VANCOUVER, British Columbia – Capstone Mining Corp. (TSX: CS) (“Capstone”) today announced its financial results for the three and six months ended June 30, 2011. Net earnings for the quarter were $15.5 million and cash flow from operating activities was $29.7 million. Capstone ended the quarter with cash on hand of $506.6 million and no long-term debt. Copper production for the quarter at Capstone’s two operating mines, Cozamin and Minto, totalled 20.5 million pounds of payable copper at an estimated total cash cost1 of $1.31 per payable pound.

Capstone will hold a conference call Tuesday, August 16, 2011 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results; call-in details are provided at the end of this release. This release should be read in conjunction with Capstone’s unaudited interim consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three and six months ended June 30, 2011, which are available on Capstone’s website at: http://capstonemining.com/s/FinancialStatements.asp. An updated corporate presentation, including results to June 30, 2011, will also be available at http://capstonemining.com/s/Presentation.asp.

	Three months ended June 30, 2011	Three months ended June 30, 2010	Six months ended June 30, 2011	Six months ended June 30, 2010
Gross sales revenue ($ millions)	78.9	69.2	189.1	157.2
Payable copper produced (millions lbs)	20.5	17.3	36.6	37.4
Total estimated cash cost per pound of payable copper (1) ($)	1.31	1.31	1.44	1.23
Copper sold – (millions lbs)	16.5	17.7	39.3	38.8
Realized copper price per pound ($)	4.21	3.21	4.24	3.30
Net earnings ($ millions)	15.5	44.7	34.4	59.5
Net earnings per share — basic ($)	0.07	0.23	0.16	0.30
Adjusted net earnings (1) ($ millions)	17.7	9.7	34.4	31.9
Adjusted net earnings (1) per share ($)	0.08	0.05	0.16	0.16
Cash flow from operating activities ($ millions)	29.7	32.5	36.5	37.3
Cash flow from operating activities per share – basic ($)(1)	0.13	0.17	0.16	0.19
Cash, including restricted and short-term investments ($ millions)			506.6	151.6

“Earnings from mining operations were slightly higher than the same periods a year ago as a result of continuing strong metal prices, partially offset by higher depletion and amortization at Minto where we continue to process our ore stock piles related to the previously mined Minto Main pit,” said Darren Pylot, Capstone President and CEO. “Net earnings were lower however, as 2010 included gains on unrealized derivative instruments and realized gains on the disposal of investments, which were significantly lower in 2011. Second quarter production improved over the first quarter of 2011 by 27% and, with both mines running at planned production rates, we remain on target to meet our full year 2011 guidance of 80-85 million pounds of copper in concentrates.”

“We completed the acquisition of Far West Mining Ltd. and our strategic partnership with Korea Resources Corporation in the second quarter, and subsequent to quarter end released a Pre-Feasibility Study (“PFS”) on the Santo Domingo Project. The economics of the project are compelling, with an NPV (8%) of US$1.1 billion and a three year payback. With the positive PFS we are advancing development to the permitting and feasibility study stage,” continued Mr. Pylot. “The Santo Domingo Project enhances Capstone’s robust portfolio, which now includes two operating mines, both with significant ongoing exploration and expansion potential , and two development projects, all located in the Americas.”

Highlights

Financial and Production Highlights for the Three Months Ended June 30, 2011

• Recorded net earnings of $15.5 million or $0.07 per common share which included:




• Earnings from mining operations of $29.2 million,


• Administrative and stock based compensation expense of $4.4 million,


• Gain on derivative instruments of $0.1 million,


• Gain on disposal of investments of $0.1 million,


• Foreign exchange loss of $1.5 million, and


• Current and deferred tax expenses of $8.7 million.


• Adjusted net earnings1 were $17.7 million or $0.08 per common share after making adjustments for certain non-cash and non-recurring items.


• Generated cash flow from operating activities of $29.7 million or $0.13 per common share.


• Working capital increased to $553.2 million at June 30, 2011 (which included $506.6 million of cash) from $177.0 million at December 31, 2010.


• Produced a total of 20.5 million pounds of payable copper at an estimated total cash cost1 of $1.31 per pound of payable copper.


• Recorded gross sales revenue of $78.9 million on the sale of 16.5 million pounds of copper, 3.3 million pounds of zinc, 0.6 million pounds of lead, 4,639 ounces of gold and 341,255 ounces of silver.

