9th floor, 999 West Hastings Street Vancouver B.C. V6C 2W2

ANNUAL INFORMATION FORM

For the 12 month period ended December 31, 2008

Dated March 31, 2009

TABLE OF CONTENTS Page GLOSSARY OF TECHNICAL TERMS........................................................................................ iii CORPORATE STRUCTURE........................................................................................................ 7

Name, Address and Incorporation .................................................................................... 7 Intercorporate Relationships ............................................................................................. 7

GENERAL DEVELOPMENT OF THE BUSINESS....................................................................... 8 Three Year History ............................................................................................................ 8

DESCRIPTION OF THE BUSINESS.......................................................................................... 13 General ........................................................................................................................... 13 Material Mineral Properties ............................................................................................. 18

Cozamin Project (Mexico) – Technical Information................................................... 18 Minto Mine (Yukon Territory) – Technical Information .............................................. 39 Kutcho Project (British Columbia) – Technical Information ....................................... 82

DIVIDENDS ................................................................................................................................ 99 DESCRIPTION OF CAPITAL STRUCTURE............................................................................ 100

Share Capital ................................................................................................................ 100 Stock Options................................................................................................................ 100 Convertible Debentures ................................................................................................ 101 Shareholder Rights Plan ............................................................................................... 101

MARKET FOR SECURITIES.................................................................................................... 102 Common Shares - Trading Price and Volume............................................................... 102 Debentures - Trading Price and Volume....................................................................... 102

DIRECTORS AND OFFICERS................................................................................................. 102 Name, Occupation and Security Holding ...................................................................... 102 Cease Trade Orders, Bankruptcies, Penalties or Sanctions......................................... 106 Conflicts of Interest ....................................................................................................... 107

AUDIT COMMITTEE INFORMATION ...................................................................................... 107 Audit Committee Charter............................................................................................... 107 Composition of the Audit Committee............................................................................. 107 Relevant Education and Experience ............................................................................. 108 Audit Committee Oversight ........................................................................................... 108 Reliance on Certain Exemptions................................................................................... 108 Pre-Approval Policies and Procedures ......................................................................... 109 External Auditors Service Fees (By Category).............................................................. 109

LEGAL PROCEEDINGS .......................................................................................................... 109 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS................. 109 TRANSFER AGENT AND REGISTRAR .................................................................................. 109 MATERIAL CONTRACTS........................................................................................................ 109 EXPERTS ................................................................................................................................. 111

Names of Experts.......................................................................................................... 111 Interests of Experts ....................................................................................................... 112

ADDITIONAL INFORMATION.................................................................................................. 113

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Preliminary Notes

In this Annual Information Form, unless the context otherwise requires, Capstone Mining Corp. is referred to as the “Company” or “Capstone”. All information contained herein is as at March 31, 2009, unless otherwise stated.

Financial Statements

This Annual Information Form should be read in conjunction with the Company's consolidated financial statements and management's discussion and analysis for the year ended December 31, 2008. The financial statements and management's discussion and analysis are available under the Company's profile on the SEDAR website at www.sedar.com. National Instrument 43-101 Report As required by National Instrument 43-101, Capstone has filed technical reports detailing the technical information related to its mineral interests discussed herein. The technical reports are available on SEDAR at www.sedar.com. This Annual Information Form sets out a summary of information contained in the technical reports and, for investors to fully understand the information in this Annual Information Form, they should read the technical reports in their entirety, including all qualifications, assumptions and exclusions that relate to the information set out in this Annual Information Form. Cautionary Statement Regarding Forward-Looking Statements

This Annual Information Form, and the documents incorporated by reference herein, may contain “forward-looking information” within the meaning of Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”). These forward-looking statements are made as of the date of this document and Capstone Mining Corp. (the "Company") does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation. Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual financial statements and management's discussion and analysis of those statements, all of which are filed and available for review on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in

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forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking statements. Conversion Table In this Annual Information Form, metric units are used with respect to the Company’s mineral properties, unless otherwise indicated. Conversion rates from imperial measures to metric units and from metric units to imperial measures are provided in the table set out below.

Imperial Measure

= Metric Unit Metric Unit = Imperial Measure

2.47 acres 1 hectare 0.4047 hectares 1 acre 3.28 feet 1 metre 0.3048 metres 1 foot

0.62 miles 1 kilometre 1.609 kilometres

1 mile

0.032 ounces (troy)

1 gram 31.1 grams 1 ounce (troy)

1.102 tons (short)

1 tonne 0.907 tonnes 1 ton

0.029 ounces (troy)/ton

1 gram/tonne 34.28 grams/tonne

1 ounce (troy)/ton

Classification of Mineral Reserves and Resources In this Annual Information Form, the definitions of proven and probable mineral reserves and measured, indicated and inferred resources are those used by Canadian provincial securities regulatory authorities and conform to the definitions utilized by the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) in the “CIM Standards on Mineral Resources and Reserves – Definitions and Guidelines” adopted on August 20, 2000 and amended December 11, 2005. Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated and Inferred Resources In this Annual Information Form, the terms “measured resources” and “indicated resources” are used. The Company advises U.S. investors that while such terms are recognized and permitted under Canadian securities rules, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into proven or probable reserves. This Annual Information Form also uses the term “inferred resources”. The Company advises U.S. investors that while such term is recognized and permitted under Canadian securities rules, the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that any part or all of an inferred resource exists, or is economically or legally mineable.

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GLOSSARY OF TECHNICAL TERMS

In this Annual Information Form, the following technical terms have the following meanings:

AA means Atomic Absorption.

Alteration means chemical and mineralogical changes in a rock mass resulting from the passage of fluids.

Anomaly means a deviation from uniformity. In the search for minerals, it is an area in which higher or lower than background concentrations of minerals may be found.

ASL means above sea level.

Assay means an analysis of the contents of metals in mineralized rocks.

Au means gold.

Basalt means an extrusive rock composed primarily of calcic plagioclase and pyroxene, with or without olivine.

bcm means bank cubic metre.

Biotite means a magnesium-iron mica widely distributed in igneous rocks.

Breccia means a fragmental rock whose components are angular and not water-worn.

Chlorite means in geology, the general term for hydrated silicates of aluminum, iron and magnesium.

CIM means Canadian Institute of Mining, Metallurgy and Petroleum and the CIM Standards on Mineral Resources and Reserves – Definitions and Guidelines” adopted on August 20, 2000 and amended December 11, 2005.

Cons means concentrates.

Cu means copper.

Deposit means a mineralized body which has been physically delineated by drilling, trenching and/or underground work and may contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures. Such a deposit does not qualify as a commercially mineable reserve until final technical, legal and economic factors have been resolved.

Diamond drill Holes means holes drilled by a method whereby rock is drilled with a diamond impregnated, hollow drilling bit which produces a continuous, in situ record of the rock mass intersected in the form of solid cylinders of rock which are referred to as core.

Disseminated means a texture in which minerals occur as scattered particles in the rock.

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Dyke means a tabular body of igneous rock that cuts across the layering or fabric of the host rock.

EM means electromagnetic.

Fabric means the spatial arrangement and orientation of rock components, whether crystals or sedimentary particles, as determined by their sizes, shapes, etc.

Fault means a fracture in a rock across which there has been displacement.

Feldspar means one of a group of rock forming minerals which include microcline, orthoclase, plagioclase and anorthoclase.

Fire Assay means a test to determine the grade of metallic ores, usually gold and silver, by methods requiring a furnace heat. It commonly involves certain processes, including scorification and cupellation.

Float means rock detached from the underlying bedrock.

Foliation means the preferred planar orientation of minerals and mineral aggregates in metamorphic rocks.

GIS means geographic information system.

g means gram.

Grade means the amount of valuable mineral in each tonne of ore, expressed as ounces per ton or grams per tonne for precious metal and as a percentage by weight for other metals.

g/t means grams per metric tonne.

Host Rock means a volume of rock within which mineralization or an ore body occurs.

Hydrothermal means applied to metamorphic and magmatic emanations high in water content; the processes in which they are concerned; and the rocks or ore deposits, alteration products, and springs produced by them.

Igneous means a type of rock that is crystallized from a liquid magma.

Indicated Mineral Resources

means, in accordance with CIM definitions, that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

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Inferred Mineral Resources

means, in accordance with CIM definitions, that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

Inverse Distance means one divided by distance.

K means thousands.

Kt means thousands of tonnes.

M means millions.

Mafic means ferromagnesian minerals and rocks where these minerals are abundant.

Measured Mineral Resources

means, in accordance with CIM definitions, that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

Metamorphosed describes a rock mass which has been subjected to metamorphism. Metamorphism is a geological process whereby the original mineral composition of a rock is changed (metamorphosed) in response to local or regional scale changes in temperature, pressure and the action of chemically active fluids.

Mineral Reserve means, in accordance with CIM definitions, the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting minerals and allowances for losses that may occur when the material is mined.

Mineral Resource means, in accordance with CIM definitions, a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.

Mineralization means significant amounts of mineral(s) that is (are) of economic interest which may be established by prospecting, trenching and drilling.

Mlbs means millions of pounds.

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Mt means millions of tonnes.

NA means not available.

NI 43-101 National Instrument 43-101 - Standards of Disclosure for Mineral Projects.

NSR means net smelter return.

Ore means rock that contains one or more minerals or metals, at least one of which has commercial value and which can be recovered at a profit.

Outcrop means an exposure of rock at the earth’s surface.

Pyrite means a common iron sulphide mineral commonly found in hydrothermal veins and systems and commonly associated with gold mineralization.

Qualified Person means, in accordance with NI 43-101, an individual who is an engineer or geoscientist with at least five years experience in mineral exploration, mine development, production activities and project assessment, or any combination thereof, including experience relevant to the subject matter of the project or report and is a member in good standing of an approved self-regulating organization.

Quartz means a common rock forming mineral made up of silicon dioxide.

Silica means silicon dioxide (SiO2), which occurs in the crystalline forms as quartz, cristobalite, tridymite, as cryptocrystalline chalcedony, as amorphous opal, and as an essential constituent of the silicate groups of minerals.

TC/RC means treatment charges and refining charges by metal smelting and refining companies.

tpd means tonnes per day.

tpy means tonnes per year.

Vein means a sheet-like body of minerals formed by fracture-filling or replacement of the host rock.

Volcanic means formed by volcanic activity.

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CORPORATE STRUCTURE

Name, Address and Incorporation

The Company was incorporated pursuant to the Company Act (British Columbia) on July 17, 1987 under the name 330338 B.C. Ltd.

The Company changed its name to Fire Star Resources Ltd. on April 21, 1989, and to International Bancorp Ltd. on August 17, 1989, and to IBL Equities Ltd. on March 5, 1991.

On January 2, 1996, the Company changed its name to Serena Resources Ltd. and consolidated its share capital on a 5:1 basis. On May 17, 2001, the Company changed its name to Consolidated Serena Resources Ltd. and consolidated its share capital on a 5:1 basis.

On March 6, 2003, the Company changed its name to Capstone Gold Corp. On February 8, 2006, the Company changed its name to Capstone Mining Corp. and is now governed by the Business Corporations Act (British Columbia).

On January 12, 2005, Capstone amended its Notice of Articles to change it authorized capital from 100,000,000 common shares to an unlimited number of common shares and to remove the “Pre-existing Company Provisions”, with a consequence of reducing the threshold percentage of votes required to approve a special resolution from 75% to 66⅔%, amongst other things.

The Company is a reporting Company. The Company’s principal business and registered and records address is at 9th floor, 999 West Hastings Street, Vancouver, BC, V6C 2W2.

On January 1, 2009, Capstone and its wholly-owned subsidiary, Capstone Mining North Ltd., were amalgamated as one company under the name Capstone Mining Corp.

The Company carries on its Mexican operations through Capstone Gold, S.A. de C.V. (“Capstone Mexico”), a company incorporated on December 31, 2003, pursuant to the laws of Mexico. The Company owns 99% of the issued and outstanding voting securities of Capstone Mexico; the remaining 1% is beneficially owned by the Company and held in trust by its attorney of law in the Mexico, Juan Carlos Galvan Pastoriza. Capstone Mexico has not issued any non-voting securities. All the salaried employees at the Cozamin mine are employeed through Capstone Services S.A. de C.V. and all the employees paid on an hourly basis are employed through Capstone Mining S.A. de C.V.

The Company carries on its Yukon operations through Minto Explorations Ltd. (“MintoEx”), a company incorporated on April 20, 1903, pursuant to the laws of the Province of British Columbia. The Company owns 100% of the issued and outstanding common shares of MintoEx.

The Company carries on its British Columbia activities through Kutcho Copper Corp. (“Kutcho Copper”), a company incorporated on May 27, 2008, pursuant to the laws of the Province of British Columbia. The Company owns 100% of the issued and outstanding common shares of Kutcho Copper.

Intercorporate Relationships

The Company has the following subsidiary companies:

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Name Jurisdiction of incorporation or organization

Percent of voting shares owned by the Company

Minto Explorations Ltd. British Columbia 100%

Kutcho Copper Corp. British Columbia 100%

Capstone Gold, S.A. de C.V. Mexico 99%

Capstone Services S.A. de C.V.

Mexico 99%

Capstone Mining S.A. de C.V. Mexico 99%

GENERAL DEVELOPMENT OF THE BUSINESS

The Company has been engaged in the acquisition, exploration, development and operation of mineral properties. Over the past three completed financial years, the Company has continued to operate, expand and explore in the mining and resource sector. The Company’s principal product is copper, although zinc, lead, gold and silver are also produced and sold. The Company currently carries on mining operations in Mexico and Canada and is evaluating a potential development project in British Columbia. The Company is active in seeking further production, exploration and development opportunities elsewhere throughout the world. Three Year History

Financial Year Ended December 31, 2006

On June 2, 2006, the Company completed a corporate dividend transaction whereby (a) the rights and obligations of Capstone Mexico to earn an interest in the remaining exploration properties were transferred to Silverstone Resources, S.A. de C.V. (“Silverstone Mexico”), and (b) any obligations of the Company under the earlier option agreements that related to the acquisition of an interest in any of the remaining exploration properties were transferred to Silverstone Resources Corp., (“Silverstone”), the parent company of Silverstone Mexico, pursuant to the above-referenced assignment agreement. The Company then caused the transfer of all of its shares of Silverstone Mexico to Silverstone in exchange for three convertible demand promissory notes, each dated June 2, 2006, as follows: (i) C$3,583,311 promissory note in regard of expenditures (inclusive of fixed assets and other costs) incurred by and option payments made by the Company to June 2, 2006, in respect of the remaining exploration properties; (ii) C$744,906 promissory note in regard of working capital to be used by Silverstone to complete a work program on the exploration property in Copala and to satisfy the minimum listing requirements of the Exchange; and, (iii) C$282,593 promissory note in regard of certain transaction expenses incurred by Silverstone pursuant to the dividend transaction. The interest on each of the promissory notes was calculated at a rate of 6.25% per annum not in advance and not compounded, and the total indebtedness on each of the promissory notes is due and payable on written demand by the Company at any time on or after the demand date, which is 390 days from June 7, 2006, the date that Silverstone’s common shares were listed and called for trading on the Exchange; on or before that date, the Company has the option to require Silverstone to satisfy some or all of the indebtedness by issuing common shares of Silverstone to the Company. Such common shares shall be issued at the rate of one common share for an amount of indebtedness equal to the volume weighted average trading price of such common shares on the first 5 days that the common shares trade on the Exchange. Silverstone may prepay the promissory notes at any time without penalty. On April 23, 2007, the promissory notes were converted into common shares of the Silverstone. A total balance of C$4,867,405 was converted into 4,056,171 common shares of Silverstone.

On June 30, 2006, Bacis converted its 10% interest in the Cozamin Project to a 1.5% NSR, thus leaving Bacis with a 3% NSR regarding the Cozamin Project.

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Further to the January 21, 2004 option agreement and the June 20, 2005 option exercise agreement, Capstone Mexico and Bacis entered into an option agreement dated for reference November 30, 2005; this option agreement became effective upon regulatory approval of the spin-off of the exploration properties to Silverstone Mexico described above. Upon becoming effective, this option agreement replaced the January 21, 2004 option agreement; the only difference was that under the November 30, 2005 option agreement, the exploration properties assigned to Silverstone Mexico were not included and the only property involved was Cozamin Project.

That option agreement was superseded by an amended and restated option agreement entered into among Capstone Mexico, Bacis, and the Company, pursuant to which it was confirmed that in order to exercise the option, Capstone Mexico would be required (a) to pay US$250,000 upon regulatory acceptance; (b) to pay 1,000,000 of our shares upon regulatory acceptance, a further 1,000,000 of our shares on or before the first anniversary of regulatory acceptance, and a further 1,000,000 of our shares on or before the second anniversary of regulatory acceptance; and, (c) to incur at least US$5,000,000 in exploration and development expenditures by the fifth anniversary of regulatory acceptance. The agreement also reflected the revision to the June 20, 2005 option exercise agreement that Capstone Mexico assume all responsibility for the payment of indebtedness to Fideicomiso de Fomento Minero (“FIFOMI”) and that all payments by the Company to FIFOMI would be credited against any work expenditure required of Capstone Mexico. Financial Year Ended December 31, 2007

On February 21, 1007, Capstone reached an agreement in principle with Silverstone, whereby Capstone would sell, over the next 10 years, all of its silver production from the Cozamin mine in Mexico to Silverstone. In consideration Silverstone agreed to pay an upfront payment of US$44 million, comprised of US$20 million in cash and issuing 19,155,310 Silverstone special warrants (the “Special Warrants”), plus a deferred payment upon delivery of the silver equal to the lesser of (a) US$4.00 (subject to a consumer price adjustment after three years) and (b) the then prevailing market price per ounce of silver as quoted on the London Bullion Market Association. Each Special Warrant may be exercised into a common share of Silverstone for no additional consideration at any time provided that: (a) the common shares issued pursuant to such exercise would not result in Capstone owning, together with any other common shares under its ownership, control or direction, 20% or more of the issued and outstanding common shares after immediately giving effect to such issuance; or (b) the shareholders of Silverstone other than Capstone pass a resolution at a meeting of Silverstone’s shareholders approving any exercise that would result in Capstone owning 20% or more of the issued and outstanding common shares of Silverstone. The transaction closed on April 4, 2007.

On May 3, 2007, the Company acquired control and direction over 8,407,882 common shares (representing 13.4% of the outstanding shares at that time) of Silverstone. The Company also has special warrants to purchase an additional 10,747,428 common shares of Silverstone. The Company acquired the shares in connection with the silver purchase transaction between the Company and Silverstone.

On July 11, 2007, Capstone announced that it would make a normal course Company bid to purchase, through the facilities of the Toronto Stock Exchange, certain of its outstanding Common Shares.

In October 2007, the Company announced that it had completed the expansion and commissioning of the 120% increase in production at its Cozamin mine. Commissioning of the mine expansion from the initial 350,000 tonnes per year (1,000 tpd) to 750,000 tonnes per year (2,200 tpd) began in late May, with start up commencing in mid-June. Production in July and August averaged 1,900 tpd or 86% of planned throughput. Production in September 2007 averaged 1,977 tpd or 90% of

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planned throughput and had achieved over 2,200 tonnes on successive days. During the first week of October, the mine operated at designed throughput and onwards. Also in October 2007, an updated resource estimate was released, with the new resource estimate significantly increasing both the tonnage and contained metal within all of the resource categories, while maintaining its high grade. In November 2007, the Company acquired control and direction over an additional 3,577,670 common shares of Silverstone. The Company as a result has control and direction over a total of 24,032,340 common shares of Silverstone. The Company also had, at that time, special warrants to purchase an additional 2,747,428 common shares of Silverstone. If such warrants were exercised, the Company would have control and direction over 21.8% of the outstanding shares of Silverstone. The Company acquired the shares in connection with a financing carried out by Silverstone.

Financial Year Ended December 31, 2008

In January 2008, Capstone started the expansion of the Cozamin mine from the then current rate of 2,200 tpd or 750,000 tonnes per year (“tpy”) to 3,000 tpd or approximately 1 million tpy, a 36% increase in production. This expansion was expected to be completed by September 2008 at a total budgeted cost of US$9.5 million (including a 15% contingency).

In July 2008, Capstone made a normal course Company bid to purchase, through the facilities of the Toronto Stock Exchange, certain of its outstanding common shares.

On September 8, 2008, the Company announced that it entered into a letter agreement with Sherwood Copper Corp. to combine, by way of a plan of arrangement or other form of business combination to create a well-funded, low-cost, growth-oriented, copper company with two producing mines in mining friendly jurisdictions in North America. The transaction closed on November 24, 2008. For more information on the business combination, please “Business Combination with Sherwood Mining Corporation” below. In November 2008, Capstone announced that its Minto copper-gold mine in the Yukon was officially connected to Yukon Energy’s electrical grid. The connection of the Minto Mine to Yukon Energy’s electrical grid completes a two-year process whereby the Minto Mine and Yukon Government made contributions toward the capital cost of extending the Yukon Electrical grid approximately 80 km north from Carmacks to Minto Landing, and also involving the construction of three substations and a 27km dedicated spur line from Minto Landing to the Minto Mine at Minto’s cost. On November 21, 2008, Sherwood Copper (now Capstone) completed a transaction with Silverstone whereby Silverstone purchased all of the payable gold and silver from the Minto Mine in the Yukon, over the life of the mine starting December 1, 2008. Silverstone will purchase all of the payable gold and silver from the Minto Mine and, in exchange, Sherwood received an up-front payment from Silverstone of US$37.5 million, plus a further payment of the lesser of (a) US$300 per ounce of gold and US$3.90 per ounce of silver (subject to a 1% inflationary adjustment after three years and each year thereafter) and (b) the prevailing market price of gold and silver quoted on the London Bullion Market Association, for each ounce delivered. If production from the Minto Mine exceeds 50,000 oz of payable gold in the first two years of the agreement or 30,000 oz of payable gold per year thereafter, Silverstone will be entitled to purchase only 50% of the amount in excess of those thresholds. Kutcho Copper Corp. has also granted Silverstone a right of first refusal to purchase any gold and/or silver streams from the Kutcho Project, should Kutcho Copper elect to sell such, on terms and conditions to be agreed by mutual consent.

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In December 2008, Capstone announced results for the final 28 drill holes from its 2008 exploration program at the high grade Minto copper-gold mine in the Yukon. Highlights of results included multiple, thick intercepts of near surface, good grade copper-gold mineralization at Ridgetop, included in which are significant sub-intervals of much higher grades. Business Combination with Sherwood Copper Corporation

On September 8, 2008, the Company announced that it entered into a letter agreement with Sherwood Copper Corp. (“Sherwood”) to combine, by way of a plan of arrangement or other form of business combination. The two companies agreed to combine on an “at-market” basis whereby each Sherwood shareholder will receive 1.566 shares of Capstone (based on the 20-day volume weighted average share price of the two companies). The transaction was carried out by way of statutory plan of arrangement of Sherwood whereby Capstone acquired all of the issued shares of Sherwood and Sherwood became a wholly-owned subsidiary of Capstone (the “Capstone Arrangement”). Full details of the offer were included in the formal arrangement agreement and Management Information Circular of Sherwood filed with the regulatory authorities and mailed to Sherwood shareholders in accordance with applicable securities laws. Under the Capstone Arrangement, Capstone acquired all of the issued and outstanding shares of Sherwood in exchange for Capstone shares on the basis of 1.566 Capstone shares for each one Sherwood share. The Capstone Arrangement was an “at market” transaction with no premium to either party, based on the 20-day volume weighted average price of each of Capstone and Sherwood to September 5, 2008. Based on the number of Sherwood shares outstanding as at September 17, 2008, the transaction involved the issuance of approximately 84 million Capstone shares, which equated to approximately 105% of Capstone’s shares outstanding. Each outstanding option, warrant, convertible and exchangeable security and any other right to acquire common shares of Sherwood entitled the holder thereof to receive upon the exercise, exchange or conversion thereof 1.566 common shares of Capstone in lieu of one common share of Sherwood and on the same other terms and conditions as the original option, warrant, convertible or exchangeable security or other right to acquire the common share of Sherwood; provided always that holders of the 5% convertible unsecured debentures due March 31, 2012 of Sherwood shall be entitled to tender the debentures held by them for repurchase by Capstone upon Capstone making such offer as required by their terms, all in accordance with terms and subject to the conditions as currently exist under the trust indenture dated as of February 28, 2007 between Sherwood and Computershare Trust Company of Canada, as trustee. A special meeting of shareholders of Sherwood was held on November 14, 2008 which approved the proposed transaction. Completion of the transaction was subject to certain customary conditions, including receipt of all necessary court and shareholder approvals and holders of not greater than 10% of the outstanding common shares of Sherwood shall have exercised dissent rights to the transaction. On November 24, 2008, Sherwood and Capstone completed an arrangement under Section 192 of the Canada Business Corporations Act whereby Capstone, through its wholly-owned subsidiary, 7045204 Canada Inc. ("Subco"), acquired all of the issued and outstanding shares of Sherwood, thereby affecting a Change of Control of Sherwood. Under the transaction, Sherwood and Subco amalgamated to form a new corporation named "Capstone Mining North Ltd.".

