overlies the Mescal Limestone and is cover by the Troy Quartzite.

Troy Quartzite

Troy Quartzite, a Cambrian unit, is a distinct marker unit underlying the Martin Limestone,

with unconformable boundaries separating upper and lower limestone units. Welded by cherts

and siliceous cements, this fine-grained sediment is very resistant to weathering, and, therefore, it

forms ridges and escarpments adjacent to limestone units. Where outcropped, the quartzite is

a well- bedded, well- sorted unit forming gullies and gorges when exposed, sculptured by

surface water ways. A quartzite conglomerate bed exists at the base of this unit comprised of

well-rounded quartz pebbles in a sandy silicified matrix; iron oxide staining gives this rock is

characteristic red-brown colour.

Martin Limestone

Martin Limestone is a massive sequence of layered brown to grey-coloured carbonatious rocks

with only a minor presence of fossil fragments. It is interbedded with fine red sandstones and

shales. This un

Documents

Pinto Valley Property Mineral Resource Estimate...CAPSTONE MINING CORP. Pinto Valley Property Mineral Resource Estimate NI 43-101 Technical Report Qualified Person: Garth Kirkham,