Financial and Production Highlights for the Six Months Ended June 30, 2011

• Recorded net earnings of $34.4 million or $0.16 per common share which included:




• Earnings from mining operations of $68.5 million,


• Administrative and stock based compensation expense of $10.7 million,


• Loss on derivative instruments of $1.2 million,


• Gain on disposal of investments of $1.5 million,


• Foreign exchange loss of $3.6 million, and


• Current and deferred tax expenses of $20.9 million.


• Adjusted net earnings1 were $34.4 million or $0.16 per common share after making adjustments for certain non-cash and non-recurring items.


• Generated cash flow from operating activities of $36.5 million or $0.16 per common share.


• Produced a total of 36.6 million pounds of payable copper at an estimated total cash cost1 of $1.44 per pound of payable copper.


• Recorded gross sales revenue of $189.1 million on the sale of 39.3 million pounds of copper, 6.3 million pounds of zinc, 1.6 million pounds of lead, 12,404 ounces of gold and 689,656 ounces of silver.

Operating Highlights for the Three Months Ended June 30, 2011

Cozamin, Mexico:

• Produced 10.0 million pounds of payable copper at a total cash cost1 of $1.19 per pound.


• Completed an initial mineral resource estimate for the Mala Noche Footwall Zone (“MNFWZ”) adding 74 million pounds of copper in the measured and indicated category and 163 million pounds in the inferred category.


• Continued both surface and underground drilling in the MNFWZ with four drills. The MNFWZ remains a significant exploration target and the main focus of the 2011 exploration program at the Cozamin Mine. The mineralized structure is still open, toward the east and down dip and an update to the mineral resource model suitable for feasibility work is planned for later this year.

Minto, Yukon:

• Produced 10.5 million pounds of payable copper at a total cash cost1 of $1.44 per pound of payable copper.


• Completed final mining of the Minto Main pit. Stockpiled ore will feed the mill until early 2012, at which time ore will be available from Area 2, where development of the underground portal and pre-stripping is proceeding.


• The implementation of contract pre-crushing for the SAG mill feed starting in mid-April allowed mill throughput to exceed expectations. May mill throughput set a monthly record of 115,913 tonnes, or 3,739 tonnes/day, and throughput has been sustained in excess of 3,700 tonnes/day.


• The Yukon Environmental and Socio-Economic Assessment Board issued a new Quartz Mining License for the Minto Phase IV project.


• Completed a mineral resource estimate, adding 219 million pounds of copper in the measured and indicated category. Recent drilling has demonstrated geological continuity between the Wildfire/Copper Keel area and the Area 2/118 deposit. The combination of the four areas is now known as the Minto South Deposit or MSD. Additional drill data will be incorporated into a further model update, which will support a Phase VI PFS, which has commenced.

Santo Domingo, Chile:

• Completed the arrangement with Far West Mining Ltd. (“Far West”) on June 17, 2011, pursuant to which Capstone acquired all of the issued and outstanding common shares of Far West. Far West is now held through a newly-formed subsidiary of Capstone, owned 70% by Capstone and 30% by Korea Resources Corporation (“KORES”).


• Formed a long-term strategic partnership with KORES for the development of the Santo Domingo Project. KORES will arrange for a debt financier to offer to provide funding, on then prevailing market terms, for 65% of the capital costs of the Project and fund 30% of the balance of the capital requirements at the Project and will enter into an off-take agreement for 50% of all copper and iron concentrate produced from the project over the life of the mine, at market terms.


• Concurrent with the completion of the Far West arrangement, KORES (through affiliated companies) subscribed for approximately 40.2 million common shares of Capstone, representing an approximate 11% interest in Capstone, at a price of C$4.35 per share.


• Completed a PFS in early August, that contemplates an 18 year mine life, with an after tax IRR of 22%, NPV of US$1.1 billion at an 8% discount rate and a 3 year payback with average annual production of 144 million pounds of copper, 4.1 million tonnes of iron and 15,000 ounces of gold.

Kutcho, British Columbia:

• Submitted the Project Description to provincial and federal agencies May 30 initiating the informal pre-application phase and are actively engaged in discussions with the interested First Nations groups. A project application is expected to be submitted to the B.C. Environmental Assessment Office in early 2012, at which time a review will begin with legislated timelines.


• Completed an airborne VTEM survey totaling 1,649 kilometres of flight lines spaced 100 metres apart, covering 14,700 hectares. Drilling is underway to test anomalies generated by the VTEM survey.