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Repurchase of Convertible Debentures

In February 2007, Sherwood issued C$43.6 million in convertible debentures (the “Debentures”) pursuant to a short form prospectus offering. On December 22, 2008, the Company sent a letter to all Debentureholders informing the holders that the Company was offering to repurchase their outstanding Convertible Debentures for C$1,025.62 for each C$1,000 principal amount of such Debentures, being equal to the aggregate of (i) 101% of the principal amount of the Debentures and (ii) all accrued and unpaid interest thereon up to but excluding the Payment Date. On January 22, 2009, the Company repurchased C$38,871,000 of the outstanding Debentures. There are currently C$4,729,000 convertible debentures still outstanding.

Subsequent to December 31, 2008

On January 1, 2009, Capstone and Capstone Mining North Ltd. were amalgamated as one company under the name Capstone Mining Corp.

On January 16, 2009, Capstone completed a US$40 million corporate revolving term credit facility with The Bank of Nova Scotia (the "RT Facility"). Under the terms of the RT Facility, the funds are re-drawable over a three year term, subject to a US$8 million reduction every 6 months commencing on the first anniversary, and it attracts an interest rate of US LIBOR plus 3.5% (adjustable in certain circumstances). US one-month LIBOR rates have averaged between 0.3% and 0.5% so far in 2009.

In January 2009, the Company announced that its 2009 exploration drilling at the Minto Mine commenced. The principal exploration objectives for 2009 include resource definition drilling at the Area 118 and Ridgetop deposits in support of Capstone’s proposed Phase IV expansion study (targeting increased daily throughput of 4,000-5,000 tpd), and exploration drilling at the 2008 high grade Copper Keel discovery.

In February 2009, Capstone reported:

• that its Minto and Cozamin mines had produced 74.1 million pounds of copper in concentrates in 2008. Capstone further reported achieving commercial production, effective January 1, 2009, of the most recent expansions at its Cozamin mine in Mexico and Minto Mine in Canada;

• the results of an independent NI 43-101 compliant mineral resource estimate for the three known deposits that comprise the high grade Kutcho Project. The update incorporated the 2008 drill intercepts that were designed to better define the high grade mineralization within the Main deposit and provides the basis for evaluating options for the optimal development of the Kutcho Copper Project, including smaller tonnage, lower cost options and consideration of both open pit and/or underground extraction;

• the discovery of another high grade copper-gold zone at its Minto Mine in the Yukon, the 5th

such discovery since acquiring the project in June 2005; and

• an updated, independent NI 43-101 compliant mineral resource estimate for the Cozamin Mine was completed. This estimate includes the results of an extensive in-fill and step out drill program completed in 2008 designed to expand and upgrade the previously announced mineral resources, and includes mineral resources not only for the principal San Roberto area of the Cozamin Mine, but also a first time estimate for the newly defined San Rafael area, approximately 500m along strike to the east of San Roberto.

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On March 12, 2009, Capstone announced that it entered into a voting agreement with Silver Wheaton Corp. whereby Capstone has agreed to vote its shares in favour of the proposed plan of arrangement between Silverstone and Silver Wheaton whereby Silver Wheaton will acquire all of Capstone’s shares and special warrants in Silverstone at a ratio of 0.185 shares of Silver Wheaton per common share or special warrant of Silverstone held by Capstone.

DESCRIPTION OF THE BUSINESS

General

Principal Products and Operations

The Company’s principal products and sources of sales are copper, zinc, lead, gold and silver in concentrates. In 2006 through 2007, the Cozamin mine accounted for all of the Company’s production of concentrates, while Minto mine contributed to concentrate production from November 24, 2008 onwards. Technical information regarding both the Cozamin Mine and the Minto Mine is contained in the section titled “Material Properties – Cozamin Mine” and “Material Properties – Minto Mine” below. Information related to the Company’s segmented information is set forth in Note 14 to the Company’s Consolidated Financial Statements for the year ended December 31, 2008.

The following tables are summaries of the actual operating statistics for 2008 and forecast for 2009:

Operating Statistics

Minto Mine Cozamin Mine

Production (contained in concentrates)

- Copper (000’s lbs) 47,687 26,372 - Gold (oz) 1 30,758 - - Zinc (000s lbs) 9,710 - Lead (000s lbs) 6,442 - Silver (oz) 259,824 1,299

Mining

- Waste (tonnes) 8,370,800 - - Ore (tonnes) 1,158,520 - - Total material mined (tonnes) 9,529,320 825,909

Milling

- Tonnes processed 809,426 833,176 - Tonnes processed per day 2,218 2,282 - Copper grade (%) 2.91 1.63 - Gold grade (g/t) 1 1.14 - - Zinc (%) 1.31 - Lead (%) 0.55 - Silver grade (g/t) 11.8 65.3

Recoveries

- Copper (%) 91.9 88.3 - Gold (%)1 77.9 - - Zinc (%) 40.3 - Lead (%) 63.7

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Minto Mine Cozamin Mine

- Silver (%) 84.6 74.2

Concentrate

- Dry tonnes produced 53,148 53,293 - Copper grade (%) 40.7 22.4 - Silver grade (g/t) 152 572 - Gold grade (g/t) 1 16.5 - - Zinc (%) - 41.5 - Lead (%) - 62.1 Cash cost/payable pound of Copper2 US$1.15 US$1.44

1 Gold is not assayed on site, resulting in a significant lag in receiving this data. 2 This is a non-GAAP performance measure; please see Non-GAAP Performance Measures of the Year End MD&A. 3 The cash cost per pound of payable metal measure shown is an estimate of the cash cost on a production basis for 2008. Forecast

Cozamin Minto Total

Tonnes milled (millions) 1.0 1.0 2.0

Copper grade (%) 2.0% 3.1% 2.6%

Copper recovery (%) 91% 93% 92%

Contained copper (millions pounds) 35 to 40 60 to 65 95 to 105

Total cash cost per pound of payable copper US$1.00 US$1.00 US$1.00 Note: all numbers approximate During the year ended December 31, 2008, net revenue of US$106.0 million was generated on the sale of 53,061 dmt of copper concentrates and 2,571 dmt of zinc concentrates. Payable metals sold were 42.0 million pounds of copper, 2.0 million pounds of zinc, 24,344 ounces of gold and 267,873 ounces of silver.

The Company’s principal market (buyer) for copper, zinc and lead concentrates from the Cozamin and Minto mines are open global markets. The concentrates are delivered through intermediaries to customers worldwide by ship.

The Company sold all of its silver production from the Cozamin Mine over a 10 year period to Silverstone in consideration for an upfront payment of US$44 million of which US$20 million was received in cash and US$24 million in 19,155,310 special warrants of Silverstone which are convertible into common shares of Silverstone at no additional cost. In addition, Silverstone will pay for each ounce of refined silver from the mine the lesser of US$4.00 per ounce of silver and the prevailing market price per ounce of silver.

The Company sold all of its gold and silver production from the Minto Mine over the life of the mine to Silverstone in consideration for an upfront payment of US$37.5 million, plus a further payment of the lesser of (a) US$300 per ounce of gold and US$3.90 per ounce of silver (subject to a 1% inflationary adjustment after three years and each year thereafter) and (b) the prevailing market price of gold and silver quoted on the London Bullion Market Association, for each ounce delivered. If production from the Minto Mine exceeds 50,000 oz of payable gold in the first two years of the agreement or 30,000 oz of payable gold per year thereafter, Silverstone will be entitled to purchase only 50% of the amount in excess of those thresholds.

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Kutcho Copper Corp. has also granted Silverstone a right of first refusal to purchase any gold and/or silver streams from the Kutcho Project, should Kutcho Copper elect to sell such, on terms and conditions to be agreed by mutual consent.

Competitive Conditions

The mining industry is intensely competitive, particularly in the acquisition of additional reserves and resources in all of its phases of operation and the Company competes with many companies possessing similar or greater financial and technical resources.

The Company’s competitive position is largely determined by its costs compared to other producers throughout the world and its ability to maintain its financial integrity through the lows of the metal price cycles. Costs are governed to a large extent by the location, grade and nature of the Company’s mineral reserves as well as by operating and management skills. In contrast with diversified mining companies, the Company focuses on copper production, development and exploration, and is therefore subject to unique competitive advantages and disadvantages related to the price of copper and to a lesser extent, the price of base metal by-products. If copper prices substantially increase, the Company will be in a relatively stronger competitive position than diversified mining companies that produce, develop and explore for other minerals in addition to copper. Conversely, if copper prices substantially decrease, the Company will be at a competitive disadvantage to diversified mining companies.

Employees

The number of personnel employed by at the end of the most recently completed financial year was 887 compared to 526 at the end of the previous quarter, of which approximately 101 were contractors.

Environmental Protection

The Company’s operations (Cozamin and Minto) and development project (Kutcho) are in Canada and Mexico and are subject to national and local laws and regulation in respect of the construction, operating standards for the mine and, once mine closure occurs, the eventual abandonment and restoration costs for the site. Since both of the operating mines and the proposed Kutcho Project are relatively smaller tonnage, higher grade operations, the overall financial impact of the environmental protection requirements is relatively minor relative to the overall financial performance of the Company. Each operation is subject to an asset retirement obligation review at year end, which assesses the abandonment and restoration cost for the operation at that point in time, and any changes are reflected in the balance sheet and could flow through the earnings statement. However, while the financial obligations will increase as disturbance increased, given the relatively modest amounts involved, such impacts are likely to be relatively minor from a capital and earnings perspective. Since the Kutcho Project is currently unpermitted, the environmental protection requirements could affect the Project’s advancement – both by delaying or preventing project approvals and development and by adding financial burdens to the Project. However, British Columbia is a mature permitting regime and the environmental protection requirements are expected to be appropriate for a mine on the proposed scale of the Kutcho Project. Overall, the Company’s assets are in mature and stable mining jurisdictions and the environmental protection requirements are not anticipated to be a significant impediment to Capstone carrying out its business, nor should they result in an unsustainable burden on the Company’s earnings. This likely gives the Company a competitive edge over some other mining company’s with assets in less stable and mature mining regions, where changing requirements could negatively affect their projects.

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Foreign Operations

The Company’s principal asset is the Minto Mine in Canada, which generates approximately 60% of the Company’s sales. However, all of its production (copper concentrates) is sold to overseas markets, primarily in Asia, and its sales are commodities (copper, gold and silver) priced in US dollars. Approximately 40% of the Company’s production comes from the Cozamin Mine in Mexico. The Cozamin Mine’s product (copper, zinc and lead concentrates) are sold in US dollars to overseas markets and approximately 60-70% of the operating costs are Mexico Peso driven, while the remainder are driven by world prices, especially the US dollar. As a result, the Cozamin Mine is relatively sensitive to the US$:Mexican Peso exchange rate. Risk Factors

An investment in securities of the Company involves significant risks which should be carefully considered by prospective investors before purchasing such securities. In addition to the other information set forth elsewhere in this Annual Information Form, the following risk factors should be carefully reviewed by prospective investors: Price Risk

The Company is exposed to commodity price risk given that its revenues are derived from the sale of metals, the prices for which have been historically volatile. It manages this risk by entering into forward sale agreements with various counterparties, both as a condition of certain debt facilities as well as to mitigate price risk when management believes it a prudent decision. Currently the Company has in place derivative contracts for the sale of copper from both its Minto and Cozamin mines. Additionally, it has sold forward to Silverstone the gold and silver production from the Minto mine and silver production from the Cozamin mine. Liquidity Risk The Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company maintains adequate cash balances and credit facilities in order to meet short and long term business requirements, after taking into account cash flows from operations and believes that these sources will be sufficient to cover the likely short and long term cash requirements. The company’s cash is invested in business accounts with quality financial institutions and which is available on demand for the Company’s programs, and is not invested in any asset backed commercial paper. Trade Credit Risk

The Company will be exposed to trade credit risk through its trade receivables on concentrate sales. The Company manages this risk dealing with a number of different trade creditors and by requiring provisional payments of 90 percent of the value of the concentrate shipped. The Company enters into derivative instruments with a number of counterparties. These counterparties are large, well diversified multinational corporations, and credit risk is considered to be minimal.

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Foreign Exchange Risk

The Company is exposed to foreign exchange risk as the Company’s operating costs will be primarily in Canadian dollars and Mexican Pesos, while revenues will be received in US dollars, hence any fluctuation of the US dollar in relation to these currencies may impact the profitability of the Company and may also affect the value of the Company’s assets and liabilities. The Company currently does not enter in to financial instruments to manage this risk but the draws on debt facilities are made in US dollars to mitigate the risk on loan repayments if available.

Derivative Instrument Risk

The Company manages its exposure to fluctuations in metal prices by entering into derivative instruments approved by the Company’s Board of Directors. The Company does not hold or issue derivative instruments for speculation or trading purposes. These derivative instruments are mark to market at the end of each period and may not necessarily be indicative of the amounts the Company might pay or receive as the contracts are settled.

Interest Rate Risk

Currently the Company’s long term liabilities are based on both fixed and variable interest rates. The Company is exposed to interest rate risk on its variable rate debt facilities. Variable interest rates are based on both US dollar and Canadian dollar London Inter-bank Offered Rates (“LIBOR”) plus a fixed margin. The Company does not enter into derivative contracts to manage this risk.

Reserve and Resource Risk

Reserve and resource figures are estimates, and no assurance can be given that the anticipated tonnage and grades will be achieved or that the indicated level of recovery will be realized. Metal price fluctuations may make the ore reserves uneconomical and require the Company to write down assets or discontinue operations.

Political and Country Risk

Political and related legal and economic uncertainty may exist in countries where the Company may operate. The Company’s mineral exploration and mining activities may be adversely affected by political instability and changes to government regulation relating to the mining industry. Other risks of foreign operations include political unrest, labour disputes, invalidation of governmental orders and permits, corruption, war, civil disturbances and terrorist actions, arbitrary changes in law or policies of particular countries, foreign taxation, price controls, delays in obtaining or the inability to obtain necessary environmental permits, opposition to mining from environmental or other non-governmental organizations, limitations on foreign ownership, limitations on the repatriation of earnings, limitations on mineral exports and increased financing costs. These risks may limit or disrupt the Company’s projects, restrict the movement of funds or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation. Presently, all of the Company’s mineral properties are located in Mexico. While the Company believes that Mexico represents a favourable environment for mining companies to operate, there can be no assurance that changes in the government or laws or changes in the regulatory environment for mining companies or for non-domiciled companies will not be made that would adversely affect the Company. Title Risk

Although the Company has exercised the usual due diligence with respect to determining title to properties in which it has a material interest, there is no guarantee that title to such properties will

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not be challenged or impugned. The Company’s mineral property interests may be subject to prior unregistered agreements or transfers and title may be affected by undetected defects. Surveys have not been carried out on the majority of the Company’s mineral properties and therefore, in accordance with the laws of the jurisdiction in which such properties are situated, their existence and area could be in doubt. Dependence on Management The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management’s services would be unavailable for any reason, a disruption to the operations of the Company could result, and other persons would be required to manage and operate the Company. Environmental Regulations The Company’s operations are subject to various laws and regulations governing the protection of the environment, exploration, development, production, taxes, labour standards, occupational health, waste disposal, safety and other matters. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a direction of stricter standards, and enforcement, and higher fines and penalties for non-compliance. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations. The Company intends to fully comply with all environmental regulations. Economic Conditions Unfavourable economic conditions may negatively impact the Company’s financial viability. Unfavourable economic conditions could also increase the Company’s financing costs, decrease net income, limit access to capital markets and negatively impact any of the availability of credit facilities to the Company. Material Mineral Properties

The Company's material mineral properties are (i) Cozamin project is located in the Morelos Municipality of the Zacatecas Mining District near the southeastern boundary of the Sierra Madre Occidental Physiographic Province in north-central Mexico; (ii) Minto Mine located in the Whitehorse Mining District, Yukon Territory; and (iii) 100% owned Kutcho copper-gold project located in the Liard Mining Division of Northern British Columbia.

Cozamin Project (Mexico) – Technical Information

Technical information contained in this Annual Information Form was extracted from a technical report which can be found under the Company’s profile on SEDAR. This report is entitled the “Technical Report on the Cozamin Project, Zacatecas State, Mexico” dated December 31, 2007 and prepared by Michelle S. Stone, Ph.D., P.Geo. and Robert B. Barnes, B.Sc., M.B.A., P.Eng. of the Company and Jenna Hardy, M.Sc., M.B.A., P.Geo. of Nimbus Management Ltd., independent geologists and “qualified persons” for the purposes of NI 43-101.

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Some of the information contained in this technical report has been updated for events occurring subsequent to the date of the technical report. The updated information has been prepared by or under the supervision of Robert Barnes, P.Eng., Vice President Operations (Mexico) and Hugh Willson, Vice President Exploration (Mexico) for the Company. See “Experts – Names of Experts” and “Experts – Interests of Experts”. Mr. Barnes and Mr. Willson are “Qualified Persons” for the purposes of NI 43-101. Property Description, Location and Access

The Cozamin mine (“Cozamin”) is located in the Morelos Municipality of the Zacatecas Mining District near the southeastern boundary of the Sierra Madre Occidental Physiographic Province in north-central Mexico. The project area is located approximately 3.8 km from the city of Zacatecas. Cozamin is accessible by two-wheel drive vehicles via paved roads to the project area boundary where gravel roads in good condition provide access to the mine and most of the surrounding area.

The Cozamin mine consists of 35 mining (exploitation) concessions covering approximately 2,898.1 hectares. Recent rules enacted for mining concessions under Mexican Mining Law extended their term of existence to 50 years.

COZAMIN CLAIM STATUS MARCH 2009

DESCRIPTION TITLE NAME ON CLAIM HECTARES

NAME NUMBER TITLE CLASSIFICATION 001 PLATEROS 188806 CAPSTONE EXPLOITATION 9.0000 002 SANTA LUCIA 195187 CAPSTONE EXPLOITATION 18.7267 003 SAN NICOLÁS 200150 CAPSTONE EXPLOITATION 5.3697 004 SAN JACINTO FRAC. 1 202437 CAPSTONE EXPLOITATION 78.7955 005 SAN JACINTO FRAC. 2 202438 CAPSTONE EXPLOITATION 17.7846 006 STA. BARBARA FRAC. 4 202628 CAPSTONE EXPLOITATION 0.4585 007 STA. BARBARA FRAC. 2 202645 CAPSTONE EXPLOITATION 9.5938 008 GABRIELA II 203364 CAPSTONE EXPLOITATION 18.9438 009 PLATEROS DOS 208838 CAPSTONE EXPLOITATION 50.0000 010 LA LIGA 217237 CAPSTONE EXPLOITATION 20.1817 011 SAN BONIFACIO 217858 CAPSTONE EXPLOITATION 40.8518 012 STA. BARBARA FRAC. 1 218259 CAPSTONE EXPLOITATION 82.9691 013 LA SECADORA 219630 CAPSTONE EXPLOITATION 9.0000 014 LA PROVIDENCIA 223954 CAPSTONE EXPLOITATION 60.0000 015 UNIFICACIÓN CARLOS 224657 CAPSTONE EXPLOITATION 542.5265 016 ORLANDO 225620 CAPSTONE EXPLOITATION 11.7899 017 SAN LUIS I 223325 CAPSTONE EXPLOITATION 290.6121 018 SAN LUIS II 224466 CAPSTONE EXPLOITATION 133.8409 019 SAN LUIS II FRAC. I 224467 CAPSTONE EXPLOITATION 2.1713 020 SAN LUIS II FRAC. II 224468 CAPSTONE EXPLOITATION 2.4654 021 ACUEDUCTO 224469 CAPSTONE EXPLOITATION 13.5590 022 ACUEDUCTO FRAC. 1 224470 CAPSTONE EXPLOITATION 9.5980 023 LA PARROQUIA 224471 CAPSTONE EXPLOITATION 1.2601 024 LA GLORIA 224474 CAPSTONE EXPLOITATION 4.1372 025 LA SIERPE 224503 CAPSTONE EXPLOITATION 4.2638 026 LA SIERPE FRAC. 1 224504 CAPSTONE EXPLOITATION 0.0108 027 SAN JUDAS 226699 CAPSTONE EXPLOITATION 14.5989 028 EL LUCERO 226834 CAPSTONE EXPLOITATION 145.3505 029 LORENA * 227712 CAPSTONE EXPLOITATION 318.5825

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DESCRIPTION TITLE NAME ON CLAIM HECTARES

NAME NUMBER TITLE CLASSIFICATION 030 SARA 228086 CAPSTONE EXPLOITATION 231.9436 031 EL RANCHITO 228343 CAPSTONE EXPLOITATION 11.2997 032 EL RANCHITO F. 1 228344 CAPSTONE EXPLOITATION 0.6189 033 LA VETA 228345 CAPSTONE EXPLOITATION 1.4533 034 ANABEL 229238 CAPSTONE EXPLOITATION 310.771 (035) CECILIA 230921 CAPSTONE EXPLOITATION 425.6022 TOTALS 35 2,898.1308 (36) XIMENA E.27627 Not yet granted Under review

The Company is not aware of any significant environmental liabilities related to the current Cozamin mine.

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PROPERTY LOCATION MAP

0 200 400

Au-Ag Mine Districts and Projects Along The

Sierra Madre

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MINERAL CONCESSIONS MAP

CAPSTONE GOLD S.A. DE C.V.

OTHERS OWNERS0 2000mts

E- 7

44 0

00

E- 7

42 0

00

N- 2 522 000

N- 2 524 000

E- 7

46 0

00

E- 7

48 0

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50 0

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S a n R o b e r t o S h a f t

Z a r a g o z a S h a f t

M i l l

M a l a N o c h e S y s t e m

S a n R a f a e l S h a f t S a n B e r n a b e

S h a f t

Capstone Gold, S.A.

Other Owners

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Property Ownership and Terms of Agreement

On January 21, 2004, Capstone, through its 100% owned subsidiary Capstone Gold S.A. de C.V., entered into an option agreement with Grupo Minero Bacis S.A. de C.V. (“Bacis”) to acquire the Cozamin project. In June 2006, Capstone acquired 100% interest in the project subject to a 3% Net Smelter Return/tonne of ore. In February 2007 Capstone paid Bacis the equivalent of one million shares as final settlement of the deal.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Access to the Cozamin project is by paved roads from the city of Zacatecas to the property boundary. Gravel roads in good condition provide access to the office, mine and plant area, and most other parts of the property. The Cozamin mill, in the west-central part of the property, is situated approximately 3 km north-northwest of the Zacatecas city centre.

Zacatecas is the largest city in Zacatecas State, Mexico, with a metropolitan population of approximately 260,000. An international airport services the city with multiple flights daily to and from Mexico City. Local residents of Zacatecas have a strong mining tradition and provide the Cozamin mine with a knowledgeable source of labour. Drilling and mining contractors are available in Durango, Zacatecas, Fresnillo and other areas of Mexico.

The Cozamin mine is located in the Western Sierra Madre Physiographic Province (Sierra Madre Occidental Province) near the boundary with the Mesa Central Province (Central Plateau Province). The Zacatecas area is characterized by abrupt north-northwesterly trending mountains with the Sierra Veta Grande to the north and the Sierra de Zacatecas to the south. The city of Zacatecas is located in a fault line valley that separates the two sierras (Ponce and Clark, 1988). The elevation in the Zacatecas area is approximately 2,400m, and the local relief is approximately 200m.

The climate in the region is semi-arid with maximum temperatures of approximately 30ºC during the summer season and minimum temperatures in the winter season producing freezing conditions and occasional snow. The rainy season extends from June until September. The average annual precipitation is approximately 500 mm.

The Zacatecas area is located between forested and sub-tropical regions to the southwest and desert conditions to the northeast. The climate in the region is semi-arid. Vegetation consists of natural grasses, mesquite or huizache, crasicaule bushes and a variety of nopales. Standing bodies of water are dammed as most streams are intermittent.