Outlook
Based on the improved operating results in the second quarter, Capstone reaffirms full year 2011 production guidance of 80-85 million pounds of copper in concentrates, however is increasing cost guidance from the originally projected $1.30 to $1.35 per payable pound of copper to $1.45 to $1.50 per payable pound of copper.

Cozamin production is expected to continue to stabilize at higher levels as additional stopes are placed into production to provide for increased flexibility in mine planning. Costs at Cozamin have come down from the first quarter as much of the overrun in costs in that quarter were due to one-time charges related to the settlement of labour disputes and adjustment to labor related provisions. Overall though, costs in many areas remain higher than expected and as a result, 2011 Cozamin cost guidance of $0.95 to $1.05 per payable pound of copper has been revised upwards to $1.20 to $1.30 per payable pound of copper. Initiatives are ongoing to control costs over the long-term with positive results, however have not yet offset the additional costs associated with the program. Costs are expected to remain at current levels for the third quarter and trend down to previous guidance levels by the fourth quarter.

A Pre-Feasibility Study has commenced at Cozamin that will apply economic parameters to the MNFWZ resource block model to determine economic viability, with completion targeted in the fourth quarter of 2011.

At Minto, contract pre-crushing will continue until permanent improvements are implemented later in the year. It is expected that this will allow Minto to remain at approximately 3,750 tonnes per day throughput for the remainder of the year. Year-to-date costs of $1.44 per payable pound are currently below guidance of $1.60 to $1.70 per payable pound of copper; however grades are expected to decline somewhat while recovery is expected to increase during the second half of the year and there will be a delay in placing tailings into the Minto Main pit until early 2012 as a result of a slide that occurred shortly after mining of the pit was completed in the second quarter. With this upward pressure on unit costs during the second half of the year, unit costs are expected to return to the higher levels previously guided for the full year.

At Minto, driven by exploration success in 2010 and 2011, Capstone has a PFS (Phase VI PFS) planned starting in 2011. This Phase VI study is scheduled to be completed in early 2012 using a new mineral resource estimate that is being completed in two stages. The preliminary resource estimate released in the second quarter will determine the initial scope of the PFS. This will be followed by a more robust estimate in the third quarter that will incorporate additional drilling.

With the positive PFS at Santo Domingo, Capstone will staff up the development team in Chile, commence the permitting process based on the parameters in the PFS and commence a full Feasibility Study. The permitting process and Feasibility Study are targeted for completion in 2013.

Development activities at Kutcho for the remainder of 2011 will be focused on the environmental and socio-economic assessment process and consultations towards permitting mine development, as well as ongoing exploration.

Conference Call and Webcast Details

Capstone will host a conference call on Tuesday, August 16, 2011 to discuss these results. The conference call and webcast details are as follows:

Date:	Tuesday, August 16, 2011
Time:	11:30 am Eastern Time (8:30 am Pacific Time)
Dial in:	North America – 1.888.231.8191, International – 1.647.427.7450
Webcast:	http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3595240
Replay:	North America – 1.800.642.1687, International – 1.416.849.0833
Replay Passcode:	81625702

The conference call replay will be available until August 25, 2011. A transcript of the call will also be made available on Capstone’s website (http://capstonemining.com/s/ConferenceCalls.asp) within approximately 24 hours of the call.

About Capstone Mining Corp.

Capstone Mining Corp. is a TSX listed Canadian mining company with two producing copper mines in the Americas: the Cozamin copper-silver-zinc-lead mine located in Zacatecas State, Mexico and the Minto copper-gold-silver mine in Yukon, Canada.

Using its operations as a springboard, Capstone aims to grow organically and through acquisitions in politically stable, mining-friendly jurisdictions, with a focus in the Americas: organic growth through continued mineral resource and reserve expansions as well as expanding operations at its operating mines, development of its large scale 70% owned Santo Domingo copper-iron-gold project in Chile in partnership with Korea Resources Corporation, development of its Kutcho copper-zinc-gold-silver project in British Columbia and exploration at properties in Chile, British Columbia and Australia. Capstone’s cash flow and strong balance sheet provide the platform to enhance that growth profile. Capstone is included in the S&P/TSX Composite Index and S&P/TSX Global Mining Index. Additional information is available at www.capstonemining.com.

For further information please contact:
Capstone Mining Corp.
Cindy Burnett, VP, Investor Relations
Telephone: 604-637-8157
Email: [email protected]
Website: www.capstonemining.com