Capstone owns and operates a 3000 tpd process plant, an operational underground mine and headframe, laboratory and several service buildings at the Cozamin mine site. The buildings are connected to the local power grid. The area has sufficient water for exploration and mining.

Tailings are deposited into the existing tailings dam located immediately south and east of the mill facilities and process buildings. The updated plan is to initially store a total of 9.5 million tonnes of tailings in this facility. The second lift of expansion was a 6m lift constructed on a modified centre line method which will store approximately another 760,000 m3. This second lift will provide 14 months containment at the expanded processing rate before another lift will be required. A third 6m lift will be constructed in 2009. Lifts are built based on both capacity requirements and construction requirements (i.e. the rainy season). The ultimate capacity of this tailings area was in excess of 10 million tonnes during design, leaving in excess of 8.5 M tonnes of available capacity as of December 31, 2008.

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Power Supply and Distribution

Electrical energy is supplied to Cozamin by the Federal Electrical Commission, via a 13,200v line from Zacatecas totaling 4,300kw. Power is distributed throughout the property at 13,200v. There are two main substations - one at the plant and one near the mine shaft. The plant substation services the process plant, crushing plant and the laboratory. The motors in the plant are primarily 480 volts except the two 14 ft x 12 ft primary grinding mills and the blowers for the flotation circuit which have 4,160 volt motors.

The mine substation on surface supplies power to the hoist at 2,300v, 480v to the mine compressors and pumps to plant make up water tanks and 220/110v for offices and surface infrastructure. Power is distributed underground at 13,200v to two main substations on Levels 8 and 10. The main distribution voltage underground is 4,160v. The Level 8 substation has 13,200/4160v transformers and 4,160/480v transformers which supply power at 480v to operating equipment. The Level 10 substation is supplied at 13,200v, which is then transformed and supplied to the primary for distribution by a 1,500 kva 13,200/4160v transformer, and then to remote 500 kva substations at 4,160/440v transformers. The 13,200v supply line feeds the process water return pumps, the fresh water pump in the San Rafael mine and the main ventilation fans through 13,200/480v transformers. The total load for the mine and plant operating at 3000 tpd is 5,500 kW. Additional required load is provided by a generator that was installed in 2008 during the tonnage expansion. Two generators were installed with one operating, and one on standby.

Water Supply

The main fresh water supply for the plant is obtained from the San Roberto and San Rafael mines. Reclaimed water is also recycled from the tailings disposal area. There is a power line and 4” steel waterline from the San Rafael mine to the process plant. Any water infiltrating from the toe of the tailing dam is returned to the dam and recycled to the plant.

Mine potable water is presently supplied by a potable water line passing near the property from Zacatecas to Veta Grande. Two head tanks are installed to supply potable water by gravity to all areas of the property. Mine drill water is supplied from the water settling tank near the San Roberto shaft.

History

In pre-Hispanic times, the area was inhabited by Zacatecan Indians who mined native silver from the oxidized zone of argentiferous vein deposits in the Zacatecas Mining District. In 1546, Juan de Tolosa, guided by a local Indian, arrived in Zacatecas (then Lomas de Bracho) to examine argentiferous occurrences. In 1548 production commenced at 3 mines: the Albarrada mine on the Veta Grande system (March), and the San Bernabe mine (June) and Los Tajos del Panuco (November) on the Mala Noche vein system. The initial operations worked only the oxides for silver and some gold, and later the sulfide zones were worked for base and precious metals.

During the Mexican Revolution (1910-1917), mining was essentially halted with flooding and cave-ins limiting access. Foreign companies worked the mines for base metals from 1936 to 1948 but the lack of electric power, labour problems and low metal prices resulted in closure of unprofitable mines. From 1972, Consejo de Recursos Minerales (“CRM”) worked mines in the El Bote, La Purisima and La Valencia zones.

A number of old workings are located throughout the project area, but accurate records of early production are not available. Historic production from the Zacatecas district is estimated by the CRM (1992) to be 750,000,000 ounces of silver from 20 million tonnes grading over 900 g/t silver

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and approximately 2.5 g/t gold. Lead, zinc and copper have also been recovered but the production and grades were not estimated.

Minera Cozamin was established in 1980 by Penoles to consolidate concession holdings over the Mala Noche vein. Penoles established a 250 tpd mill before vending the property to a group of miners headed by Mr. Jacek Zanewicki. In 1996 the property was acquired by Bacis for US$6.8 million. Bacis expanded the mill to a 750 tpd flotation plant, and processed 250,000 tonnes of ore grading 1.2% copper, 90 g/t silver, 0.5 g/t gold, 1.8% zinc and 0.6% lead. A significant reduction in metal prices occurred between 1997 and 1999, and Bacis was forced to close the underground mine. The crushing unit was moved off the property but the remainder of the mill was kept intact.

Capstone obtained an option to acquire the Cozamin property in January 2004. Capstone received the right to acquire an undivided 90% beneficial interest in five advanced phase properties (Cozamin, Promontorio, Montoros, Copala and Claudia). By June 2006, Capstone had acquired 100% interest in the Cozamin project subject to a 3% NSR.

Geological Setting

The Zacatecas Mining District covers a belt of epithermal and mesothermal vein deposits that contain silver, gold and base metals (copper, lead and zinc) in the southern Sierra Madre Occidental Physiographic Province in north-central Mexico. The dominant structural features that localize mineralization are of Tertiary age, and are interpreted to be related to the development of a volcanic centre and to northerly trending basin-and-range structures.

The Zacatecas Mining District occurs in a structurally complex setting, associated with siliceous subvolcanic and volcanic rocks underlain by sedimentary and metasedimentary rocks. The geologic units of the Zacatecas area include Triassic metamorphic rocks of the Zacatecas Formation and overlying basic volcanic rocks of the Upper Jurassic or Lower Cretaceous Chilitos Formation.

Property Geology and Mineralization

The veins at Cozamin are hosted mainly in volcanic and sedimentary rocks of the Chilitos Formation and partly in Triassic metasedimentary rocks of the Zacatecas Formation. The principal vein on the property, the Mala Noche, occupies a series of anastamozing faults and has been traced on surface for more than 5 km. The Mala Noche vein strikes east-west and dips on average at 60º to the north.

Mineralization in the Mala Noche vein at Cozamin is interpreted to have been episodic. Early epithermal alteration and mineralization have been superimposed and replaced by higher temperature pyrrhotite and pyrite dominant mineralization. This later episode of mineralization contains a copper-silver phase that provides the economic values of most interest at Cozamin. This phase of mineralization is interpreted to have a mesothermal origin that is associated with a telescoping, intrusive related, hydrothermal system.

Exploration Concept

The area with the largest historical workings at Cozamin, the San Roberto mine, was selected as the principal exploration target. Widely spaced exploration drill holes by prior operators suggested that mineralization in the Mala Noche vein extended at least 100m below the historical workings and contained significantly higher copper grades (with undiminished silver grades) than encountered in the historical production. Surface exploration drill holes by Capstone subsequently confirmed these higher copper grades over significant mineable widths. This exploration drilling

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demonstrated that the higher grade copper-silver dominant mineralization was continuous along strike for 1.4 km and extended more than 350m below the historic workings.

Status of Exploration, Development and Operations

Exploration at Cozamin commenced in 2004. By October 2005, the first resource estimate had been completed and a pre-feasibility study was underway. Meanwhile, Capstone commenced underground development and rehabilitation of the processing plant at Cozamin. Additional underground drilling through to mid-2006 increased the resources at Cozamin and indicated that the copper-silver-lead-zinc ore was continuous and mineable over a strike length of at least 1.4 km and 300m depth. In June 2006, refurbishment of the plant was completed and commercial production commenced in September 2006 at 1,000 tonnes per day (tpd). The first concentrates were shipped in November 2006.

An operational expansion to 3000 tpd was announced in late 2007. Phase IV and V drill programs subsequently commenced to increase and upgrade the current resources. Sampling and Analysis

Exploration completed to date at the Cozamin project has focused on defining the copper-silver-lead-zinc mineralization associated with the Mala Noche vein in and around the historic workings of the San Roberto and San Rafael mines. Additional exploration along strike and down dip is warranted.

Diamond Drill Core Sampling

A total of 16,308 drill core samples have been collected from the 150 surface and 216 underground diamond drill holes.

These samples were collected from the Mala Noche vein and surrounding rock over a total strike length of approximately 3.5 km and a 925m vertical extent. Samples selected for assay from each hole consisted of the Mala Noche vein, sulfide-bearing hangingwall and footwall quartz veins, and non-mineralized rock surrounding these intervals. Sample intervals vary from 0.11m to a maximum of 3m in the surface exploration holes, and from 0.2m to 3.05m in the underground drill holes. Sample intervals in mineralized zones do not exceed 1m and are typically 0.5m in length.

Underground Chip Sampling

A total of 18,939 underground chip samples were used in preparing the updated resource estimate. These samples were collected from Levels 8-550, 8.3, 8.6, 8-400, 9C, 9W, 9.3, 9.6, 10, 10.3, 10.6 and 11 in the San Roberto mine. Sample lines vary in length from 1.1m to 22.00m and are generally oriented perpendicular to the vein strike. Individual sample intervals range from 0.20m to 1.8m in length (0.8m average). Line spacing is approximately every 4m in sampled areas.

Sample Security and Analysis

No employees, officers, directors or associates of Capstone were involved in preparation of the drill core samples used in the February 2009 resource estimate. Channel samples were prepared by Capstone employees for analysis at the on site laboratory. Duplicate quality control samples (coarse crush and pulp) were also prepared by Capstone employees for analysis at an off site laboratory.

At Cozamin in all the drill programs starting in March 2004, Capstone has used a principal lab to prepare and analyze core samples. A second lab has been used to verify the work of the primary

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lab by analyzing duplicate pulp samples. In 2008, drill core samples were sent to ALS Chemex in Hermosillo, Mexico, for preparation. The pulps were shipped directly to Canada for analysis by ALS Chemex in Vancouver. Duplicate samples were sent to SGS Toronto for checking.

Blanks, standards and pulp duplicates were inserted into the series of underground drill core samples submitted for assay. Typically, standard and blank samples were placed at the start and finish of the sampled interval within a hole. Approximately two sample intervals per hole were selected to have pulp duplicates prepared, and another two intervals per hole were selected for preparation of core duplicates. Additional quality control samples were inserted into the sequence as deemed necessary, i.e. a blank inserted in the sample sequence after a sample expected to have very high grade to monitor the quality of the assays.

In 2008, QA/QC sampling for the combined surface and underground drilling totalled: 328 pulp standard samples, 242 pulp duplicate samples, 318 rock duplicate samples, and 278 blank samples. Overall, approximately 1 in every 16 samples submitted for assay was used for quality control. In addition, ALS Chemex completed 1,705 laboratory standard analyses and 2,588 analyses of blanks were completed.

Underground Channel Sample Preparation and Analytical Procedures

The underground channel samples were analyzed at the on-site lab at Cozamin. Gold was determined by fire assay with an atomic absorption finish. Copper, silver, lead, zinc and iron were analyzed by aqua regia digestion with an atomic absorption finish.

Blanks, standards and pulp duplicates were inserted into the series of underground samples submitted for assay. Standard and blank samples are inserted into the sample sequence approximately 1 every 15 samples, and pulp duplicates every 20 samples. Additional quality control samples were inserted into the sequence as deemed necessary.

Resource Estimate for the Cozamin Project

During 2008, the company diamond drilled a total of 39,430m at Cozamin. Of this, 30,394m in 108 holes were drilled from surface and 9,035m in 23 holes were drilled from underground drill stations. The surface drilling was mostly focused on the San Rafael zone located about 500m east of the main San Roberto deposit. Both the underground and surface drills were used for infill drilling in the San Roberto deposit. The 2008 drilling brings the total drilling at Cozamin by the Company to 105,261m in 367 holes. The mineral resource estimate presented in this report is derived from the February 18, 2009 resource estimate that was prepared by Robert Sim, P.Geo., a qualified person within the meaning of National Instrument 43-101. Grades for copper, silver, lead, zinc and gold were estimated using 1m composites with a nominal block size measuring 10mx3mx3m, with the long axis oriented parallel to the E-W strike of the deposit. Grade estimates are made using ordinary kriging with parameters derived from the geostatistical properties present in the underlying database. Bulk densities are estimated into model blocks using the inverse distance (ID2) interpolation method. Resources are classified in accordance with the CIM definition standards for mineral resources. The base case for the new resource using a copper cut-off of 1.15% totaled 7.8 million tonnes grading 2.00 % copper, 1.15% zinc, 0.29% lead, and 68.2 g/t silver. This resource estimate will be incorporated in an updated reserve estimate and mine plan by the SRK consulting group that will be completed in the second quarter of 2009. The resources reported in February 2009 are summarized by resource category in the following table.

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San Roberto Area Mineral Resource Estimate at a 1.15 % Copper Cut-Off (1)

Grade Contained Metal Copper Zinc Lead Silver Gold Copper Zinc Lead Silver Gold

(millions (millions (millions (000s (000sClass Tonnes

(000's) (%) (%) (%) (g/t) (g/t) lbs) lbs) lbs) oz) oz)

Measured(M) 1,749 2.35 1.01 0.41 86.0 0.063 90.6 38.9 15.7 4,833 3.5 Indicated(I) 6,077 1.90 1.20 0.25 63.0 0.063 255.0 160.2 34.0 12,313 12.3 M & I 7,826 2.00 1.15 0.29 68.2 0.063 345.6 199.1 49.7 17,148 15.9 Inferred 1,100 1.58 0.95 0.17 52.5 0.065 38.4 23.0 4.1 1,856 2.3

San Rafael Area Mineral Resource Estimate at a 3.0 % Zinc Cut-Off (1)

Grade Contained Metal

Copper Zinc Lead Silver Gold Copper Zinc Lead Silver Gold (millions (millions (millions (000s (000s

Class Tonnes (000's)

(%) (%) (%) (g/t) (g/t) lbs) lbs) lbs) oz) oz) Measured (M) - - - - - - - - - - - Indicated (I) 1,467 0.23 3.64 0.47 38.3 0.482 7.6 117.6 15.0 1,806 22.7 M & I 1,467 0.23 3.64 0.47 38.3 0.482 7.6 117.6 15.0 1,806 22.7 Inferred 556 0.14 3.55 0.57 35.8 0.609 1.7 43.5 7.0 641 10.9

(1) Numbers may not total due to rounding The following table presents these same resources by classification at a variety of cut-off grades for comparison purposes.

San Roberto Area by Classification and Cut-Off (1)

Classification Copper Cut-off (%)

Tonnes(000s)

Copper (%)

Zinc (%)

Lead (%)

Gold (g/t)

Silver (g/t)

Measured 0.5 2,287 2.00 1.10 0.43 0.068 79.2 1.0 1,908 2.24 1.03 0.42 0.064 84.1 1.15(2) 1,749 2.35 1.01 0.41 0.063 86.0 1.5 1,373 2.63 0.96 0.37 0.061 90.0 2.0 947 3.04 0.93 0.31 0.057 95.1 2.5 616 3.48 0.94 0.24 0.056 99.0 3.0 386 3.92 0.93 0.18 0.056 101.3 Indicated 0.5 12,303 1.35 1.26 0.30 0.074 54.8 1.0 7,296 1.76 1.21 0.27 0.065 61.2 1.15(2) 6,077 1.90 1.20 0.25 0.063 63.0 1.5 3,963 2.22 1.16 0.23 0.060 66.9 2.0 2,091 2.67 1.12 0.21 0.056 72.8 2.5 1,030 3.13 1.04 0.21 0.052 79.5 3.0 490 3.59 0.94 0.21 0.050 87.1

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Classification Copper Cut-off (%)

Tonnes(000s)

Copper (%)

Zinc (%)

Lead (%)

Gold (g/t)

Silver (g/t)

Inferred 0.5 4,782 0.95 1.06 0.21 0.073 42.4 1.0 1,623 1.42 0.98 0.19 0.063 49.0 1.15(2) 1,100 1.58 0.95 0.17 0.065 52.5 1.5 504 1.93 1.03 0.18 0.071 62.4 2.0 181 2.32 1.04 0.16 0.075 72.3 2.5 41 2.75 0.88 0.15 0.076 73.4 3.0 5 3.13 0.62 0.10 0.089 77.4

(1) Numbers may not total due to rounding (2) Base case

San Rafael Area by Classification and Cut-Off (1)

Note: No Measured Resources in San Rafael deposit.

Classification Zinc Cut-off (%)

Tonnes(000s)

Zinc (%)

Copper (%)

Lead (%)

Gold (g/t)

Silver (g/t)

Indicated 2.0 3,431 2.97 0.21 0.40 0.441 33.8 2.5 2,407 3.29 0.22 0.43 0.469 36.0 3.0(2) 1,467 3.64 0.23 0.47 0.482 38.3 3.5 720 4.07 0.25 0.50 0.489 41.4 4.0 328 4.48 0.24 0.52 0.462 44.3 4.5 135 4.87 0.24 0.56 0.468 47.5 5.0 41 5.22 0.25 0.61 0.518 51.3

Classification Zinc Cut-off (%)

Tonnes(‘000s)

Zinc (%)

Copper (%)

Lead (%)

Gold (g/t)

Silver (g/t)

Inferred 2.0 2,642 2.61 0.09 0.37 0.436 24.0 2.5 1,161 3.11 0.12 0.47 0.514 30.2 3.0(2) 556 3.55 0.14 0.57 0.609 35.8 3.5 256 3.92 0.14 0.65 0.675 39.5 4.0 83 4.32 0.15 0.72 0.714 41.9 4.5 19 4.76 0.17 0.81 0.709 45.4 5.0 3 5.16 0.20 0.73 0.855 51.4

(1) Numbers may not total due to rounding (2) Base case

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Reserves

The mineral reserves estimate reported as of August 31, 2007 by R Barnes P.Eng. of Capstone were based on metal prices of US$2.25 per pound copper, US$8.50 per ounce silver, US$1.00 per pound zinc and US$0.60 per pound lead. An NSR of US$40 per tonne was the cut off grade used, and the reserves are shown below. These proven and probable reserves are derived from measured and indicated resources with consideration of mining method, mine plans, mine configuration, mine schedules, mine dilution, recoveries and appropriate costs (processing, general, administration and capital) to demonstrate economic viability. Mining dilution calculations were based on the results of the actual mining which took place in the preceding 12 months and the two mining methods (cut and fill and long hole stoping). Metallurgical recovery was based on actual recoveries that the mill had obtained in the previous 12 months. A cut off value of NSR US$40 per tonne was chosen to cover all site operating costs and forecast sustaining capital. The NSR was based on the metal prices outlined above, actual contracts for concentrate sales and mill recovery, together with the grade in each mining block. A new NI 43-101 compliant reserve estimate conducted by SRK has begun and will be completed in the 2nd quarter of 2009. This estimate will be based on the independent resource by R, Sim P.Geo. discussed above.

Summary of the mineral reserves at the Cozamin mine on August 31, 2007 reported using US$40 NSR/tonne (totals include measured and indicated resources).

Classification Tonnes Cu (%) Ag (g/t) Pb (%) Zn (%)

Proven 1,809,719 2.32 84 0.45 1.17

Probable 1,915,248 2.42 81 0.34 1.19

Total 3,724,967 2.37 82 0.40 1.18 Reconciliation of Mineral Reserves

Mineral reserves are adjusted annually by the amount mined, by additions and deletions resulting from new geological information and interpretation, in conjunction with changes in operating parameters and metal prices. However, proven and probable mineral reserves are not usually revised in response to short-term fluctuations in the metal markets. The following is a reconciliation of the proven and probable mineral reserves at Cozamin to December 31, 2008:

Tonnes Opening balance, October 2007* 3,724,967 Additions 0 Less Tonnes Milled September –December 2007 260,378 Less Tonnes milled January to December 2008 833,176 Closing balance as of December 31, 2008 2,631,413

*2007 reserves were calculated using metal prices of: US$2.25/lb copper, US$8.50/oz silver, US$0.60/lb lead and US$1.00/lb zinc.

For a discussion of the extent to which the estimate of mineral resources and mineral reserves may be materially affected by the metallurgical, environmental, permitting, legal, title, taxation, socio-economic, marketing, political and other relevant issues, see Risk Factors, below.

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Outlook

The 2008 surface and underground drill programs have been successfully completed. The results of the drilling have increased and upgraded the 2007 resources especially in the measured and indicated categories. A new reserve study conducted by SRK is under way and will be based on the new measured and indicated resource estimate, and actual mine operating parameters including mining methods, mill recoveries, smelter contracts and actually operating costs.

Capstone has increased its commercial production at Cozamin and currently the historical reserve estimate is not representative of the life of the mine reserves. A new technical report will be filed upon receipt of the NI 43-101 compliant report from SRK.

Mining Operations

In September 2007 Cozamin initiated a mine and plant expansion to 3,000 tpd. The eventual capacity of the expansion designed at 3000 tpd throughput was reached in December 2008. Accessing lower level higher grade stopes was later than planned caused by the new mine haulage ramp being completed at year end versus schedule of September 2008.

From January to December 2008, the mine processed a mill feed of 833,176 tonnes of ore grading 1.63% copper, 1.31% zinc, 0.55% lead and 65 g/t silver. The average production rate was approximately 2285 tpd during that period. The mine produced 26.3 million pounds of copper, 9.7 million pounds of zinc, 6.4 million pounds of lead and 1.25 million ounces of silver.

During the year 3,486 meters of development were capitalized in the expansion program and relate to the development of the Guadalupana ramp to access lower levels of the mine from surface. In addition 195 meters of development was provided to assist in the underground exploration program. A total of 4,457 meters of development (ramps, drifts and raises) were completed to support stope mining. The Cozamin mine operates on a two-10 hr shift per day basis 7 days per week using Cozamin employees and contractors. In the mine department, there are 39 Cozamin staff employees, 172 Cozamin hourly employees and 182 contactor employees. Three crews work the mine on a basis of 10 days of work and 5 days off rotation.

Access to the Cozamin mine is by the 6m x 5m Guadalupana ramp from surface down to Level 11 (380 m below surface). The grade of the ramp is 15%. Personnel and equipment enter the mine by this ramp. The 2m x 4m vertical San Roberto shaft extends 360m to loading pockets located below Level 10. The Level 10 hoisting capacity is 1,800 tpd using a 400 hp hoist with 2 skips of 4.2 tonnes per skip. The head frame and 400 tonne capacity surface ore bins are located 900 metres from the mill stockpile. Ore is transported by contractor 18 tonne trucks from the surface ore bins to the crusher coarse ore stockpile. Six 10 tonne trucks and six 20 tonne trucks haul 1200-1400 tonnes of ore per day up the main ramp to the plant, as well as transferring waste for stope backfill and ore from the stopes to the shaft ore pockets within the mine.

All waste produced from development is used as fill in cut and fill stopes. Waste rock is not hoisted out of the mine. During 2009, waste development will be used to backfill long hole stopes as well.

The main air intake to the mine for ventilation is the San Roberto shaft. A 3m x 3m raise (280m deep) located on the eastern side of the active stoping area is used as ventilation exhaust. A 250 hp 78 inch exhaust fan extracts 160,000 cubic feet per minute (“cfm”) from the mine. A second 150 hp 72 inch exhaust fan extracts 145,000 cfm on the west side of the mine. A third 150 hp 72 inch exhaust fan extracts 120, 000 cfm for the main ramp and exhausts into the old San Rafael Mine workings.

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Mine services including compressed air, water, electrical power and dewatering pump water lines are installed in a 1.5m Robbins service raise. Four Gardner Denver Stationary air compressors with a capacity of 750 cfm each are installed on surface near the shaft and supply compressed air underground for drilling and pump operation.

The mine has operating stopes on Levels 8, 9 and 10 and 11. Stopes on Level 12 are being developed. Transfer raises near the shaft transfer all ore from level 9 and 10 to the Level 10 skip measuring and loading pocket. The dump pocket and grizzly on Level 10 is 42 cm x 42 cm and has a hydraulic hammer to help break the ore small enough to pass through the grizzly and to fit in the hoisting skips. Ore from level 11 is normally hauled via the ramp out to the mill directly.

The mine has a small shop on Level 8.5 and a larger shop planned on level 11. A shop exists on surface for major repairs.

Mining Method

All of the mining reserves at the Cozamin mine occur within a 1.4 km section of the Mala Noche vein, which has an identified strike of more than 7 km. Prior to the re-commissioning, the mine was operated until 1998 by various companies. Previous mining methods included open stoping, mechanized cut and fill, shrinkage stoping and long-hole stoping.

Since commissioning, Cozamin has operated mechanized cut and fill stoping and long hole stoping mining methods. The stope widths average between 4 and 10 metres, although some sections approach 20m in width. The operating levels (8, 9, 10 and 11) are spaced 60m apart with the vein dipping an average of 70º to the north. Access to both the mechanized cut and fill stopes and the long hole stopes is from 4m x 4m footwall ramps, footwall drifts and crosscuts (+/-20%) from the footwall ramps. Development waste is used for backfill in cut and fill stopes and also for backfill in long hole stopes where additional support is warrented. No waste is hosited.

During the fall of 2007, and throughout 2008 an ongoing rock mechanics study and stability analysis in the long hole stoping area of the mine was conducted. This study reviewed the current plan of stope and pillar design, and showed the need to increase pillar size and/or increase ground support. During 2009 a study will be conducted to determine the economics of recovering pillars left behind in the mining process. The results of this will affect the amount of reserves left in pillars. Operating costs would likely increase for pillar recovery because of the additional ground support.

Milling

The mill flowsheet consists of three-stage crushing, ball mill grinding and selective flotation of the ore to produce copper, lead and zinc concentrates, followed by thickening and filtering of the concentrates.

Throughout 2008 daily treatment capacity was averaged 2,285 tpd, with the mill operating 7 days a week. In 2008, the concentrator plant processed approximately 833,000 tonnes of ore and is expected to process 1,000,000 tonnes of ore in 2009.

In 2008, Cozamin generated positive cash flow and income, with recorded cash costs of US$1.43/lb copper net of by-product credits and including smelting, refining, transportation and all site costs. This cost was calculated using US$4.00 per ounce silver and not including the deferred revenue of US$4.40 received upon the sale of the silver stream to Silverstone.

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Environment

This summary of the environmental impact and permitting requirements is based on work undertaken for Capstone under the supervision of Nimbus Management Ltd., J. L. Hardy, P.Geo., Principal. The Cozamin project site lies within a regionally mineralized area that has seen extensive historic mining over more than 475 years. Host rocks surrounding the mineralized bodies are anomalous in base and precious metals, providing a halo of elevated metals values that extend a considerable distance beyond known workings. Numerous old mine workings, excavations and dumps, as well as some historic tailings are present, both on, and adjacent to, the Cozamin project site; some lie on mining lands held by Capstone and others are held by third parties. Environmental impacts within the project site resulting from historic activities are evident. As well there are obvious impacts from present day (though sometimes intermittent) operations of surrounding mines by third parties. The impacts have been discussed, though not necessarily completely documented, in historic reports. Prior to Capstone’s option of the Cozamin project, several environmental studies had been completed by previous owners, and the San Roberto mine had been permitted to operate at 750 tpd. With a view to re-opening the mine and expanding tonnage throughput to 1,000 tpd, Capstone completed the following to support permitting and regulatory approvals:

• an environmental impact assessment, known in Mexico as a Manifestacion de Impacto Ambiental (MIA);

• a detailed study of new ground needed for use as part of an expanded mining operation, known as the Estudio Justificativo de Cambio de Uso de Suelos (ETJ); and,

• a risk assessment to include all aspects of the expanded operation, known as an Estudio de Riesgo (ER).

Studies required to support the MIA included detailed analysis of: soil, water quality, vegetation, wildlife, hydrology, hydrogeology, cultural resources and socio-economic impacts. These investigations identified acid rock drainage and metal leaching as potential concerns manageable with appropriate mitigation measures. Static acid-base accounting showed that flotation tailings and some types of waste rock have the potential to generate acid drainage. However, the country rocks surrounding the deposit have significant neutralizing capacity and show relatively low permeability. In addition, construction activities programmed as part of the expansions have significantly reduced identified sources of acid drainage associated with the historic tailings impoundment, as well as downstream contamination due to tailings spills by previous operators. Further, during operation both newly generated waste rock, as well as waste rock deposited during historic operations, will be used as underground back fill. Over the longer term, mining will not generate new surface waste dumps, and will reduce significantly the volume of existing dumps. Additional mitigation measures involve both engineering design and operational approaches. Planning for closure design may include covering and encapsulation of the tailings impoundment if monitoring indicates this is required. Other issues of environmental concern relate to potential impacts comparable to those in underground mines of similar size with flotation tailings impoundments. These include: dust, tailings handling/management, storm water diversion, combustibles and reagent management/handling, waste management and disposal and noise. Planned “best practices” operational management along with sequential progressive reclamation and closure planning will reduce new sources of contamination. Reclamation, post-closure monitoring and follow-up will require more detailed planning, but have the general objective of leaving the land in a useful, stable and safe condition capable of supporting native plant life, provided appropriate wildlife habitat, maintaining watershed function and

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supporting limited livestock grazing. Reclamation obligations will be funded during mining operations, and are not anticipated to involve measures significantly different than would be expected for an underground mining operation of this size and type. An original preliminary closure cost estimate has been revised to include disturbances present to December 31, 2008 and now totals US$2,196,000. This amount will be revised and updated on an annual basis to reflect the disturbances present to year end, the evolving knowledge of specific site conditions and their reclamation requirements, and an understanding of the success of ongoing progressive rehabilitation, reclamation and closure activities, as well as prevailing costs for physical and other work related to closure. The original MIA was approved by SEMARNAT (Secretaría de Medio Ambiente y Recursos Naturales) on August 29, 2005. It remains valid for a period of ten years, and was conditional on acceptance of the ETJ (accepted 20Jan-06) for Phases 1 and 2 of the tailings dam expansion. Capstone subsequently filed application for a modification to this MIA and a second ETJ, to include additional lands leased from the neighboring ejido for tailings dam expansion. These applications were accepted on April 20, 2006 and July 10, 2006 respectively. As a result of significant exploration and operational success in 2006, Capstone completed additional documentation in support of a MIA for an expanded operation up to 2,600 tpd. The modified MIA for the expanded operation was approved by SEMARNAT on April 18, 2007, and also has an operational term of ten years. With continuing exploration success, Capstone subsequently submitted documentation on January 19, 2009 for another modification to the MIA for an expansion of the operation to 3,000 tpd. The modified MIA for this expanded operation was accepted on August 6, 2008, and also has an operational term of ten years. Capstone applied for an additional ETJ to allow inclusion of additional lands for tailings dam and water management structures, as well as the entryway for the new Guadalupana ramp which was approved on March 18, 2008. The application to increase production from 2,600 tpd can only be applied for when the plant reaches the design operating rate. The government’s statement of approval for the MIA, known as a “Dictamen”, includes detailed terms and conditions of compliance, as well as an obligation to file operational reports every six months describing progress in fulfilling the terms and conditions. The MIA Dictamenes provide authorization for Capstone to complete activities related to the expansion within the approved project footprint subject to the terms and conditions outlined; these represent normal environmental and regulatory requirements as described in the MIA, and all costs are included in the operating costs summary. Development of the required mitigation plans, closure strategy and operational procedures is ongoing. Detailed reporting includes filing of mitigation and closure plans with SEMARNAT. Following a final inspection by PROFEPA (Procuraduria Federal de Proteccion al Ambiente en el Estado de Zacatecas), the federal environmental attorney general (i.e. enforcement) branch of SEMARNAT, Capstone formally received its operating permit on October 20, 2006. This is known in Mexico as a Licencia Unica Ambiental (LAU). An LAU for the tonnage expansion to 2,600 tpd was received on March 25, 2008. On January 19, 2009, application was made to modify the LAU for the tonnage expansion to 3,000 tpd. While unforeseen delays are always possible, Capstone has supplied all additional information requested, project details and schedules have been fully and completely discussed with SEMARNAT, and no delays or difficulties are expected in obtaining approval for this modification. Under the LAU, companies are permitted to consolidate environmental reporting data on a single form to be submitted annually know as a COA (Cedula de Operacion Anual). An environmental management and monitoring program is currently underway and will be ongoing. Data collected are used to define an operational environmental management and monitoring

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program, which will include appropriate environmental management and mitigation plans based on the principle of continuous improvement. These will be reviewed and revised as necessary, on at least an annual basis, with results reported as required to Mexican regulators. Though some assessment and management planning remain to be completed, work to date indicates that environmental impacts are manageable. It is expected that appropriate management solutions can be developed within the project schedule and time frames. In September 2007, Capstone applied to enter into PROFEPA’s National Environmental Auditing Program (Programa Nacional de Auditoria Ambiental). This ambitious voluntary environmental audit program is perhaps one of the most advanced programs of voluntary compliance in Latin America. Known also as the Voluntary Audit or Clean Industry (Industria Limpia) Program, the initiative was created by PROFEPA in 1992 to promote self-regulation and continuous environmental improvement. Companies volunteering to join the program pay for an environmental audit by an accredited, third party, private sector inspector. PROFEPA determines the terms of reference of the audit, defines audit protocols, supervises the work through certification of the independent third party auditors, and supervises compliance with the agreed-upon actions. Companies that enter the program are exempt from the normal inspection activities carried out by PROFEPA unless a public complaint has been issued. The audit results in an action plan that is included in an Environmental Compliance Agreement to be signed by PROFEPA and the company concerned. By way of this process, the Cozamin mine will be able to receive certification under the Clean Industry Program. In late 2007, the Cozamin operation underwent a rigorous evaluation by the certified third party auditor to assess compliance with a broad spectrum of environmental, mine and operational safety, health and occupational safety laws and regulations. By way of a cooperative process between Capstone and PROFEPA, the Company identified areas for improvement, and developed a detailed Action Plan (with estimated costing) to achieve compliance over an approximate two year period ending in 2010. The first trimestral progress report on the Audit was submitted to PROFEPA on January 12, 2009, and the second was submitted on March 10, 2009. The Company anticipates no difficulties in achieving the agreed upon Plan and schedule. Work supporting the Plan must be verified by the independent auditor, who must issue a favourable opinion of the work completed as compared to the work identified in the Plan before PROFEPA can issue a Clean Industry Certificate for the operation. The Clean Industry Certificate recognizes operations that have demonstrated a high level of environmental performance, based on their own environmental management system, as well as total compliance with regulations. Apart from public acknowledgement of its clean status, benefits to Capstone include agreement with its regulators on a defined program of remediation and mitigation, and the ability to participate in no cost training programs established by PROFEPA. The Audit certificate is valid for two years and can be re-authenticated and renewed by an additional audit. Closure Plans and Costs

The closure cost for the mine was re-estimated and updated in February 2009. The closure cost estimate was approximately US$2.15 million and included US$0.48 million for severance. Health and Safety

The Safety Superintendent is the head of the Safety and Environmental Department. He reports directly to the General Manager of Cozamin. The department includes 4 hourly employees, 12 security guards, 1 trainer/safety engineer, 1 environmental coordinator, 1 paramedic and 1 nurse.

Cozamin has a mine rescue team which trains two times per month. The rescue team also trains with other mine rescue teams in the area and is prepared to provide assistance as needed at

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Cozamin and other mines. Conversely, Cozamin can receive assistance from other mine rescue teams if required.

The mine has contracted with a private hospital located 8 km from the mine site to provide the best medical assistance available in case of an incident.

Capital Expenditures

During 2008, capital expenditures were approximately US$13.5 million and consisted of US$5.0 million for exploration and US$8.5 million for mine and mill expansion from 2200 tpd to 3000 tpd.

Exploration expenditures were approximately US$4 million for surface drilling and US$1 million for underground drilling. Mine and mill expansion costs included US$4.3 million in the mine including the new haulage ramp and additional equipment to meet the higher production rate, and US$4.2 million on surface facilities including US$0.9 million for the installation of column flotation cells for both the copper and zinc circuits, US$ 0.7 million for generators to supply the incremental power needed for the expanded tonnage rate and US$0.7 million for an increase in tailings dam capacity.

Capstone has budgeted US$4.8 million for 2009 capital expenditures at the Cozamin Project for mine ramp development, underground equipment and site services. Capstone has budgeted US$0.25 million for surface exploration studies.

Taxes

The Cozamin property requires land rental and government fee payments on the mining concessions. In 2008 the taxes totaled US$15,700 and US$17,500 is expected for 2009.

Marketing

In 2008, zinc and lead concentrates were sold to Glencore International AG under a contract which was valid through 2008. Copper concentrate was sold 50% to Glencore International AG and 50% to Trafigura Beheer B.V. (“Trafigura”). During 2008 Capstone Gold S.A. de C.V. secured contracts to sell its concentrates through 2011; copper concentrate will be sold to Trafigura, zinc concentrate will be sold to MRI Trading AG (“MRI”) and lead concentrate will be sold to Louis Dreyfus Commodities.

Payable silver contained in all concentrate was sold to Silverstone on April 11, 2007 for the following 10 years. Capstone received US$44 million on signing, and an ongoing payment of US$4.00 for every ounce delivered to Siverstone.

The copper concentrate produced is highly marketable in Mexico due to the low arsenic and antimony impurity levels. The lead concentrate is also highly marketable with high lead and silver content and low levels of impurities. The zinc concentrate is a low grade concentrate with high iron content but Capstone has been able to secure contracts for 2009-2011 for its sale. Metal Price Contract Cozamin has metal price guarantee contracts with Standard Bank PLC for copper for copper production that are valid until 2013. The contracts have varying levels of metal take and metal price.

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Metal Price Hedging Contract Summary

Metal Total Hedged Metal Average Contract Metal Price

Copper 10,500 tonnes US$6,926 /tonne Contracts Cozamin has several contracts for the supply of goods and services to the mine, concentrate sales and metal price guarantees. A summary of the main contracts is shown in the table below.

Significant Cozamin Contracts

Company Contract Coverage Comments

Trafigura Beheer B.V. Concentrate purchase Agreement to purchase Cozamin copper concentrates up to December 2011. See “Marketing”.

MRI Trading AG Concentrate purchase Agreement to purchase Cozamin zinc concentrates up to December 2011. See “Marketing”.

Louis Dreyfus Commodities Concentrate purchase Agreement to purchase Coazmin lead concentrates up to December 2011. See “Marketing”.

Standard Bank PLC Metal price guarantee (hedge)

Agreement to pay Cozamin pre-set metal prices for a portion of its metal production. See “Marketing”.

Silverstone Resources Corp. Silver stream contract

Agreement to purchase all of the silver production from the Cozamin Mine for 10 years, in exchange for US$44M up front payment, and on going payment of US$4.00/oz of silver.

Operations

2008 Operating Results

Key operating results for the Cozamin mine in 2008 are outlined in the table below.

Tonnes mined 825,909 Tonnes Milled 833,176 Grade copper (%) 1.63 Grade zinc (%) 1.31 Grade lead (%) 0.55 Grade silver (g/t) 65.3 Recovery copper (%) 88.3 Recovery zinc (%) 40.3 Recovery lead (%) 63.7 Recovery silver (%) 74.2 Cu Concentrate produced (tonnes) 53,293 Concentrate copper grade (%) 22.4 Concentrate silver grade (g/t) 572

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Zinc Concentrate produced (tonnes) 10,610 Concentrate zinc grade (%) 41.5 Lead Concentrate produced (tonnes) 4,705 Concentrate lead grade (%) 62.1 Concentrate silver grade (g/t) 1,801

Concentrate Shipments

During 2008, Cozamin shipped 50,809 dmt of copper concentrate, 8,385 dmt of zinc concentrate and 3,757 dmt of lead concentrate on vessels for sale to Asian smelters. In addition, these concentrates contain silver credits.

Revolving Term Credit Facility

On January 16, 2009, Capstone has completed a US$40 million corporate revolving term credit facility with The Bank of Nova Scotia (the "RT Facility"). Under the terms of the RT Facility, the funds are re-drawable over a three year term, subject to a US$8 million reduction every six months commencing on the first anniversary, and it attracts an interest rate of US LIBOR plus 3.5% (adjustable in certain circumstances). US one-month LIBOR rates have averaged between 0.3% and 0.5% so far in 2009.

Minto Mine (Yukon Territory) – Technical Information

One of the Company’s material mineral properties is the Minto Mine located in the Whitehorse Mining District, Yukon Territory. The Minto Mine is subject to a 0.5% NSR royalty to the Selkirk First Nation under a Cooperation Agreement dated September 16, 1997. Property Description and Location

The Minto Mine is located 240 km northwest of Whitehorse, Yukon within the Whitehorse Mining Division, as shown on the April 11, 2008 Yukon Energy Mines and Resources Minerals Resources Branch Mining Claim map sheet 115 I/11. The property centre is approximately 62°37’N latitude and 137°15’W longitude (NAD 83, UTM Zone 8 coordinates 6945000N, 384500E). The Project is located on the west side of the Yukon River on Selkirk First Nation settlement ‘A’ land. Highway 2 is located on the east side of the Yukon River. The Minto Mine consists of 164 claims; 99 quartz claims and 65 quartz claims under lease. The claim and lease boundaries are shown on the following Claim Location Map. The 100% registered owner of the claims and leases is MintoEx. All claims are currently in good standing, as shown in the table below. The DEF quartz claims (59) are in good standing until March 1, 2013, Minto quartz claims are in good standing until March 1, 2013 (40). DEF leases (29) are valid until October 7, 2028 and the Minto leases (36) are valid until May 13, 2018. MintoEx renewed the DEF leases for a 21 year term on September 5, 2007 with the required report and payment of C$6,150. Payments in lieu of assessment work were C$420 on January 30, 2009 for 1 quartz claim (Southwick, 2009). Claim Status

Claim Name Number of Claims Grant No. Expiry Date Type DEF 1 – 9 9 Y61693 – Y61701 10/07/28 L DEF 10 1 Y61702 03/01/13 DEF 11 1 Y61703 10/07/28 L DEF 12 1 Y61704 03/01/13 DEF 13 - 18 6 Y61705 – Y61710 10/07/28 L

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Claim Name Number of Claims Grant No. Expiry Date Type DEF 19 - 30 12 Y61711 – Y61722 03/01/13 DEF 31 - 32 2 Y61723 – Y61724 10/07/28 L DEF 33 - 34 2 Y61978 – Y61979 10/07/28 L DEF 35 - 36 2 Y61980 – Y61981 03/01/13 DEF 37 - 38 2 Y61982 – Y61983 10/07/28 L DEF 39 - 78 40 Y61984 – Y62023 03/01/13 DEF 79 - 84 6 Y66779 – Y66784 10/07/28 LF DEF 85 - 87 3 Y76964 – Y76956 03/01/13 F DEF 1379 1 Y76953 10/07/28 L MINTO 1 - 16 16 Y61620 – Y61635 05/13/18 L MINTO 17 - 18 2 Y61904 – Y61905 05/13/18 L MINTO 19 - 20 2 Y61906 – Y61907 03/01/13 MINTO 23 - 28 6 Y61914 – Y61919 03/01/13 MINTO 29 - 30 2 Y61932 – Y61933 03/01/13 MINTO 31 1 Y61920 03/01/13 MINTO 32 1 Y61921 05/13/18 L MINTO 33 1 Y61922 03/01/13 MINTO 34 1 Y61923 05/13/18 L MINTO 35 - 36 2 Y61908 – Y61909 05/13/18 L MINTO 37 - 38 2 Y61910 – Y61911 03/01/13 MINTO 41 - 44 4 Y61926 – Y61929 03/01/13 MINTO 45 - 46 2 Y61930 – Y61931 05/13/18 L MINTO 47 - 52 6 Y61934 – Y61939 05/13/18 L MINTO 65 - 68 4 Y62296 – Y62299 05/13/18 L MINTO 69 1 Y62300 03/01/13 MINTO 70 - 71 2 Y62301 – Y62302 05/13/18 L MINTO 72 - 73 2 Y62303 – Y62304 03/01/13 MINTO 75 - 89 15 Y62305 – Y62319 03/01/13 MINTO 94 - 95 2 Y77310 – Y77311 03/01/13 F MINTO 96 - 97 2 Y78024 – Y78025 03/01/13 F TOTAL CLAIMS 164 Mineral Title Summary

Description Anniversary Number

Quartz Claims 1-Mar-13 92 Full Quartz Fraction Claims (<25 acres) “F” 1-Mar-13 7 Quartz Claim Under Lease “L” 10-Oct-28 23 Full Quartz Fraction Claims Under Lease (<25 acres) “LF” 10-Oct-28 6 Quartz Claim Under Lease “L” 13-May-18 36 TOTAL CLAIMS 164

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LOCATION MAP

42

CLAIM LOCATION MAP – DEF AND MINTO CLAIMS

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Technical information contained in this Annual Information Form was extracted from technical reports which can be found on SEDAR. These reports include the report (the “Area 2 Technical Report”) prepared by SRK Consulting (Canada) Inc. (“SRK”), independent geologists and “qualified persons” for the purposes of NI 43-101, dated November 30, 2007, entitled “Area 2 Pre-feasibility Study, Minto Mine, Yukon” and the report entitled “Technical Report Minto Mine” (“Technical Report Minto Mine”) prepared by SRK dated June 30, 2008. The Area 2 Technical Report and the Technical Report Minto Mine are, collectively, the “Technical Reports”. These Technical Reports are available for viewing under the profile of Capstone Mining North Ltd. (formerly Sherwood) on the SEDAR website at www.sedar.com. Some of the information contained in these Technical Reports has been updated for events occurring subsequent to the date of the Technical Reports. Where appropriate, updates have been discussed in footnotes as well as under the heading “Minto Mine (Yukon Territory) – Exploration Program Update and Status”. The updated information has been prepared by or under the supervision of Stephen Quin, P. Geo., President and COO of the Company. The exploration activities at the Minto Mine are carried out under the supervision of Brad Mercer, P. Geo., Vice President Exploration for the Company. See “Experts – Names of Experts” and “Experts – Interests of Experts”. The operating activities at the Minto Mine are carried out under the direction of Kevin Weston, Vice-President, Operations (Canada) of the Company, Randall Thompson, General Manager of the Minto Mine and Guy Lauzier, P. Eng., Manager of Mining at the Minto Mine. Mr. Quin, Mr. Mercer and Mr. Lauzier are “Qualified Persons” for the purposes of NI 43-101. Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Minto Mine is accessible from Whitehorse, Yukon by means of the Klondike Highway (Yukon Highway No. 2) to Minto Crossing (240 km). It can also be reached by barge in the summer or by ice bridge across the Yukon River in the winter. A 27 km long, 10 m wide gravel access road provides access from the west side of the Yukon River to the project site. The highway, river crossing and gravel access road are suitable for heavy transport traffic. Storage capacity for consumables at the mine site is for 2½ months time which, historically, is sufficient for the impassable freeze up period or thaw period of the Yukon River. Operations personnel are transported weekly to the site from Whitehorse by charter airplane or bus, depending on the time of year. The barge has a 107 metric tonne net capacity. B-train transport trucks are transported across the river on the Company’s barge one at a time. The road from the Yukon River to the project site is a well maintained Class “A” all-weather gravel road, complete with drainage ditches, road signage and runaway lanes on steeper downhill sections. Roadbed material is fluvial sand or gravel along its lower reaches along the Yukon River and coarse sand along its upper reaches. For the most part, the road is constructed on stable south facing slopes, which do not have permafrost, except for one short section where insulating tech-cloth was laid down prior to the road fill to keep the permafrost from melting and eroding. The road crosses one major tributary of the Yukon River, Big Creek, by way of a single lane bridge made with reinforced concrete abutments and deck. The approaches to the bridge have been stabilized with berms and a spillway constructed to divert floodwaters exceeding the bridge capacity. The climate in the Yukon is sub-Arctic continental with short cool summers and long cold winters. The average temperature in the summer is 10°C and the average temperature in the winter is –20°C. Average precipitation is limited to about 25 cm of rain equivalent per annum in the form of rain and snow. The weather does not impede year round commercial operations in the Yukon, including outdoor activities in the winter, except in the harshest cold snaps when temperatures may plummet to –50°C. The Cyprus Anvil open pit lead/zinc mine at Faro, not far from the project, operated successfully for many years in this climate.

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There is a barge landing at Minto Landing, with a short gravel road connecting to Highway 2 (the Klondike Highway). Most services are available at Carmacks, 75 km south of Minto. Some services are available at Pelly Crossing, 35 km to the north of Minto. There is a 161 person ATCO trailer camp/kitchen facility at the mine site. There is a trailer pump house with a water pump and filtration tanks that are supplied by a potable water well located adjacent to the pump house. This potable water well is sufficient for the mine development camp additions and operations camp expansions. There is an existing arctic sewage system that was expanded during mine development. There is an emergency on-site portable diesel generator fueled from a fuel tank located beside the camp. The project is located 240 km from Whitehorse, the capital of Yukon Territory. Whitehorse, with a population of approximately 25,000, is serviced by daily commercial flights from British Columbia, Alberta and other northern communities. There are all-weather paved highways to the south and west, including to the port of Skagway, Alaska. There is daily freight service from Edmonton by Pacific Northwest Freight Systems. Some construction and supply shipments come out of Vancouver. Historically, mining has been the Yukon’s most important source of income. The Yukon-White Pass Railroad previously provided rail service from Whitehorse to the port at Skagway, Alaska. Concentrate from the Faro Mine was previously transported to Whitehorse by truck and by rail to Skagway. When the Faro Mine closed down the railroad also closed (except for tourist excursions). When the Faro mine reopened for a short period of time the railway was not available and the concentrate was trucked to Skagway, Alaska and Stewart, B.C., for shipping overseas. The property lies in the Dawson Range, which is part of the Klondike Plateau, an uplifted surface that has been dissected by erosion. Topography in the area consists of rounded rolling hills and ridges with relief of up to 600 m. The highest elevation on the property is 975 m above sea level, compared to elevations of 460 m along the Yukon River. The property is at a height of land where slopes are relatively gentle, thereby providing accessible areas for waste storage and tailings containment for the anticipated development. The hills and ridges often have spines of bedrock outcrops at their crests; elsewhere bedrock exposures are limited in the area. Overburden is colluvium primarily made up of sand derived from decomposition of the largely granitic bedrock in the area and is generally thin but pervasive. In south-facing locations, this material provides a well-drained, sound foundation for buildings and roads. The north-facing slopes in the area are permanently frozen solid with permafrost. Vegetation in the area is sub-Arctic boreal forest made up of largely spruce evergreen trees and poplar deciduous trees. The trees prefer well-drained south-facing slopes and may be sparse on the north-facing slopes where moss and alder ‘buck brush’ prevails. The area was burned over by several wild fires, the latest of which was in 1997, and is now devoid of mature living trees. Many of the burnt trees have blown down. History

The Minto Mine has a long history of exploration and development dating from 1970. 1970

• regional stream sediment geochemical survey by the Dawson Syndicate, a joint venture between Silver Standard Mines Ltd. and ASARCO Inc.

1971

• follow-up of stream sediment anomalies and staking of the Minto claims • soil sampling, IP geophysical surveys and manual excavated prospect pits on the Minto

claims • seven diamond drill holes (1,158m)

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• DEF claims staked by United Keno Explorations, a joint venture between United Keno Hill Mines, Falconbridge Nickel and Canadian Superior Explorations, to cover follow-up prospecting

• IP and VLF-EM geophysical surveys, soil sampling and mapping on the DEF claims 1972

• mapping, airstrip construction and bulldozer trenching, 12 diamond drill holes (1,871m) on 4 zones on the Minto claims

• grid soil sampling and bulldozer trenching on the DEF claims 1973

• 62 diamond drill holes (7,887m) on the Minto claims • bulldozer trenching, EM and magnetic geophysical surveys and 41 diamond drill holes

(7,753m) on the DEF claims • main mineralized body discovered

1974

• winter road built from Yukon River Crossing and 58 diamond drill holes (11,228m) on the Minto claims

• additional geophysics, rock mechanics, feasibility studies and 52 diamond drill holes (8,238m) on the DEF claims

1975-1976

• joint feasibility studies commenced 1984

• Silver Standard changed its name to Consolidated Silver Standard and transferred its interest in the Minto claims to Western Copper Holdings, a subsidiary of Teck Corp. (predecessor company to Teck-Cominco Limited)

• five percussion drill holes (518m) on the DEF claims 1989

• Western Copper Holdings transferred its interest in the Minto claims to Teck Corp. • 84 percussion drill holes (4,897m) on the DEF claims

1993

• MintoEx was formed • ASARCO and Teck Corp. sold their interest in the Minto claims (and leases) for shares in

MintoEx and provided C$375,000 in working capital • ASARCO and Teck Corp. also received an NSR royalty of 1.5% to be divided evenly • Falconbridge, the parent of United Keno Hill, sold its interest in the DEF claims to MintoEx

for C$1 million, payment due in 1996 • Falconbridge was granted an option to repurchase the DEF claims on January 1, 2005 if the

deposit was not in production by then • MintoEx carried out an airborne geophysical survey and drilled 8 diamond drill holes (960m)

1994

• initial public offering of shares of MintoEx completed • 5,912,501 shares were issued and outstanding with ASARCO the majority shareholder with

3,297,500 shares (55.8%) • 19 diamond drill holes (2,185m) • feasibility study began with engineering and geo-technical studies

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1995

• six diamond drill holes (572m) on magnetic anomalies and 1 condemnation diamond drill hole north of the proposed mill site

• feasibility study completed, reserves are 8,818,000T of 1.73% Cu, 0.014 oz/t Au and 0.22 oz/t Ag at 0.5% Cu cut-off grade (not to NI 43-101 standards)

• recoveries are 95% for Cu and 85% for Au and Ag • mine life was projected to be 12 years at production rate of 477,000 tonnes per year

1996

• funding arranged with ASARCO to bring the deposit into production whereby ASARCO would provide up to US$25 million

• ASARCO would acquire a 70% interest in the project, MintoEx would retain a 30% interest and remain as operator

• MintoEx makes the C$1 million payment to Falconbridge for the DEF claims completing the consolidation of the Minto and DEF claims

• 16 km access road constructed including a barge landing site on the west side of the Yukon River and a bridge over Big Creek

• four diamond drill holes (545m) 1997

• a further 12.8 km of road construction to complete the new access road • site for camp excavated • 72 m water well for domestic water supply • mill site excavated and two used grinding mills moved onto site using an ice bridge over the

Yukon River • co-operation agreement signed with Selkirk First Nation

1998

• mill concrete foundations poured with cement trucks from Whitehorse barged across the Yukon River

• Type A water license granted by Yukon government • concentrator design completed • access road completed, camp constructed and the location of the proposed tailings dam

was grouted • phase 1 open pit mining plan completed

1999

• production license received • five diamond drill holes (957 m) for engineering purposes

2000

• minor maintenance of on-site facilities 2001

• additional maintenance of camp facilities • five confirmation diamond drill holes (552m) in the centre of the deposit • most of the ASARCO core and all of the Falconbridge core destroyed by time and forest

fires • regional airborne magnetic and radiometric surveys carried out by the Yukon government

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2002 • a limited amount of the old ASARCO core that could be recovered was re-sampled • all the drill and geophysical data compiled in a data base to aid further exploration • three Landsat anomalies examined and prospected • road maintenance scheduled to keep permits active • ASARCO bought 100,000 shares of MintoEx to hold a total of 3,397,500 shares

2004

• MintoEx announces all of its shares are for sale 2005

• Sherwood consolidates 100% ownership of the Minto property by taking over MintoEx and purchasing ASARCO’s interest and Falconbridge’s back in right for C$7 million

• Sherwood purchases ASARCO, Falconbridge and Teck NSR royalties for C$1.4 million • 44 hole 5,369 metre confirmation and delineation drill program on the Minto Deposit • Type A Water Licence amended and extended to 2016 • Historical exploration data in analog format was compiled into digital databases for mine

modeling (GEMS) and GIS (Mapinfo) software use 2006

• Phase 1 25 hole 4,129 metre drill program including 19 holes to upgrade the Minto gold resource, one hole to obtain metallurgical sample and 5 exploration holes

• Bankable Feasibility Study • Initiated Construction of Mill facilities; upgraded camp and started pre-stripping open pit • Phase 2 94 hole 20,262 metre exploration drill program including 79 holes (18,376 m) at

Area 2 • Area 2 Deposit discovered and resource drilled to NI 43-101 standards • 330 ha gradient IP and ground magnetic surveys over large area south of the Minto Deposit • Gravity survey over the Minto Deposit and adjacent magnetic anomalies • Completed C$85 million debt financing with Macquarie Bank • Commenced mine construction • Completed agreement for use of port of Skagway for concentrate exports

2007

• 101 hole 23,292 m drill program • Area 118 deposit discovered and drilled to NI 43-101 resource standards • Infill drilling at Ridgetop (Area1) to NI 43-101 resource standards • Significant drill discoveries at Gap; Copper Keel; Airstrip SW and Ridgetop W. • NI 43-101 compliant mineral resource estimation for Area 2 • Announced agreement with Yukon Energy Corporation for provision of grid electric power • Mine construction and development completed • PFS completed on Area 2 increasing mineral reserves • Commercial production declared • 12,630 dry metric tonnes (“dmt”) of concentrate produced and 5,938 dmt of concentrate

shipped to smelters overseas • Mill expansion from 1,563 tpd to 2,400 tpd essentially completed by December 31st • Clearing of power line right of way started

2008

• Repayment of project debt facility begins • Phase 2 mill expansion to 2,400 tpd completed and commissioned

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• Updated mineral resource completed for the Minto Mine, including Main, Area 2, Area 118 and Ridgetop deposits incorporating drilling to the end of 2007

• An updated mineral reserve estimates was completed for the Minto Mine incorporating the Main deposit and portions of the Area 2 deposit based on drilling to the end of 2006

• A C$5.4 million approximately 24,000m drill program carried out to define the expanded Area 2, Area 118 and Ridgetop deposits to reserve standards

• Expansion of the mill to 3,200 tpd of throughput commenced in the third quarter of 2008 and construction completed by year end

• Connection to Yukon Energy grid system completed and the mine connected in November 2008

2009

• Commissioning of the 3,200tpd production expansion that was completed in the fourth quarter of 2008 was completed in the first quarter of 2009

• A C$3.0 million approximately 10,000m drill program commenced in the first quarter of 2009 and currently in process

• Discovery of a new mineralized zone at Minto North on the 1st hole of the 2009 drill program • NI 43-101 compliant mineral resource estimations for all deposits at Minto are under way in

support of a further feasibility study • A Phase IV pre-feasibility study incorporating an updated resource estimate and a further

mill production increase is planned for 2009 Historic Resource Estimates

The Minto Deposit has been subject to several historical (as defined in NI 43-101) tonnage and grade estimations over the years (Klingmann & Proc, 1993 and MintoEx) as summarized in the following table. The historic resources are presented here to show the progression of development of the resources over the years on the property.

Historical Tonnage & Grade Estimates of the Minto Deposit

Year Source Tons Cu % Au oz/t Ag oz/t Comments 1976 R.T.Heard

UKHM 8,219.370 2.04 - - -

1976 L.A. Wigglesworth Falconbridge

8,210,219 2.03 - - -

1975 R.J. Prevedi ASARCO

8,441,941 1.74 - - Cutoff grade 0.6% Cu

1976 R.J. Prevedi ASARCO

7,220,900 1.86 - -

1980 D.M. Fletcher ASARCO

2,968,600 3.24 0.027 0.411 Cut-off grade 2.0% Cu

1989 J.Proc & H.L.Klingmann MintoEx

6,368,000 2.11 0.016 0.33 Open Pit and Underground recovery at 75% and 5% dilution Cut-off grade 0.8% Cu

1990 SRK/Falconbridge 7,592,318 1.88 0.016 - Cut-off grade 0.0%? Cu Includes Lower Zone

1992 J.Proc & H.L.Klingmann MintoEx

6,071,000 2.21 0.018 0.28 Open Pit and Underground UG = 1,600,000 ton @ 3.73% Cu, 0.038 oz/t Au o.49 oz/t Ag

1994 G. Giroux Montgomery Consultants

8,780,000 0.5% 0.015 0.223 Pre 43-101 “proven” + “probable”

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The estimates in the table do not follow the required disclosure for reserves and resources (as outlined in NI 43-101) because they were prepared prior to the inception NI 43-101. The resource estimates have been obtained by sources believed reliable and are relevant but cannot be verified. No effort has been made to refute or confirm these estimates and they can only be described as historical estimates and are superseded by more recent NI 43-101 compliant mineral resource estimates see below. Since 2005 mineral resource and mineral reserve estimates have been calculated to NI 43-101 standards; including two mineral resource estimates and two mineral reserve estimates for the Main Minto deposit (Minto Mine), two mineral resource estimate plus one mineral reserve estimate for the Area 2 deposit and one mineral resource estimate for each of the Area 118 and Ridgetop deposits. These NI 43-101 compliant estimates are summarized below under the sections “Mineral Resource and Mineral Reserve Estimates”. Geological Setting

The Minto Mine is found near the eastern margin of the Yukon-Tanana Composite Terrain, which is comprised of several metamorphic assemblages and batholiths. It is broadly contemporaneous with the Omineca Belt in nearby British Columbia to the south. The Minto mine property and surrounding area are underlain by plutonic rocks of the Granite Mountain Batholith (Early Mesozoic Age). They vary in composition from quartz diorite and granodiorite to quartz monzonite. The batholith is unconformably overlain by clastic sedimentary rocks of the Tantalus Formation and andesitic to basaltic volcanic rocks of the Carmacks Group, both are assigned a Late Cretaceous age. Immediately flanking the Granite Mountain Batholith, to the east, is a package of undated mafic volcanic rocks, outcropping on the shores of the Yukon River. The structural relationship between the batholith and the undated mafic volcanics is poorly understood because the contact zone is not exposed. Geobarometry and geothermometry data (Tafti and Mortensen, 2004) suggests the Granite Mountain Batholith was emplaced at a depth of at least 9 km, while the presence of euhedral to subhedral epidote, interpreted by Tafti and Mortensen as magmatic in origin, may suggest a deeper emplacement depth in the order of 18-20 km. Exploration

Mineral exploration on the Minto mine property was conducted intermittently from 1971 until mid 2005 by previous operators. Since July 2005, when MintoEx was taken over by Sherwood, exploration activity has proceeded on an annual basis. Based upon the approach of compiling and modeling historical data to highlight regions with higher exploration potential this work has identified a region called the Priority Exploration Corridor (“PEC”). Trending southward from the Minto Mine, the PEC was approximately 2,000 m by 2,000 m (400 ha) or roughly 15% of the approximately 2,725 ha property. Since 2005, the PEC has been the focus of nearly 100% of MintoEx’s drilling efforts, producing significant results, including three new deposits and several major new prospects discovered with a total mineral resource increase of 140% since acquisition in 2005; not including results of the 2008 and 2009 drilling. In early 2009 a further potentially significant new drill discovery was made approximately 700m north of the Minto Mine. Name Minto North, the first three holes returned copper-gold intersections reminiscent of the Main deposit with respect to both grade and thicknesses at depths of approximately 50m below surface. This discovery is exactly on trend with three other deposits and now extends the PEC north of the Minto mine for at least 700m, opening up more exploration potential. Minto North will be an exploration priority for Capstone in 2009.

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Focusing on the PEC, MintoEx identified individual exploration targets by exploiting two physical characteristics of the Minto-type mineralization, specifically the abundance of copper sulphide minerals and the prevalence of magnetite disseminated throughout prospective horizons. Starting in 2006 and continuing into 2007 most of the PEC and some of the surrounding area was covered with detailed, ground based, total field magnetic surveys (“TFM”) to determine magnetic signatures and Gradient Array Induced Polarization surveys (“GAIP”) to determine chargeability signatures of the underlying bedrock. Both surveys conducted by Aurora Geosciences Ltd. of Whitehorse, Yukon, identified multiple magnetic and chargeability anomalies and the data (which is presented as raster images) show many areas where these anomalies are coincident. It was noted that several geophysical anomalies are associated with known mineralization from historical drilling, lending confidence in the approach and helping to vector exploration to new discoveries. Coincident magnetic / chargeability anomalies in areas of some known mineralization from historical drilling are assigned given the highest priority for future exploration. The Minto North discovery mentioned above is the first test of a coincident magnetic / chargebility target that did not have some prior indication of mineralization or favorable host rocks. One of the most important exploration tools for guiding exploration is building 3D geological models from the expanding drill hole database. By continually updating these models with new drill data, mineralized trends can be projected into areas where little or no drilling has yet taken place typically near the fringes of known deposits and prospects. Combined with geophysics, these models provide a powerful exploration tool, as it is postulated that most of the mineralization within the PEC is part of one giant and previously continuous hydrothermal system, which is now dismembered by later post mineral, brittle faults, many of which display relatively little displacement. Essentially the approach is to systematically reconstruct the original geometry of the hydrothermal system building outward from the known to the less known. This multidisciplinary approach has been very successful to date, as evidenced by three new deposits defined in 2006 and 2007 and expansion of some of these deposits by drilling in 2008. This iterative process will continue to be important for future exploration at Minto. Drilling activity in 2005 focused entirely on confirmatory drilling of the Main Minto deposit in order to gain better confidence in the resource in preparation for a Definitive Feasibility Study (“DFS”) for the current open pit mine. In 2006, exploration drilling discovered Area 2 early in the year and then in preparation for a Pre-Feasibility Study (“PFS”) drilling was largely focused on drilling the new deposit to a standard to get an NI 43-101 compliant Mineral Resource estimate by year end. In 2007 MintoEx broadened its exploration scope with another major drill campaign; again testing targets within the PEC and a third deposit was discovered. Flanking the west side of Area 2, the Area 118 discovery was also sufficiently drill delineated to support an NI 43-101 compliant mineral resource (inferred category only). Also in 2007, drilling was conducted to expand and infill the Area 2 deposit, and to define the Ridgetop deposit (ASARCO’s “Area 1”, their discovery prospect in 1972/73) in preparation for another NI 43-101 compliant mineral resource estimate. In 2008 another large drill program was completed to expand and increase confidence in the combined Area 2/Area 118 deposit and another for the Ridgetop deposit. These resource estimates are in preparation and are expected to be completed and released in early Q2, 2009. Exploration drilling is currently underway at Minto and further mineral resource updates are expected for late in 2009. Since Sherwood’s takeover of MintoEx in 2005, MintoEx has drilled 86,841 metres of diamond drilling, making five significant new discoveries in 3.5 years (Area 2, Area 118, Ridgetop, Copper keel and Minto North) and several other prospects (Airstrip, South Copper Keel, Gap and West Ridgetop).

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See also “Minto Mine (Yukon Territory) – Exploration Program Update and Status”. Deposit Type At various times since its discovery the Minto Deposit has been described as an example of porphyry copper, volcanogenic massive sulfide, redbed copper, magnetite skarn (see discussion by Pearson and Clark, 1979) and Iron Oxide Copper Gold (“IOCG”) (MintoEx, 2003). Based on the preceding paragraph it is reasonable to say that the origin of the Minto Deposit is enigmatic. Various workers appear to have ascribed different interpretations for the most part based on their empirical observations, the background of the observer and the popular models of the day. The abundance of the high Cu/S mineral bornite in a moderately oxidized magmatic system along with the obvious magnetite association suggests that Minto belongs to one of three recognized deposit types; alkalic porphyry copper; magnetite skarn or IOCG. The lack of the typical calc-silicate skarn mineral assemblage seems to preclude this deposit type leaving only two other possibilities. The host rocks to the Minto Deposit were emplaced in a deep batholitic setting exceeding 9 km deep to perhaps as much as 18-20 km deep (Tafti and Mortensen, 2004), which is not considered to be the typical porphyry environment. The host is derived from a moderately oxidized magma (Tafti and Mortensen, 2004) with widespread iron oxide (magnetite and hematite) mineralization. A very strong structural control on ore mineral emplacement is evident in drill cores and in mine exposures and there is no apparent genetic link between mineralization and any specific phase of intrusion. Typical porphyry-type alteration zoning such as widespread propilitization, argillization; barren silica core, stockwork style mineralization or large barren pyritic halo etc. is not recognized at Minto. Altogether these observations suggest the porphyry deposit model which is well understood is not applicable to Minto. Some examples of IOCG mineralization with similar characteristics and setting to Minto include Copperstone in Arizona, Caldelaria in Chile and Ernest Henry in Australia. From a genetic and structural prospective, albeit not in respect of size, Capstone geologists suggest the Sossego IOCG Deposit in Brazil is a reasonable analog. While an IOCG origin for the Minto Deposit cannot be unequivocally demonstrated, the Company is of the opinion that this style of deposit provides the most consistent model for our current level of understanding. Alternatively, it is a previously unrecognized deposit type. Mineralization

The Minto Deposit is located at the headwaters of a small creek, called Minto Creek (formerly Copper Creek), which has a very limited drainage basin. Mineralization in the area was discovered as a result of an anomalous stream sediment sample from this creek and a few scattered boulders on the surrounding slopes (Ridgetop Deposit area) with malachite on fractures and joint planes. There is no overt indication of the primary sulphide mineralization on the surface. The Minto Deposit has no surface exposure, it was discovered by drilling and the following discussion on the mineralization is based on observations made from drill core. The mineralization is hosted by foliated granodiorite to gneiss. Higher-grade mineralization often occurs in quartzo-feldspathic gneiss, biotite quartz feldspar gneiss and siliceous gneiss which are similar to the foliated granodiorite apart from the added minerals implied in their description and more intense foliation. The foliated granodiorite, in turn, is very similar in composition to the largely unfoliated Klotassin Batholith in which the deposit occurs. Other than the mineralization itself, the foliation appears to be the principal geological difference between mineralized and non-mineralized rock. Capstone geologists interpret the foliated horizons to be zones of ductile deformation cutting

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through the batholith versus as some earlier theories that they may be roof pendants or inclusions of sedimentary or volcanic rock within the batholith. The primary sulphide minerals include: chalcopyrite, bornite, minor pyrite and rare chalcocite. Silver telluride (hessite) is observed in polished samples but has not been logged macroscopically. Native gold and electrum have both been reported as inclusions within bornite and accounts for the high gold recoveries in test concentrates. Occasionally, coarse free gold is observed associated with the chloritic fractures that cross-cut the sulphide mineralization. The free gold may be due to secondary enrichment during a later hydrothermal process overprinting the main copper sulphide-gold event. The Main Minto deposit exhibits crude zoning from west to east. The bornite zone is dominant in the west and a thicker, lower grade chalcopyrite zone is dominant on the east side of the deposit. The bornite zone is defined by the metallic mineral assemblage magnetite-chalcopyrite-bornite. Bornite mineralization is conspicuous, but chalcopyrite is the dominant sulphide species. Stringers and massive lenses of chalcopyrite with various quantities of bornite are typical. Massive mineralization occurs locally over intervals rarely exceeding 0.5 m in thickness and semi-massive mineralization over several metres in thickness may occur. In these sulphide rich areas, textures often resemble those seen in magmatic sulphide zones with sulphide mineralization interstitial to the rock forming silicate minerals. The higher grade portion of the Main Minto deposit roughly corresponds to the bornite zone; local concentrations of bornite up to 8% are seen. The precious metal grades are elevated in the bornite zone (very fine gold and electrum occur as inclusions in bornite). The chalcopyrite zone is characterized by the metallic mineral assemblage chalcopyrite-pyrite +/- very minor bornite. Magnetite is minor to absent. Empirical observations indicate the highest concentrations of bornite are associated with coarse grained, disseminated and stringer-style magnetite mineralization, up to 15% by volume locally. The stringers of magnetite are often folded or boudinaged, suggesting that at least some of the magnetite mineralization predates peak ductile deformation. Sulphide mineralization on the other hand, shows both evidence and absence of ductile deformation locally and is interpreted to have formed contemporaneous with too late in the ductile deformation history. Texturally, the sulphide minerals occur as disseminations plus foliform stringers along foliation planes in the deformed granodiorite (i.e. sulphide stringers tend to follow the foliation planes). Sulphide mineral content, however, tends to increase where this foliation is disrupted by intense folding, while the thicker, more massive mineralization tends to obliterate the foliation altogether. The upper portion of the Main Minto deposit is variably oxidized and the secondary copper minerals malachite, azurite and chalcocite are observed in the upper reaches of the deposit and sometimes at greater depth but only very locally in late brittle fault zones. Mineralization in the Area 2 deposit and its fault displaced western extension, the Area 118 deposit, appear very similar in nature to that at Minto Main. Consistently deeper drill holes over widespread areas at these localities clearly show that the primary mineralization, comprised of the same mineral assemblage as the Main deposit, is stacked in parallel to sub-parallel structures and extends to a minimum of 350 metres below surface. One minor difference to the Main Minto deposit is that copper sulphide minerals are more evenly disseminated and massive stringer style mineralization is less important. Area 2 exhibits very little evidence of supergene oxidation whereas, in the upper portions of Area 118, chalcocite is more prevalent.

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At Ridgetop, 400 metres south of Area 2, supergene copper minerals are much more prevalent than in the deposits to the north; Ridgetop is best described as a partially oxidized copper deposit. In the upper reaches of the deposit, essentially just beneath a few metres of gravel residuum, chalcocite is the prevalent copper mineral. While malachite and azurite are common, they do not predominate. At varying depths, the primary copper sulphide minerals chalcopyrite and bornite are more prevalent and are clearly seen in similar foliated rocks as at the other deposits to the north but these minerals often exhibit partial oxidation as evidenced by chalcocite rims. Drilling to date shows a complicated interplay of both styles of mineralization, suggesting a shifting oxidation front over time. Drilling

Historical Drilling Most of the historic drilling on the property was diamond drilling done in the early 1970s in programs by Falconbridge and ASARCO during the initial exploration on the property, with definition drilling once the deposit was discovered. The reports of this era do not go into the details of the drilling procedures but it is the authors’ of the Technical Report Minto Mine impression that basic drilling procedures have changed little over time. This early drilling was done with BQ drill rods which return a core diameter of 1.43 in. Within the main zone of the deposit the drill hole density is on 100 ft centres on the DEF (Falconbridge) part of the deposit (locally as close as 50 ft), and generally on 150ft to 200ft centres on the Minto (ASARCO) side. The locations of the holes were surveyed in by Underhill Geomatics, of Whitehorse, using a local grid controlled by local benchmarks. The same land surveyor was used to survey in subsequent holes using the same benchmarks. The core from this drilling was stored onsite in two core sheds. Over time the sheds have collapsed and/or been burned out by wildfires rendering most of the core unusable. In addition, the labels on the few remaining intact boxes are missing and/or are not legible. The drill roads and pads for this drilling are still visible and the holes are often identifiable by casing and/or wooden posts protruding from the ground although labels are currently no longer attached or legible. The results of this drilling have been instrumental in estimating the grade and tonnage of the deposit. It is the authors’ opinion that the drilling was carried out using accepted practices of the time and is documented well enough to be reliable for the purposes of grade and tonnage estimations.1 In their compilation of the results, MintoEx has distinguished the ASARCO drill holes with an ‘A’ prefix and the Falconbridge hole with a ‘K’ prefix. The results of this drilling have been instrumental in estimating the grade and tonnage of the deposit. The drilling was carried out using accepted practices of the time and is documented well enough to be reliable for the purposes of grade and tonnage estimations, particularly when compared to the results of subsequent infill drill completed by MintoEx in 1993-2001 and 2005-07. Recent Drilling MintoEx has carried out several diamond drilling programs for both specific purposes on the deposit proper and exploration on the property in general, as follows:

• 1993 - 960 m drilled in eight holes (93 – A to H) within the deposit area to sample

the two main mineralization types (foliated granodiorite and quartz-feldspathic gneiss) for metallurgical test work

- Six of the holes were located to intersect the lower zone mineralization immediately below the main zone and one was designed to test deeper mineralization indicated in the 1970’s drilling

1 MintoEx has infill drilled the same deposit area in 2005/2006 confirming earlier results.

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- The core was used for metallurgical testing and some of it was not split and assayed

- Four of the holes were logged for magnetic susceptibility

• 1994 - 2,185 m drilled in 19 exploration holes to test mineralization south of the

main deposit - This drilling outlined a mineralized horizon roughly 6 m thick grading 2 – 3%

Cu - One hole (94-17) filled in a large gap in the deposit area

• 1995

- 572 m drilled in six holes: 425 m drilled in five exploration holes to test geophysical anomalies and 160 m completed in one condemnation hole north of the proposed mill site

- The exploration holes failed to intersect any anomalous mineralization

• 1996 - 545 m completed in four condemnation holes in the area of the proposed

west waste rock dump

• 2001 - 552 m drilled in five confirmation holes within the proposed open pit area

• 2005

- MintoEx drilled 44 NQ and HQ sized diamond drill holes (5,369 m) and five reverse circulation (“RC”) holes (568 m) on the margins of the deposit, and seven condemnation RC drill holes outside of the deposit area in areas of planned waste rock dumps and tailings disposal areas

• 2006

- MintoEx drilled 20 diamond drill holes to infill the northern half of the Minto Deposit and five exploration holes, three of which resulted in the discovery of the Area 2 deposit for a Phase 1 total of 4,129m. This was followed by Phase 2 comprised of 20,262 m of drilling in 94 holes, including 18,376 m in 79 holes at Area 2

• 2007

- MintoEx drilled 101 diamond drill holes in a two phase program for a combined total of 23,292m, mostly exploration focused except for five holes to collect further metallurgical test samples for the Minto Mine and five holes for geotechnical information for pit wall stability studies at Minto and Area 2. Sufficient drilling was conducted at the Area 118 and Ridgetop deposit to allow for new resources estimates which are expected to be finished in 2008. Several other new prospects were discovered at Gap; Copper Keel; Airstrip SW and West Ridgetop

• 2008

- Up to August 31, 2008, MintoEx had drilled 120 diamond drill holes in a two-phase program for a combined total of 23,840m, mostly infill and step out holes at the Area 2, Area 119 and Ridgetop deposits to increase drill density and allow for new resource estimaes expected in 2009.

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• 2009 - Up to March 18, 2009, MintoEx drilled 53 diamond drill holes totaling 9,975

m. Drill holes were typically infill and step out holes at the Area 118 and Ridgetop deposits to increase drill density and update resource estimates expected to be complete in 2009. Exploration drill holes included the Copper Keel prospect and discovered a new prospect, Minto North.

All of the drilling on the Minto Mine, from 1993 through 2005, was contracted to E. Caron Diamond Drilling of Whitehorse. The 1993, 1994, 1995 and 2001 programs utilized HQ core and the 1996 drilling was NQ core. This historical drilling was completed in the 1990s, prior to the legislation for NI 43-101. There was less regulatory scrutiny and results were the focus of reporting, rather than details of data collection. There is little in the way of documentation for the methods used in the pre-1990s drilling and sampling. The 2001 drilling was subject to a rigorous report by both MintoEx (Minto Explorations Ltd., 2003) and ASARCO (Simpson, 2001), which seconded a geologist to the project to log and sample the core. Some of the core from the 1993, 1996 and 2001 drilling programs is stored in the Ken Bostock Core Library in Whitehorse. Some of the other core from the exploration on the property (away from the deposit) is stacked on site in a pile behind the camp buildings. Older core was stored in sheds, which were burnt in a forest fire and is now unidentifiable. Since its acquisition by Sherwood, MintoEx has completed extensive diamond drill programs in each of 2005; 2006; 2007, 2008 and 2009 (still in progress). Drilling was completed using footage markers and MintoEx personnel converted the markers to metres. All logged data was recorded in metres. In 2005, the drill hole locations initially marked on the ground using a differential GPS were subsequently surveyed by Underhill Geomatics at the conclusion of the drilling campaign. In subsequent programs drill hole locations were surveyed by YES Engineering of Whitehorse or the MintoEx’s mine survey technicians shortly after drilling.

The core is taken to the logging facility by the drilling company and MintoEx personnel to be logged for geology and geotechnical purposes. Each hole is logged for lithology; structure; alteration; and mineralization before sampling.

Basic geotechnical data were collected on the first 15 drill holes in 2005, including rock quality designation (“RQD”) and core recovery data. Then starting with drill hole 05SWC016 full geotechnical logs were started that included RQD and core recovery but were expanded to include data collection for fracture density and orientation, hardness, joint data as well. Core recovery is typically good to excellent and this geotechnical data was used to aid in the Minto Mine open pit design.

Magnetic susceptibility data was also collected for each hole in drill holes from all campaigns since 2005 inclusive. No direct correlation between the degree of magnetic susceptibility and grades of mineralization can be made, but a marked increase in the magnetic susceptibility is noted in mineralized intervals. This is not surprising since increased magnetite content is frequently logged in all mineralized horizons while magnetite is present, but only in trace amounts, in unmineralized rock. Bulk densities (“BD”) for use in resource calculations prior to the current estimation were based on relatively few measurements and were assumed to rise or fall in proportion to copper grade. In 2006, MintoEx initiated a program to measure actual bulk densities on core to incorporate into the 3-D geology and block model. MintoEx believes this is more appropriate, since it relies more on actual data than on assumptions. Since 2006 core samples were taken from each drill hole in both mineralized and waste material for actual direct measurement. Pieces of core measuring

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approximately 10 cm were weighed both in air and in water using an Ohaus triple beam balance. The method used by MintoEx was validated in 2006 by G&T Metallurgical Services (“G&T”) in Kamloops, B.C., who independently tested selected samples to confirm similar values. The result from G&T confirmed the quality of the MintoEx bulk density determinations and that they are acceptable for use in the current resource estimates. This procedure continues to date and BD data is collected on all new core holes. Sampling Method and Approach

1973 to 2001 The sampling programs in place for the historical samples were implemented by geological employees of large professional Canadian, American and International mining companies, who are expected to have used acceptable sampling techniques of that era. No reports or data detailing the sampling methods, analyses methods, quality control measures or security procedures used by the previous lessee companies were available to the authors for review and verification during the time of the preparation of the Technical Report Minto Mine. Based on the information available, most of the samples sent for analysis were obtained by splitting the core using a mechanical wheel core splitter (in contrast to a diamond saw in 2005-2006). In the case of two holes drilled in 1993 for metallurgical grinding testing, the entire core through the mineralized interval was utilized to improve the validity and reliability of the metallurgical tests and hence no assay data are available. In the early drilling, sample intervals were consistently 5 feet or 10 feet (approximately 1.5 m or 3 m respectively) long, except in areas where complicated geology or contacts needed to be honoured. The 2001 drill program utilized a 1.5 m sample interval, with smaller samples taken at contacts or mineralization variations. The mineralization is quite obvious and contacts between mineralized and non-mineralized material are generally sharp. In the deposit, the intensity of sulphide mineralization is generally consistent and evenly distributed and geological contacts appear to have been honoured, so no inadvertent biasing of the results, depending on what part of the core was sampled, is expected. 2005 to 2008 (MintoEx) The mineralized intervals in core have been sampled in lengths ranging from 0.3 m to 3.0 m and averaging 1 m to 1.5 m. The sampling intervals are typically 1.5 m in mineralized material and 3 m in longer waste intervals within the mineralized zones. Two shoulder samples are taken in waste at both the upper and lower contacts, consisting of a 1.5 m sample and a 1 m sample. Samples do not cross geological contacts. The author believes this approach is sound and is appropriate for this style of mineralization and the objectives of the program. MintoEx analyzed 1,391 sawn core samples in 2005, 11,013 in 2006, 10,926 in 2007 and 12,565 in 2008. The samples were tagged and then split in half using a rock saw on site. One half of the core is put into sample bags and the remaining core is returned to the boxes and remains on site as a record of the hole. From 2005 to 2007 the samples were packaged into rice bags with security zip seals and sent to ALS CHEMEX of Vancouver (“Chemex”) for assaying. Manitoulin Transport was used to send the samples by ground in 2005 and Air North was commissioned in 2006 and 2007 to air freight the samples. In 2008, most samples were prepared for analysis by SGS Laboratories (“SGS”) at the Minto Mine Site under a contract arrangement. Samples were packaged by the exploration department in the

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same manner as 2005 through 2007 and then delivered to the lab by exploration personnel. Copper and silver were analyzed at the Minto absed SGS lab. Subsequently, a pulp is sent offsite to SGS’ lab at Red Lake, Ontario, for gold and soluble copper analysis. The exception to this procedure in 2008 were samples from the Ridgetop deposit, these were analyzed by Chemex. Soluble copper assay data for the partially oxidized mineralization at Ridgetop is extremely important, a decision was made to continue with Chemex as SGS was not set up to perform soluble copper analysis as part of the initial analytical package at the Minto based lab. In all years from 2005 through 2009, the drill core was photographed after the sample tags were stapled to the boxes at the downhole end of each sample but before the core was sawn. Sample tags for standards and blank quality assurance and quality control (“QA/QC”) purposes are also stapled to the box in the order they were taken. Core photographs are often used as reference when preparing geological models to support resource calculation. Sample Preparation, Analysis and Security

In most cases, the historic samples would have been prepared on site from split core under the supervision of a geologist and then bagged and shipped to the laboratory. It is inevitable that employees would be involved in this process but the authors do not know how many were involved or their names. MintoEx hired independent consultants for most of, if not all, of its work. It is not known whether officers or directors of MintoEx were involved in the sample preparation. Subsequent sample preparation such as crushing, pulverizing and sample splitting would have been the responsibility of the laboratory. Chemex is believed to have been responsible for the 1970s analyses (Simpson, 2002). At the time, copper analyses were performed by digesting a 2 g sample pulverized to 100 mesh, in perchloric and nitric acid with an AA finish. Gold analyses in the 1970’s may have used a 10 g pulp digested in aqua regia and an AA finish. It is not known what quality control procedures were used in the 1970’s drilling. Some of the early samples were not analyzed for precious metals and most of the samples only had total copper run on them. The result is an incomplete data set in terms of gold and silver. Copper oxide mineralization is noted throughout much of the deposit but has not been universally quantified by analysis of soluble copper. Bondar-Clegg of North Vancouver carried out the analyses of the 2001 samples. Each sample was coarse crushed to –10 mesh, from which a 250 g split was separated and pulverized to –150 mesh size. For analysis, a 0.25 g sample was digested with HCL, HNO3, HCLO4 and HF acids with final copper determination by AA Spectroscopy. Gold and silver were determined by fire assay using a 30 g sample and AA finish. The 2001 sample shipments were accompanied by four types of quality control samples, namely: a blank (granodiorite from the site), an ASARCO coarse standard, prepared pulp samples and duplicate splits (coarse ground rejects and the pulverized rejects). Some of the blanks were placed immediately following a rich copper sample and they returned trace amounts of copper. This could possibly indicate minor contamination during the sample preparation process, but the amount of contamination was deemed insignificant (Simpson, 2001). All of the other quality control measures produced acceptable repeatability (Simpson, 2001) verifying the results of the 2001 drilling. The sample preparations and analyses were entrusted to professional Canadian, American and International mining companies, who ostensibly used professional assay laboratories for their

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samples. Limited reports detailing the methods of sample preparation or quality control measures used by the previous companies were available to the writers for review and verification at the time of this report. Full details of security of samples, as required in NI 43-101, were not commonly provided in the reports from the previous work era. A data review by the authors does not indicate any reason to suspect any irregularities in the results of the old sampling. The results contained in the Technical Report Minto Mine were collected by reputable mining companies, who would have used procedures typical of the era. All of MintoEx’s Minto Mine exploration samples from 2005 through 2007 have been processed at Chemex. Chemex is accredited to ISO 17025 by Standards Council of Canada for a number of specific test procedures including fire assay Au by AA-ICP and gravimetric finish, multi-element ICP and AA Assays for Ag, Cu, Pb, and Zn, in addition to ISO 9001:2000 registration. The analytical method for the copper, gold and silver analyses used multistage acid digestion of the samples followed by atomic absorption spectroscopy for copper and fire assay with atomic absorption spectroscopy finish for gold and ICP finish for silver plus 40 other elements. When visible gold was noted in drill core samples or regular fire assay values appear abnormally high, the pulp and screen metallic assay method was used to determine the total gold content and gold contents of different size fractions. This is considered industry best practice when dealing with coarse gold mineralization where a nugget effect is suspected. This determination is accepted as the most representative value and is used in the assay database for resource calculations. Blank and standard samples were used for quality assurance and quality control, and any check samples that assay outside the expected ranges results in the entire batch being re-assayed. All initial analytical work is carried out by Chemex. After the completion of drill programs at Minto, random check assays were carried out by Acme Analytical of Vancouver.

Reports detailing quality control data for reference materials and duplicates used by Chemex are issued with the Certificates of Analysis. In addition, QC data summaries are requested by MintoEx any time there was a failure of a MintoEx standard reference material sample (“SRM”); pulp duplicate; coarse duplicate or sample blank sample and stored with the MintoEx sample database. At the discretion of the project QA/QC and database manager the lab reran the entire batch when a QA/QC sample has failed. Each drill core sample was crushed in a jaw crusher to reduce the material to greater than 70% -10 mesh (2 mm). The sample was then divided by a riffle splitter to between a 100g to 250g sample size. The maximum 250 g sample was pulverized into a pulp (to better than 85% passing -75 microns). Sample pulps were analyzed for gold using a 1 assay tonne method, in which a 30 g sub-sample was taken, fire assayed and analyzed using a gravimetric (Grav) finish. Copper was analyzed using the four acid digestion method (HF, HNO3, HCLO4 digestion and HCL leach) with final copper determination by AA spectroscopy, and also by analysis for non-sulphide copper using sulphuric acid leach with AA spectroscopy determination. MintoEx instituted a QA/QC program for the 2005 and 2006 drilling programs. A minimum of one blank sample and one SRM for both copper and gold per every 20 samples was inserted into the sample stream of each drill hole. The blank sample is approximately 1 kg of unfoliated granodiorite chips collected from a rock cut located on the main access road approximately 2 km due east of the deposit or from similar rock from drill core located outside of mineralized areas. Starting in mid-2006, MintoEx upgraded this procedure to include two SRM samples instead of one for each batch of 20 samples. Pulp check samples were sent to Acme Laboratories in Vancouver at the end of the drill program in 2005 and 2006. Acme analyzed these check samples using the same analytical procedure as Chemex.

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In 2008, MintoEx samples were analysed for copper and silver by SGS under a contract arrangement at the Minto Mine. The copper analytical methods include digestion in aqua regia followed by absorption spectroscopy. Gold is measured using fire assay with atomic absorption spectroscopy; analysis for gold is performed by SGS at one of their commercial laboratories. When visible gold is noted in drill core samples or regular analytical values exceed five grams per tonne, the pulp and screen metallic assay method is used to determine total gold content and gold content of different size fractions. This is considered industry best practice when dealing with coarse gold mineralization where a nugget effect is suspected. The result of the pulp and screen metallic assay is accepted as the most representative value and used in the assay database for resource calculations. Blank and standard samples are added to all sample shipments prior to submittal to the lab for quality assurance and quality control. If more than two check samples assay outside of expected ranges, the work order is re-assayed. Each drill core sample is dried as required then crushed in a jaw crusher to reduce the material to greater than 75% -10 mesh (2 mm). The sample was then divided by a riffle splitter to between a 250 g sample size with 85% passing 75 um. The maximum 250 g sample was pulverized into a pulp (to better than 85% passing -75 microns). Sample pulps were analyzed for gold using a 1 assay tonne method, in which a 30 g sub-sample was taken, fire assayed and analyzed using a gravimetric (Grav) finish. Copper is analyzed using aqua regia digestion method with final copper determination by AA spectroscopy, and also by analysis for non-sulphide copper using sulphuric acid leach with AA spectroscopy determination. After the completion of the first five drill holes, check assays were carried out by Chemex. Chemex used the identical methods of analysis as SGS and also assayed for copper using the 2005-2007 method involving a 4-acid digestion. Further, between lab duplicate, samples are planned as the drilling progresses. In 2009, MintoEx samples are analysed for copper, silver and gold by ALS Chemex in North Vancouver. Each drill core sample is processed in a jaw crusher to reduce the material to greater than 70% passing -10 mesh (2mm). The sample is then divided by a riffle splitter to between a 100g to 250g sample size. The maximum 250g sample is pulverized into a pulp (to better than 85% passing -75 microns). Sample pulps are analyzed for gold using a 1 assay tonne method, in which a 30 g sub-sample is fire assayed and analyzed using a atomic absorption spectroscopy finish. The pulp and screen metallic assay method is used to determine total gold content and gold contents of different size fractions where visible gold is noted in drill core samples or regular fire assay values are greater than 5ppm. The pulp and screen metallic assay is accepted as the most representative value and used in the assay database for resource calculations. Copper and silver are analyzed using the aqua regia acid digestion method with final copper determination by AA spectroscopy. Non-sulphide copper is analysed using sulphuric acid leach with AA spectroscopy determination.

Each batch of 20 samples includes a blank, standard reference material, a pulp duplicate and a coarse reject duplicate sample for quality assurance and quality control. Where more than two check samples assay outside expected ranges, the entire batch is re-assayed. After the completion of planned drill programs at Minto, random check assays will be carried out by Acme Analytical of Vancouver. Security of Samples

Sawn drill core samples are placed in poly plastic bags with the appropriate water proof sample tag and secured with a plastic, locking zip tie. Batches of 6-10 samples are placed in woven poly sacks and secured again with a heavy duty zip tie and a one-time-use, uniquely numbered, locking plastic security seal. Shipments of multiple sacks are made up with individual samples listed on a manifest

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which is placed in bag #1 of each shipment. The bag numbers and security tags are also recorded on this manifest. The shipment is transported from the core logging and cutting facility to Whitehorse, YT by Small’s Expediting Services Ltd. who then arranges shipment to ALS CHEMEX’s laboratory by commercial trucking or air cargo. The manifest is e-mailed to the Database Manager and the Client services representative at the laboratory indicating the shipment has been dropped off and received. The laboratory opens and reconciles the shipment against the shipping manifest, and notifies the Project Supervisor and Database Manager of any discrepancies. The work order is not processed until any discrepancies, such as samples not shipped or samples out of sequence or broken security tags, are resolved to the satisfaction of all parties. Mineral Resource and Mineral Reserve Estimates

All Mineral Resource categories (Measured, Indicated and Inferred) mentioned in this section are based on the CIM definitions referred to in NI 43-101. Main Minto Deposit Mineral Resource On June 17, 2008, the Company announced the results of an updated mineral resource estimate for the main Minto deposit incorporating the results of all drilling on the Minto deposit up to the end of 2007. The Measured and Indicated Mineral Resource estimate for the Minto Main deposit using a 0.5% copper cut-off was 7.98 million tonnes at a grade of 1.84% Cu, 0.66 g/t Au and 7.6 g/t Ag for a total contained metal of 323.3 million pounds of copper, 170,000 oz of gold and 1.96 million oz of silver. Approximately 1.12 million tonnes of mineral resources were removed from the Minto Main deposit by open pit mining 2008 Mineral resources are not mineral reserves and not all of the mined resource was processed through the Minto mill; some material was placed in stockpiles for later processing. The table below outlines the resources remaining as of December 31, 2008 after the 2008 mining has been removed.

Main Deposit – Mineral Resources by Classification (at a 0.5% copper cut-off and inclusive of mineral reserves but excluding ore stockpiles)

Classification Tonnes (000’s)*

Copper (%)

Gold (g/t)

Silver (g/t)

Contained Cu (000’s lbs)*

Contained Gold (000’s oz)*

Contained Silver (000’s

oz)* Measured (M) 5,562 1.68 0.62 6.77 206,001 111 1,211 Indicated (I) 0.923 0.96 0.25 4.37 19,535 7 130 Sub-total (M + I)** 6,485 1.57 0.57 6.43 225,536 118 1,340 Additional Inferred 29 0.62 0.13 2.71 970 0 3

*Rounded to the nearest ten thousand **Totals may not add exactly due to rounding

The Mineral Resource estimate for the Minto Mine was originally completed by Gary Giroux, P. Eng of Giroux Consulting Ltd. in April 2006. Ali Shahkar, P.Eng of Lions Gate Geological Consulting Inc. of Sechelt, BC, (“LGGC”) updated the Mineral Resource estimate for the Main Zone in February 2008 to include data from five new drill holes and the open pit outline as of December 31, 2007. The estimate was completed in Gemcom Software using a three dimensional block model (5m x 5m x 3m (vertical) block size) and ordinary Kriging method.

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Area 2, Area 118 and Ridgetop Resource Estimates On June 17, 2008, the results of an NI 43-101 compliant, Mineral Resource estimate for the high grade Area 2 copper-gold deposit; the adjacent and related Area 118 deposit and the Ridgetop deposit, located approximately 400 m south of Area 2 were announced. All three deposits are located at the Minto Mine and the new resource estimates are in addition to that reported above for the main Minto deposit. The mineral resources for the Area 2, Area 118 and Ridgetop deposits were estimated by LGGC in 2008. Susan Lomas, P.Geo., was the Qualified Person under NI 43-101 who is responsible for the estimate. Area 2 Deposit

The Measured and Indicated Mineral Resource estimate (inclusive of mineral reserves) for the Area 2 deposit using a 0.5% copper cut-off was, at that time, 11.3 million tonnes at a grade of 1.13% Cu and 0.40 g/t Au for a contained metal total of 281.4 million pounds of copper, 150,000 oz of gold and 1.4 million oz of silver. This represents a more than 33% gain in contained copper and nearly a 25% gain in contained gold and a 31% gain in contained silver in the Measured and Indicated categories over the previous resource estimate for Area 2 (news release dated June 17, 2008). An additional inferred mineral resource contains 3.5 million tonnes at a grade of 0.77% Cu, 0.25 g/t Au and 2.54 g/t Ag or 59.9 million pounds of copper, 30,000 oz of gold and 290,000 oz of silver, inclusion of which would significantly increase the net gains in contained copper, gold and silver versus prior estimates. The largest gains were made in the southwest, where Area 2 transitions into Area 118 in an approximately 100 m wide corridor. All of the mineral resources in this transition corridor were assigned to Area 2. In addition, some additional gains were made in the south and the southeast sides of Area 2. Area 2 and Area 118 are essentially different segments of a much larger deposit subsequently separated by a zone of late brittle faulting. The results of 2008 and 2009 drilling have not yet been incorporated into the mineral resource estimates.

Area 2 Deposit – Mineral Resources by Classification (at a 0.5% copper cut-off and inclusive of mineral reserves)

*Rounded to the nearest ten thousand **Totals may not add exactly due to rounding

The estimate was completed in Gemcom Software using a three dimensional block model (15m x 15m x 3m (vertical) block size). The mineralization was interpreted into 11 different domains and wireframes were created and geostatistical analysis was completed on the assay and 3 m composite data for each of the metals. The grades for copper and gold were interpolated into the block model using ordinary Kriging, inverse distance squared and nearest neighbour method and the silver grades were interpolated using inverse distance squared and nearest neighbour method. The copper and gold tonnage and grade values were tabulated using the ordinary Kriging interpolation results for the Measured and Indicated Mineral Resources and the inverse distance squared results were reported for the inferred

Classification Tonnes (000’s)*

Copper (%)

Gold (g/t)

Silver (g/t)

Contained Copper

(000’s lbs)*

Contained Gold

(000’s oz)*

Contained Silver (000’s oz)

Measured (M) 4,670 1.48 0.57 5.00 151,990 90 750 Indicated (I) 6,640 0.88 0.29 2.93 129,440 60 630 Sub-total (M + I)** 11,310 1.13 0.40 3.79 281,390 150 1,380 Additional Inferred 3,530 0.77 0.25 2.54 59,910 30 290

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mineral resources. Silver tonnage and grades were reported using the inverse distance method results. The Area 2 2008 estimate is an update from a resource estimation completed in 2007. Details of the historical Area 2 mineral resource and mineral reserve estimate are provided in the Area 2 Technical Report. Area 118

Discovered in 2007, there was only one year’s (2007) relatively wider spaced drilling at Area 118 available for resource estimation, resulting in an inferred mineral resource. The results of 2008 and 2009 drilling have not yet been incorporated into the mineral resource estimates. The inferred mineral resource estimate for the Area 118 deposit, using a 0.5% copper cut-off, was, at that time, s 6.59 million tonnes at a grade of 0.97% Cu, 0.27 g/t Au and 3.07 g/t Ag for a contained metal total of 141.4 million pounds of copper and 60,000 oz of gold and 650,000 oz of silver. Area 118 is adjacent to, and contiguous with, the Area 2 deposit.

Area 118 Deposit – Mineral Resources by Classification (at a 0.5% copper cut-off) Classification Tonnes

(000’s)* Copper

(%) Gold (g/t)

Silver (g/t)

Contained Cu (000’s lbs)*

Contained Gold (000’s oz)*

Contained Silver (000’s

oz)* Measured (M) - - - - - Indicated (I) - - - - - Sub-total (M + I) - - - - - Inferred 6,590 0.97 0.27 3.07 140,540 60 650

*Rounded to the nearest ten thousand The estimate was completed in Gemcom Software using a 3 dimensional block model (15m x 15m x 3m (vertical) block size). The mineralization was interpreted into 11 different domains and wireframes were created and geostatistical analysis was completed on the assay and 3 m composite data for each of the metals. The grades for copper and gold were interpolated into the block model using ordinary Kriging, inverse distance squared and nearest neighbour method and the silver grades were interpolated using inverse distance squared and nearest neighbour method. The copper, gold and silver tonnage and grade values were tabulated using the inverse distance squared method results. The mineral resources in Area 118 were classified as inferred mineral resources due to the wide spaced drilling results currently supporting the estimate. Ridgetop

As with Area 118, Ridgetop has only benefited from one year’s relatively wider spaced drilling (in 2007), resulting in an inferred mineral resource being estimated. Subsequent drilling in 2008 and 2009 has not yet been incorporated into the mineral resource estimates. The inferred mineral resource estimate for the Ridgetop deposit, using a 0.5% copper cut-off, was, at that time, 4.89 million tonnes at a grade of 0.85% Cu, 0.23 g/t Au and 2.0 g/t Ag for a contained metal total of 92.1 million pounds of copper, 40,000 oz of gold and 320,000 oz of silver. Ridgetop is a very shallow resource, locally coming to surface beneath a few metres of overburden.

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Ridgetop Deposit – Mineral Resources by Classification (at a 0.5% copper cut-off) Classification Tonnes

(000’s)* Copper

(%) Gold (g/t)

Silver (g/t)

Contained Cu (000’s

lbs)*

Contained Gold (000’s

oz)*

Contained Silver (000’s

oz)* Measured (M) - - - - - Indicated (I) - - - - - Sub-total (M + I) - - - - - Inferred 4,890 0.85 0.23 2.01 92,140 40 320

*Rounded to the nearest ten thousand The estimate was completed in Gemcom Software using a 3 dimensional block model (25m x 25m x 9m (vertical) block size). The mineralization was interpreted into five different domains and wireframes were created and geostatistical analysis was completed on the assay and 3 m composite data for each of the metals. The grades for copper, gold and silver were interpolated into the block model using inverse distance squared and nearest neighbour method. The copper, gold and silver tonnage and grade values were tabulated using the inverse distance squared method results. The mineral resources at Ridgetop were classified as inferred mineral resources due to the wide spaced drilling results currently supporting the estimate. Total Minto Project Mineral Resources Updated mineral resource and mineral reserve estimates were announced on June 17, 2008 and the Technical Report Minto Mine provides additional details in respect of those estimates. Net of all adjustments, contained copper in the mineral resource estimate increased by 50% and precious metals by approximately 40% as a result of drilling in 2007 and the subsequent updated resource estimations completed in 2008. This follows on from a 60% gain in contained copper in mineral resource estimates based on drilling in 2006, for a 140% gain in copper resource estimates in two years. The mineral resource tonnages reported in the table below are inclusive of the mineral reserves. The results of 2008 and 2009 drilling have not yet been incorporated into the mineral resource estimates.

Mineral Resource Estimates by Classification for All Deposits (at a 0.5% copper cut-off

and inclusive of mineral reserves but excluding ore stockpiles) Classification Tonnes

(000’s)* Copper

(%) Gold (g/t)

Silver (g/t)

Contained Cu (000’s lbs)*

Contained Gold (000’s

oz)*

Contained Ag (000’s

oz)* Measured (M) 10,232 1.59 0.60 5.96 357,991 201 1,961 Indicated (I) 7,563 0.89 0.29 3.11 148,975 67 760 Sub-total (M+I) 17,795 1.29 0.46 4.75 506,926 268 2.720 Additional Inferred 15,039 0.88 0.25 2.60 292,986 130 1.263

*Rounded to the nearest ten thousand Mineral Reserves

Main Minto Deposit Mineral Reserve The In-Situ Mineral Reserve estimate remaining as of December 31, 2008 with mining in 2006, 2007 and 2008 removed is set out in the table below.

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Proven & Probable In-Situ Mineral Reserves

Mineral Reserve Tonnes Average Grade

Category (000’s) Copper (%) Gold (g/t) Silver (g/t)

Proven 4,326 1.88 0.72 7.62

Probable 249 1.18 0.55 8.12

Proven + Probable 4,575 2.16 0.81 7.65

Minto Stockpile Reserve Inventory (All economic material)

Mineral Reserve Tonnes Average Grade

Category (000’s) Copper (%) Gold (g/t) Silver (g/t)

Proven 779 1.90 NA*** 7.38 *** Gold is not assayed on site and is therefore not available for the mined stockpiles.

The total reserve for the Minto Main Pit (In-Situ + Stockpile) as of December 31, 2008 is:

Mineral Reserve Tonnes Average Grade

Category (000’s) Copper (%) Gold (g/t) Silver (g/t)

Proven 5,105 1.88 NA 7.58

Probable 249 1.18 0.55 8.12

Proven + Probable 5,354 1.85 NA*** 7.61

*** Gold is not assayed on site and is therefore not available for the mined stockpiles.

This mineral reserve estimate excludes additional low grade material that will be mined and stockpiled over the life of the mine in order to gain access to higher grade reserves, but is assumed not to be processed.

These mineral reserve estimates are based on the April 1, 2006 mineral resource estimate reported on July 10, 2006. The effective cut-off grade for mine planning was calculated based on the breakeven grade of material within the ultimate pit to decide whether the material is processed in the mill, assuming US$2.00 per pound copper price, a US$550 per oz gold price, a US$9 per oz silver price, C$26.74 per tonne of ore milling costs, C$6.44 per tonne of ore for concentrate transportation cost and C$7.25 per tonne of ore for treatment charges; and equates to approximately a 0.62% copper cut-off grade. However, as previously reported, an internal cut-off grade of 1.0% copper was used for the first six years of operation, with material between the effective cut-off and internal cut-off grade stockpiled for processing later. Mineral resources which are not mineral reserves do not have demonstrated economic viability. Mineral reserve estimates remaining as of December 31, 2008 and can be summarized as follows, representing the previously announced reserve for the Minto Main deposit and the Area 2 deposit, less mining that has taken place in 2006, 2007 and 2008.

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Minto Mine – Mineral Reserves by Classification for All Deposits (at a 0.62% copper cut-off) – Year End 2008

Classification Tonnes

(000’s)* Copper

(%) Gold (g/t)

Silver (g/t)

Contained Cu (000’s lbs)*

Contained Gold

(000’s oz)*

Contained Silver

(000’s oz)* Proven 7,908 1.78 NA 6.92 310,419 NA*** 1,789 Probable 801 1.21 0.47 5.61 21,293 12 145 Total (P&P)** 8,709 1.73 NA 6.80 331,707 NA*** 1,904

*Rounded to the nearest thousand **Totals may not add exactly due to rounding ***Gold is not assayed on site and therefore not available for the stockpile inventories

Mineral reserves were calculated by MintoEx geology and engineering staff under the supervision of Guy Lauzier, P. Eng., Manager of Mining at the Minto Mine, who is the Qualified Person under NI 43-101 responsible for the mineral reserve estimate. Minto Main deposit reserve estimate was compiled using the updated mineral resource model (the “Model”) provided by LGGC. The Model was imported into Vulcan software for the reserve calculation. The mineral resource estimate was verified using MineSight® to ensure the import was successful. The mineral reserve calculation was bounded by the 2007 year-end survey surface and the 2008 year-end survey surface. Furthermore, a cut-off grade of 0.62% copper was used. The mineral reserve summary is based on Measured and Indicated Mineral Resource classifications in the model only, totalled within ore zones 2, 4, 5, and 8 in the Minto Main deposit (as established in the Area 2 Technical Report), and bounded by the aforementioned surfaces and assumptions. Mineral resource categories and definition of ore zones in the Model were established by the relevant QPs for each resource model, as defined herein. Mining Operations

Mine Operating Plan Mine Design The Minto Mine life-of-mine (“Minto LOM”) plan currently encompasses two open pits, Minto Main pit (“Main”) which is currently being mined, and Area 2 (“Area 2”) pit as outlined in the overall site plan illustrated in the figure below. The expanded Area 2, Area 118 and Ridgetop resources defined in 2007 have not been considered in the Minto LOM plan as they have not been the subject of a preliminary feasibility study and have, therefore, not reached the reserve category. An updated preliminary feasibility study for these resource additions, plus any additions from the 2008 drilling, is planned once the resources are re-estimated and mine planning updated.

The combined 3D mineral resource model of the Main and Area 2 was used as the basis for deriving the economic pit limits. A number of calculations were performed on the resource model in order to determine the NSR of each individual block based on a number of parameters (e.g. metal price, grade, recovery, treatment and refining charges). The ultimate economic pit limit was based on a Lerchs-Grossman (“LG”) pit optimization evaluation of the resources in the NSR model. The evaluation included the aforementioned NSR calculations as well as geotechnical parameters (summarized in the table below) and mining/milling costs. The basic designs of the pits vary according to the wall orientation but, in general, the design parameters shown in the table below are used. The 30° slope angles apply to the portion of the pits in overburden.

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Open Pit Design Parameters

Parameter Value

Bench height 24 m Berm width 10 m Face angle 70o

Mining face height 12 m (6 m in ore) Main ramp width 22.5 m

Secondary ramp width 16 m Maximum ramp gradient 10% Inter-ramp slope angle 30o-57o

Overall slope angle 30o-54o The economic pit limits were constrained to only consider Measured and Indicated reserve class material. An analysis of the NSR-based optimized LG pit shells was conducted and a final pit shell selected as the basis of further detailed pit designs to arrive at the final pit configurations. Mine Operation Minto mine uses conventional open pit mining techniques and equipment for all of its ore and waste extraction and is undertaken by a contract mining company. MintoEx and Pelly Construction (“Pelly”) have entered a long term agreement for the open pit mining activities (the current agreement expires January 2010). The open pit fleet of contractor equipment as of December 31, 2008 is shown in the following table. Variations in production and stripping levels will be handled by the contract mining company. After the pits are depleted, the mining equipment required on site will be reduced, as only loading and hauling from the low grade stockpiles to the crusher will be required. The proposed mill upgrade to 3,500 tpd as specified in the June 2008 technical report will not demand more mining equipment than is already on site. The Pelly fleet has an approximate capacity of 13,000 bcm/day, which will be sufficient for the Minto LOM plan. Pelly also maintains a shop facility on site with the cost included in the unit rates. Pelly Construction will be mobilizing one additional 777 D and three 773 haulage trucks to allow for greater mining flexibility and to reduce the cost for the placement of tailings and rehandling ore.

Approximately 60% of ore from the pits is hauled directly to the crusher feeding the mill. 40% of the mined ore goes to various temporary stockpiles according to the graded characteristics of the ore. The stockpiles in the Minto LOM plan are used to blend ore going to the plant to maximize copper head grade.

Open Pit Mobile Equipment Fleet

Type Make Model Number Capacity

Trucks Caterpillar Caterpillar Caterpillar

777D 769C 740

7 6 1

90 35 40

tonnes tonnes tonnes

Caterpillar 992G 1 16 yd3 Caterpillar 988B 1 8 yd3 Caterpillar 385 2 6 yd3

Loaders/Excavators Caterpillar

Hitachi Komatsu Loader

330 1100 250

2 1 1

3 10 3

yd3

yd3

yd3

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Type Make Model Number Capacity

Komatsu Loader 380 1 3 yd3 Ingersoll Rand DML45 1

Drilling Ingersoll Rand Terex Reedrill

ECM690 2 1

Caterpillar Bulldozer D11R 1

Caterpillar Bulldozer D10N 2

Caterpillar Bulldozer D9L 1

Caterpillar Bulldozer D8L 1

Caterpillar Bulldozer D6L 1

Caterpillar Grader 16G 3

Support

Caterpillar Packer CS573E 1

The I.R. DML45 drill performs the majority of the production drilling in the mine, utilizing a down-the-hole hammer and a 10” diameter bit. The I.R. ECM690 hydraulic drill with a 4” diameter bit is used for secondary blasting requirements and on the tighter spaced patterns required for ore blasts. The main loading and haulage fleet consists of Cat 777D haul trucks, which are loaded with the Cat 992G loader or the Cat 385 excavators. The fleet of Cat 769C haul trucks supplement the main haulage fleet, if and when necessary. As pit conditions dictate, the Cat D11R and Cat D10N dozers are used to rip and push material to the excavators, as well as maintaining the waste dumps.

Additional equipment is used to maintain and build access roads, along with various site facility requirements, including ore stockpile maintenance, tailings storage construction, dry stack tailings placement, stockpiled ore rehandling. The work schedule is based on two ten hour shifts, seven days a week.

Grade Control In order to minimize ore dilution, maximize ore recovery, and thereby improve the operation’s overall economics, grade control plays an important role throughout the mining process at the Minto Mine. Grade control begins with the proper identification of the ore/waste zones and contacts in the field through: information obtained from up-to-date 3-D resource model; blast hole sampling; driller reports; face sampling (includes mapping, visual inspections, sampling); and trenching (as required, to provide better definition of ore/waste contacts, sampling). During the drilling of the 6 m benches in the ore zone of Phase 1 Main pit, one sample per blast hole was collected for analysis. Once the above information has been gathered and compiled it is communicated to operational personnel through daily/weekly production meetings; detailed “dig” maps – outlining ore zones, waste contacts, faults, field surveying and layout of dig limits, ore contacts and any trenching required. In order to maintain the effectiveness of the grade control process; regular field inspections are undertaken by engineering/geology personnel and clear lines of communication are maintained with operational personnel, including equipment operators and front line supervisors. As part of the grade control process, variable bench heights have been designed in order to maximize the ore recovery. These include: variable bench heights in waste in order to target the top of the ore zone and a varying bench height within the ore zones (during the mining of the ore zones in Phase 1 Main pit the mining bench height was reduced to 6 m from the regular 12 m high

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benches). Drill and blast control also plays an important role in order to minimize dilution of the ore zones during the blasting process (e.g. minimize heave in the ore zone). Minto personnel are working together with the blasting contractor, Pelly, and the explosives supplier, Dyno Nobel Canada Inc. (“Dyno”), in an ongoing basis to continually improve overall blast performance. Production Schedule Mine Sequence/Phasing Mining commenced with pre-stripping in the Main pit in 2006 with the first ore produced in mid 2007. The Main pit was divided into 5 phases or pushbacks in order to achieve the Minto LOM plan targets. The pit pushbacks were resequenced in 2008 to allow for higher grade material to be released to the mill in 2008. The Phase II pushback was started in early 2008, however before its completion the Phase III pushback was mined and completed. In 2009, the Phase II will be completed and the Phase IV pushback will be started. Assuming the required permit amendements are obtained, mining Area 2 will commence once mining nears completion in the Main pit (in year 2011). The Area 2 pit has been scheduled in three phases with mining to be completed in early 2015. Waste material from Area 2 is planned to be backfilled into the Main pit, thereby, significantly reducing the Area 2 waste haul distances required and reducing the waste dump impact on the environment. The 2008 Minto LOM plan has a slight overlap with the final ore benches of the Main pit being completed when the pre-stripping commences in Area 2. Further detailed engineering is required in order to determine if this requires that some initial waste production from Area 2 be hauled to an alternative location or if it can be backfilled into the Main pit while mining nears completion in the lower reaches of the pit.

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Minto Phase Configuration

Waste Management The Main waste dump, Southwest dump, low grade stockpile, and ice-rich overburden dump (“IROD”) are based on existing designs derived from the Technical Report Minto Mine. The Southwest Dump is a new waste dump permitted in 2008.

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Waste rock from the Main pit is deposited in the main waste dump and Southwest dump following the receipt of the permit. This has significantly shortened up the length and grade of the hauls out of the open pit mine. The Southwest dump is large enough to contain all the remaining waste material to be mined from the Main Pit. Markets MintoEx currently has three marketing contracts for the sale of concentrates and metals. Concentrate Sales Minto has an established concentrate purchase contract with MRI Trading AG (“MRI”). Under the terms of the contract, MRI has the obligation to buy all of MintoEx’s concentrate production and MintoEx has the obligation to sell all of its concentrate production to MRI. The contract is in effect from July 2007 to June 2010. The contract may be extended by mutual agreement for one or more years.

The Minto LOM plan assumes that treatment charges will be sustained at the current treatment charge of US$70.00/dmt of concentrate and refining charge US$0.07/lb payable copper beyond June 2010.

Metal Price Contract MintoEx has metal price guarantee contracts with Macquarie Bank and Societe Generale for copper for copper production that are valid until the fourth quarter of 2011. The contracts have varying levels of metal take and metal price. A summary of the overall contract metal volumes and prices that were in place at the time of the Minto LOM plan are shown in the table below.

Metal Price Hedging Contract Summary

Metal Total Hedged Metal Average Contract Metal Price

Copper 50,408 tonnes US$5,519/tonne Gold 55,600 oz US$667/oz Silver 624,833 oz US$12.25/oz

Silverstone Agreement On November 21, 2008, Sherwood (now Capstone) completed a transaction with Silverstone whereby Silverstone purchased all of the payable gold and silver from the Minto Mine in the Yukon, over the life of the mine starting December 1, 2008. Silverstone will purchase all of the payable gold and silver from the Minto Mine and, in exchange, Sherwood received an up-front payment from Silverstone of US$37.5 million, plus a further payment of the lesser of (a) US$300 per ounce of gold and US$3.90 per ounce of silver (subject to a 1% inflationary adjustment after three years and each year thereafter) and (b) the prevailing market price of gold and silver quoted on the London Bullion Market Association, for each ounce delivered. If production from the Minto Mine exceeds 50,000 oz of payable gold in the first two years of the agreement or 30,000 oz of payable gold per year thereafter, Silverstone will be entitled to purchase only 50% of the amount in excess of those thresholds. Kutcho Copper has also granted Silverstone a right of first refusal to purchase any gold and/or silver streams from the Kutcho Project, should Kutcho Copper elect to sell such, on terms and conditions to be agreed by mutual consent.

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Contracts MintoEx has several contracts for the supply of goods and services to the mine, concentrate sales and metal price guarantees. SRK reviewed the material Minto contracts and found them to be reasonable and within industry norms. A summary of some of the main contracts is shown in the table below.

Significant Minto Contracts

Company Contract Coverage Comments

MRI Trading AG Concentrate purchase Agreement to purchase all Minto concentrates up to June 2010. See Marketing Section.

Macquarie Bank Limited and Societe Generale

Metal price guarantee (hedge)

Agreement to pay MintoEx pre-set metal prices for a portion of its metal production. See Marketing Section.

Silverstone Resources Corp. Precious metal stream contract

Agreement to purchase all of the precious metal production from the Minto Mine, in exchange for US$37.5M up front payment, and on going payment of US$300/oz of gold and US$3.90/oz of silver (for further details see “Silverstone Agreement” above).

Yukon Energy Corporation (“YEC”) Grid power

Minto has agreed to purchase power from YEC, pay for a portion of the new transmission line and sell its four main existing diesel generators to YEC in exchange for YEC building the main new transmission line. MintoEx will fund the spur line from the grid transmission line to the minesite (see “Power Purchase Agreement” below).

Dyno Explosive and accessory supply

Supply, storage, transportation and placement of explosives and accessories.

Pelly Mining and mobile equipment supply

Pelly performs all open pit mining functions at Minto and uses its ancillary equipment for various jobs on site. The contract is based on a per volume basis with adjustments for haul distance and grade.

Canadian Lynden Transport Co. Concentrate transport Provides terms and conditions for the road transportation of concentrates to Skagway, Alaska. Valid until the second quarter of 2014.

Great Northern Oil Diesel supply Transport and supply of diesel fuel. Domco Camp Services Lodging and catering. Alaska Industrial Development and Export Agency (“AIDEA”) Oceanport Facility Provides the facility for the concentrate storage

and ship loading in Skagway, Alaska.

Mineral Services Inc. (“MSI”) Oceanport Operation Operates concentrate storage and ship loading facility in Skagway, Alaska.

Operations

2008 Operating Results

Key operating results for the Minto mine in 2008 are outlined in the table below.

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Tonnes mined 9,529,319

Ore 1,158,519

Waste 8,370,800

Tonnes Milled 809,426

Grade copper (%) 2.91

Grade silver (g/t) 11.8

Grade gold (g/t) 1.14

Recovery copper (%) 91.9

Recovery silver (%) 84.6

Recovery gold (%) 77.9

Concentrate produced (tonnes) 53,148

Concentrate copper grade (%) 40.7

Concentrate silver grade (g/t) 152.1

Concentrate gold grade (g/t) 13.8

Concentrate Shipments

During 2008, MintoEx loaded 50,372wmt of copper concentrate on vessels for sale to Asian smelters. Of this quantity, approximately 95% was delivered in MintoEx’s copper forward sales contracts, while the balance was sold a spot. In addition, these concentrates contain significant gold and silver credits. Capital Programs

The operation spent C$3.5 million on capital projects in 2008. Projects included purchase of a used camp facility, construction of a water treatment plant and some costs related to the Phase II and Phase III expansion.

Environmental Considerations

Environmental Assessment and Permitting MintoEx has completed extensive environmental and permitting work for the Minto Mine. In December 1994, a four volume Initial Environmental Evaluation (“IEE”) was submitted under Environmental Assessment and Review Process Guidelines Order (“EARPGO”) to the Department of Indian Affairs & Northern Development (“DIAND”) for review. The IEE prepared by Hallam Knight Piesold (HKP, 1994), encompassed:

A) Volume I – Development Plan providing a general overview of the Minto Project;

B) Volume II – Environmental Setting which described the local environmental conditions and studies undertaken at the site since the 1970’s;

C) Volume III – Socio-Economic Description and Impact Assessment describing socio-economic conditions and archaeological evaluation and impact assessment for the Minto Project; and

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D) Volume IV – Environmental Mitigation and Impact Assessment was submitted in May 1995 and summarized the results of overburden and waste characterization studies.

The assessment indicated no acid generation potential as tailings solids and effluent test work indicated very low levels of metals present and showed solids that were strongly acid consuming. DIAND issued an EARPGO screening report decision on April 7, 1997, indicating that potentially adverse environmental effects that may be caused by the project are mitigable, using known technology and that the project could proceed. The Type A Water License (QZ96-006) was issued in April 1998 and a Quartz Mining Production Licence (QML-9902) was issued in October 1999 for the Minto deposit. A Type B Water Use Licence application was issued in August 1996 for construction of the Yukon River barge landing sites, the Big Creek Bridge, and Minto Creek road culvert installations. A summary of the subsequent project assessments and licensing is provided below.

Water Use Licence QZ96-006 was amended (Amendment #1) to revise the decommissioning requirements for the project, and to request the submission of an interim plan as the project was not yet constructed. The project is still subject to Water Use Licence QZ96-006.

As the Type A Water Use Licence (QZ96-006), Type B Water Use Licence (MS95-013), and Yukon Quartz Mining Licence (QLM-9902) were set to expire in June 2006, and in recognition of the project development delays, licence amendment applications to extend the licenses to June 30, 2016 were filed with the Yukon Water Board (“YWB”) and Yukon Territorial Government (“YTG”), Department of Energy, Mines & Resources (“EMR”) in October 2004.

In response to the amendment applications, YTG Development Assessment Branch completed a Yukon Environmental Assessment Act (“YEAA”) screening of the Type A Water Use Licence using the previous EARPGO screening and issued their screening report in March 2005.

The YWB completed a YEAA screening of the Type B application and subsequently issued the amended Type B Water Use Licence (MS04-227) in February 2005. YTG Development Assessment Branch completed a YEAA screening of the Type A Water Use Licence and Yukon Quartz Mining Licence using the previous EARPGO screening and issued their screening report in March 2005. The YWB issued the amended Type A Water Use License (QZ04-064) in September 2005 and YTG EMR issued amendments to the Yukon Quartz Mining License QLM-0001, Amendment No. 05-001 in December 2005 and Amendment No. 05-002 to change the mill rate to 2,500 tonne/day in October 2006. In July 2008, the Quartz Mining Licence was amended again to increase the mill rate to 3,200 tpd following a Yukon Environmental and Socio-economic Assessment Act review of the amendment request.

Generally the amended licences contain similar terms and conditions as the original licences and are typical of other Yukon mining licences. All of the above noted licences have an expiry date of June 30, 2016.

In addition, the Federal Metal Mining Effluent Regulations (“MMER”) under the Fisheries Act currently apply to the Minto Mine. These Regulations are a law of general application and the requirements of this legislation are the responsibility of the Company. Generally, the Type A Water Use Licence is considered more restrictive than the MMER; however, separate reporting for effluent discharge and receiving water monitoring is required by the Federal Department of Environment Canada.

MintoEx also has a number of minor authorizations to operate the facility including an air emissions permit, commercial dump permit, special waste permit and land treatment facility permit.

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Project authorizations typically require the company to monitor environmental and physical performance and track key project statistics. The licences require the submission of various operation plans including Tailings Management Plan and Operational Surveillance Manual, Environmental Surveillance Monitoring Plan, Spill Contingency Plan and Detailed Decommissioning and Closure Plans. Key monthly reporting is provided to the YWB for all environmental surveillance programs and annual reports provided to the YWB and YTG EMR. All reports are provided to Selkirk First Nation. Generally the Company has been in compliance with all their authorizations. There have been isolated exceedances of water use licence effluent discharge standards typical of mine start up and mitigation measures have been fully implemented by management to correct these events. The Company is in full compliance with the MMER requirements.

MintoEx and the Selkirk First Nation have a Cooperation Agreement in place that establishes cooperation protocol with respect to permitting and environmental monitoring. The parties are in discussions regardding amendments related to further expansions of the Minto mine.

In 2008, the Company applied for and received an amendment to the Quartz Mining Licence to allow for the temporary discharge of water with metal levels above the limits specified in the QML. This was following a very high period of precipitation in the Yukon which caused the operation to have to store water in both the open pit and the Water Storage Pond. In order to ensure that there would not be a discharge of water with high metals the amendment was granted.

MintoEx has initiated work on revisions necessary to various licences for development of the Area 2 and other zones that will be known as the Phase IV Amendment. A Yukon Environmental and Socio-economic Assessment Board Executive Committee level of assessment will be required to support amendment applications to the Water Use and Quartz Mining Licences.

Minor amendments will be made to the Type A Water Use Licence to streamline monitoring requirements and address water management requirement that are more reflective of site and receiving waters as part of a separate WUL amendment. This amendment should be applied for during Q2 2009. Health and Safety

The Safety Department at Minto is comprised of two Site Safety personnel who work a two-week-on, two-week-off rotation and report directly to the General Manager. The Safety Department is responsible for all site emergency first aid requirements, developing and implementing training modules, facilitating Joint Occupational Health and Safety Committee meetings, and investigating and reporting accidents/incidents. MintoEx and Contractor employees form the Minto Mine Emergency Response Team (“ERT”) and hold weekly training sessions at the ERT facility, which houses all emergency-response equipment and a training room. Emergency medivacs from site are conducted using the mine site ambulance and/or the air ambulance service operated by the Yukon Territory Government. The closest medical facility is located approximately 100 kilometres from the mine site in Carmacks, Yukon. Closure Plan MintoEx has an approved Detailed Decommissioning Plan for the site. The plan is to be updated in June 2009. As part of the Phase IV permit this plan will be revised to include the Area 2 development and other areas related to the Phase IV expansion, and resubmitted to YTG to ensure that the site liabilities are fully secured.

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Taxes Federal and Provincial tax calculations start with the before tax cash flow amounts from the cash flow portion of the model and essentially deducts the cost of building the mine and mill (Class 41 UCC, CEE and CDE) as would be expected over the life of the mine as allowed by the Canadian tax rules. Generally Class 41 UCC and CEE can be deducted 100% against profit from the mine while CDE can only be deducted on a declining balance basis at 30% per year. The losses that are generated in the first few years of mine operation are deducted against income in later years.

The Yukon Quartz Mining Royalty (“Yukon mining tax”) is a much different tax calculation than would normally be expected. It also starts with before tax cash flow from the cash flow portion of the model and deducts depreciation at 15% per year on a declining balance basis for the mine capital assets and mill capital assets. It, however, does not have loss carryover provision. Taxes are paid at rates that increase as income increases. However, amendments to the Yukon mining tax were enacted in late 2008 and are expected to come into force during 2009, resulting in a significantly different structure, more along the lines of mining taxes elsewhere in Canada.

Exploration and Development Updates

The following information of a scientific or technical nature has been prepared by or under the supervision of Stephen P. Quin, P. Geo., President and COO of the Company and has previously been disclosed in news releases that are available on the Company’s website or on SEDAR at www.sedar.com. The exploration activities at the Minto Mine site are carried out under the supervision of Brad Mercer, P. Geo., Vice President Exploration (Canada) with the Company. See “Experts – Names of Experts” and “Experts – Interests of Experts”. Mr. Quin and Mr. Mercer are “Qualified Persons” for the purposes of NI 43-101. 2008 Drill Program

The objective of the 2008 exploration program was both (a) to increase confidence in the existing mineral resources to a level that would potentially support conversion to reserves through infill drilling, and (b) to increase the overall mineral resource through drilling of previously untested areas. Drilling was focused on infilling the pattern on the Area 118 side of the Area 2 / Area 118 deposit and on infilling and steping out to the east on the Ridgetop deposit. A limited program of wide spaced drill holes to evaluate the potential for linking the Area 2 / Area 118, and Ridgetop mineral resources into one large mineralizing system was also undertaken.

A total of 23,840 metres of drilling were completed in 120 holes in the 2008 drill program; 17 holes for 4,740 metres were completed in early 2008, the results of which were reported on May 14, 2008. Following a break, a further 103 holes for 19,100 metres have been completed and drilling is now complete for 2008. Copper, gold and silver assay results have been received for all 2008 drill holes but the result has not been included in new mineral resource estimates, these are underway now and are expected to be released in early Q2 of 2009.

2008 Drill Statistics – Minto Property

Holes Completed Status Drill Area and Type of Hole

2008 Phase 1

2008 Phase 2

Assay Data Released (*)

Assay Data Pending

Exploration Holes Airstrip SW 0 1 1 0

Airstrip C. 0 0 0 0

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Holes Completed Status Drill Area and Type of Hole

2008 Phase 1

2008 Phase 2

Assay Data Released (*)

Assay Data Pending

Area 2 0 14 14 0

Area 118 0 31 31 0

Area 118 SW 3 0 3 0

Regional Picture 0 3 3 0

Copper Keel 0 4 4 0

Gap 1 0 1 0 Minto Valley 13 0 13 0 Ridgetop 0 47 47 0

Ridgetop W 0 3 3 0

17 103 120 0 Summary # of Holes to Date 120 # of Metres to Date 23,840

Comments on Results from 2008 Drilling

The 2008 drill program was successfully completed and a preliminary geological interpretation, based upon very wide spaced drill holes, appears to support the hypothesis proposed by Sherwood’s exploration group in 2006 that all the copper-gold mineralization at Minto is part of one continuous to contiguous system. Post-mineralization deformation (in the form of broad open folding and late brittle faults) gives the impression that the many mineralized centers identified to date are separate deposits. However, with the density of drilling that Sherwood has completed over three years, it now appears that faults and folds have just complicated the interpretation of what is perhaps one very large mineralized system. Since 2006, Sherwood worked toward linking these prospects and deposits on a geological basis, supported by drilling, and this process will continue in 2009 as drilling steps into crucial areas where there was little or no previous data, between previously defined zones of mineralization.

A synopsis of the drill results is set out below.

Ridgetop: Step-out drilling to the east in 2008 intersected much higher grade copper mineralization than typically found in Ridgetop drilling in 2007 or in prior historical programs. Typically, two thick copper bearing horizons are encountered, a chalcocite dominated horizon nearer to surface and a chalcopyrite +/- bornite horizon a few meters below that. Holes in this region often return 1% copper or better over 20-50 metres and 2% or better over 5-10 metres.

Area 118: Infill and some step-out drilling at Area 118 in 2008 returned excellent results, with 27 of 32 holes grading better than 1% copper over significant intervals; 10 of which grade better than 2% copper, including the highest grade intersection ever reported at Area 118: 4.71% copper and 3.4 g/t gold over 8.5 m in 08SWC-310.

Area 2: Follow-up drilling in 2008 on the last hole of 2007, 07SWC-269 in the southeast of Area 2, returned significant grade intersections both at shallow and intermediate depths. Drilling in 2008 concentrated on tiding up the margins of the deposit where some mineralization had remained open at shallow depths to the southeast and at intermediate to greater depths to the east after the 2007 program. Preliminary geological interpretations suggest possible continuity between Area 2 and Copper Keel to the east. More drilling is required to test this hypothesis.

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Minto North: The very first hole of the 2009 drill program, testing concident magnetic and GAIP anomalies intersected a thick horizon of high grade copper – gold mineralization at shallow depths (50m). Located in an area approximately 700m north of the current open pit mine eight holes have now been completed and results for three of these eight have been received and released (see news release on Febuary 17, 2009 available on the Company’s website at www.capstonemining.com). The best intersection to date is 26.4m (86.6ft) grading 2.7% copper and 1.2g/t gold including 4.1m (14.4ft) grading 7.1% copper and 1.03g/t gold in drill hole 09SWC-393. A system of access roads has been constructed to facilitate a follow-up drill campaign.

The exploration activities at the Minto project site are carried out under the supervision of Brad Mercer, P. Geo., Vice President Exploration (Canada) for Capstone. The analytical method for copper and silver includes digestion in aqua regia followed by absorption spectroscopy whereas gold is measured using fire assay with atomic absorption spectroscopy. When visible gold is noted in samples or regular analytical values exceed five grams per tonne, the pulp and screen metallic assay method is used to determine total gold content and gold content of different size fractions. This is considered industry best practice when dealing with coarse gold mineralization where a nugget effect is suspected. The results of the pulp and screen metallic assay is accepted as the most representative value and used in the assay database for resource calculations. Blank and standard samples are added to all sample shipments prior to submittal to the lab for QAQC. If more than two check samples assay outside of expected ranges, the work order is re-assayed. After the completion of planned drill programs, random check assays will be carried out by Chemex. Assay intervals reported herein are drill core lengths unless otherwise stated. Because the known deposits are essentially flat lying and most drill holes reported to date are vertical, true widths are generally expected to be the same as reported core lengths unless otherwise stated. Outlook

Capstone believes that considerable exploration upside exists for the Minto property because:

1) Early exploration had not realized the importance of the magnetite-copper sulphide association, particularly in the presence of bornite.

2) Most of the early exploration drilling predates the high resolution helicopter-borne magnetic survey completed in 1993 which shows some excellent untested magnetic anomalies of similar size and amplitude as the main deposit.

3) Early drilling was based on soil geochemistry which is so highly anomalous over a large area it was of little use for detailed drill targeting.

4) Early drilling was not focused by geophysics and drill holes were often erratically spaced or collared at highly varied orientations, giving a false impression of poor continuity. Many good targets remain poorly tested in areas of historical drilling.

5) South of the main deposit, the strong sub-horizontal, structural control of the mineralization was not recognized as being continuous over large aerial extents and thus the lateral continuity of mineralized structures was not recognized.

6) Many of the historical drill holes are too shallow and fail to adequately exploit the stacked nature of the mineralized horizons.

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7) Anecdotal evidence, from conversations with senior geologists who worked on the property in the 1970’s, suggests that the core was inconsistently logged and that some of the bornite mineralization was not recognized in early exploration holes.

8) Poor shoulder sampling and frequent gaps in the sampling of the historical drill holes, even within foliated horizons with reported visible copper mineralization, complicates the interpretation and modeling of the mineralized horizons.

9) Inconsistent recognition of important lithologies and structures in the historical drill records adds to the confusion of otherwise relatively simple geology and reasonably predictable geometry.

10) Past operators proceeded with the understanding that they would return to many of the exploration targets once the mine was in production. This scenario did not unfold as planned due to lower copper prices at the time, leaving much of the property under-explored often with mineralized horizons open in several directions.

11) Better infrastructure, proposed mill expansions and metal prices today may allow the exploitation of lower grade mineralization today versus the 1970’s.

12) The discovery, within a few hundred metres of the original deposit of relatively shallow mineralization at Area 2 by Sherwood geologists in 2006, validates the property assessment outlined above and the approach Sherwood and now Capstone, is implementing.

13) The recognition in 2007 / 2008 that what had previously been considered multiple and separate prospects is actually part of one very large and relatively intact hydrothermal system with much greater continuity that previously indicated.

14) The recent discovery at Minto North, north of the DEF fault which was thought by previous operators to be the northern limit of significant mineralization now opens up the northern half of the property, a scarcely explored area, largely ignored until now.

15) The Minto North discovery validates the approach of testing concident GAIP and magnetic anomalies.

Power Purchase Agreement

Sherwood, through MintoEx, entered into a power purchase agreement (“PPA”) with YEC dated February 12, 2007 for the provision of grid power to the Minto Mine. The rates for electrical power supply are set out in the PPA and are expected to provide power at an estimated C$0.10 per KWh which would provide some degree of power rate certainty to MintoEx. Access to electrical power from YEC’s Whitehorse-Aishihik-Faro grid will enable MintoEx to significantly reduce its electrical power costs as compared to the diesel generated power currently being relied on. The estimated benefit may be in the order of an average of C$3 million to C$4 million per year for the Minto LOM, and equates to C$0.07 to C$0.10 per pound of copper produced at the average production rate of 41 million pounds of copper in the first six years of operations. MintoEx also has been provided an opportunity to purchase interruptible power for the processing of its low-grade ore at rates estimated at C$0.06 per KWh, without priority over other secondary energy customers. This will increase the likelihood that the low-grade ore will be economic to process and therefore provide added revenue benefits to both parties. YEC is targeting delivery of grid power to the Minto Mine by the end of 2008.

MintoEx provided a C$24 million take or pay guarantee to YEC assuring YEC that it will provide at least C$3 million per year, just for the power supply. This guarantee applies whether or not MintoEx

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is taking power from YEC, provided it is available. This guarantee is backed by security against what will be an operational mine by the time YEC makes its substantive commitments.

As part of the PPA, YEC has been provided with the right to acquire the diesel generator units currently at the Minto Mine for the purpose of providing peak power to its system and potentially, energy, if required, while providing reliability benefits to the Minto Mine.

Over the term of the agreement, MintoEx will pay for the cost of the transmission spur line to the Minto mine site, estimated to be about C$10.8 million and contribute C$7.2 million to the construction of the 138 KV transmission line extension. MintoEx also, during the operation of the mine, committed to provide an C$850,000 payment contribution, which will be placed into a fund established by YEC to cover decommissioning costs at the end of the mine life.

On May 2, 2007, the Yukon Utilities Board denied approval of certain provisions of the PPA which meant that the PPA could not be implemented at that time. On May 29, 2007, Sherwood reported that the Yukon Utilities Board approved a revised Power Purchase Agreement between MintoEx and YEC. As a result, the high grade Minto Mine should have access to grid power by the end of 2008, significantly reducing mine operating costs and providing potential for material benefits to Yukon stakeholders. Key modifications to the PPA announced February 12, 2007 are a fixed rate to the end of 2012 of 10c/kwh, which rate would escalate on an annual basis in accordance with an inflation measure, reduction of the take-or-pay provision from C$24 million over eight years to C$12 million over four years, and a guarantee to YEC by the Yukon Development Corporation of the financing risks related to the Minto capital contribution payments. Yukon Development Corporation will also be responsible for any risk that the amount of the Company’s contribution for the main line may increase beyond C$7.2 million agreed to in the PPA.

As of the date of this Annual Information Form, construction of the power line has been completed and the Minto Mine was connected to the grid power. The In-Service date was November 22, 2008.

User Agreement for Skagway Ore Terminal

On January 18, 2007, Sherwood and MintoEx signed a user agreement with the AIDEA for the refurbishment, reconstruction and recommissioning of the Skagway Ore Terminal (“SOT”). The term of the agreement is seven years from the in-service date, with an option to extend for an additional ten years if agreed upon between both parties. Over the term of the user agreement, MintoEx will make quarterly user fee payments of approximately US$830,000 that are comprised of the reimbursement of the capital refurbishment costs and a facility use charge. The capital refurbishment costs have been amortized over the initial seven year term of the agreement at a fixed rate of interest of 7%. The facility use charge is based on an annual fee of US$323,750. MintoEx began using the SOT in July 2007 and the in-service date of the SOT was October 1, 2007. During 2008, the SOT was expanded by AIDEA at a cost of C$2.6 million. The cost of the expansion was an addendum to the original Agreement for Ore Storage and Loading Facilities with AIDEA and repaid on the same terms. As a term of the user agreement, MintoEx is responsible for contracting the operator of the SOT. Accordingly, on April 23, 2008 MintoEx and MSI signed a Skagway Ore Terminal Operations Contract (“SOTOC”) for the long term operation and maintenance of the SOT. The SOTOC is in effect until October 1, 2014.

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Forward Sales Agreements

As a condition of the project loan facility (“PLF”), in October 2006 MintoEx entered into forward sales contracts for approximately 65% of the first four years of copper, gold and silver production from the Minto Mine as identified in the feasibility study. During 2007, MintoEx entered into additional forward sales contracts covering approximately an additional 10% of the first four years production, in addition to extending the period of forward sales by approximately six months bringing the total to approximately 75% of the first four years production and approximately 50% of the next six months production as identified in the feasibility study. The Company has the option to roll the positions to match actual metal sales as long as the total positions in a given year do not exceed 75% of forecasted production. As a result of the expanded production profile outlined in the Minto LOM plan, forward sales now account for approximately 54% of the next 3.5 years of copper production and approximately 31% of current LOM copper production. This combination provides significant downside protection yet considerable upside opportunity as production plans increase. In addition, the Cozamin mine entered into certain forward sales over a period ending 2013. The table below summarize the forward copper sales position outstanding at December 31, 2008 for the combined Minto and Cozamin positions:

Copper Forward Sales

Year Pounds (000’s) Weighted average US$ price pound

2009 43,054 2.61

2010 34,412 2.38

2011 22,293 2.41

2012 2,646 3.22

2013 1,984 3.12

Total 104,389 2.52

During 2008 the Company closed out all of its gold and silver forward sales contracts as a condition of the precious metal sales agreement with Silverstone. Concentrate Off-Take Agreement

Also in October 2006, MintoEx entered into a concentrate off-take agreement with MRI of Switzerland whereby MRI will purchase 100% of the concentrates produced by the mine on attractive terms for payment, treatment charges and refining charges. Importantly, there is no price participation payable during this entire period, up to mid-2010. MRI also agreed to provide MintoEx a US$20 million inventory financing facility that MintoEx can draw on as concentrates are delivered into the concentrate storage shed at the mine site, thereby significantly reducing the working capital required during the ramp-up and operations of the Minto mine.

Secured Debt Facilities

In October 2006, MintoEx received credit approval from Macquarie for a debt package totalling C$85 million, which is comprised of a C$65 million PLF (which was converted at the time of the draw down to US$57.8 million equivalent) and a C$20 million subordinated loan facility (“SLF”). The PLF carries an interest rate of US dollar London Interbank Offered Rate (“LIBOR”) plus 2.25%. The first payment of US$4.9 million was due and paid on April 1, 2008 and the final payment due on

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May 31, 2010. The total amount outstanding against PLF at December 31, 2008 was US$29.9 million. The PLF was drawn in US dollars to mitigate the Minto Project’s potential exposure to currency fluctuations, given that project revenues are being generated in US dollars. The SLF carries an interest rate of Canadian dollar LIBOR (“C$ LIBOR”) plus 2.65% with the first payment due October 1, 2010 and the final payment due January 31, 2011. C$10.0 million had been drawn against the SLF at December 31, 2008.

Corporate Credit Facility

In March 2008 the Company closed with Macquarie a one year, C$10.0 million revolving corporate credit facility (“CCF”). The CCF bears an interest rate equal to the Canadian dollar London Interbank Offered Rate (“LIBOR”) plus a margin of 2.65% per annum on drawn funds. The facility attracted a 0.6% commitment fee on undrawn funds. As well, the Company issued to Macquarie, two-year warrants to purchase 1,182,400 common shares of Capstone at a price of C$3.35 per share. The funds were fully drawn by October 2008 but then fully repaid by the end of December 2008. Northern Tiger Transaction

MintoEx completed, effective June 26, 2008, the sale to Northern Tiger Resources Inc. (“Northern Tiger”) of a 100% interest in four properties located in the Dawson Range in the Yukon Territory (MEL, DAD, DEL, LED & BOND claims) and data sets comprised of a database of certain exploration reports, all in accordance with the terms of the acquisition agreement between MintoEx and Northern Tiger (the “Acquisition Agreement”). A copy of the Acquisition Agreement is available on SEDAR at www.sedar.com under Northern Tiger’s profile. MintoEx recorded a gain of C$1.2 million on the sale. As part of the transaction, MintoEx transferred to Northern Tiger a 100% interest in four Dawson Range exploration properties and an extensive historical exploration database for the region. The four properties encompass exploration targets where previous prospecting encountered copper-gold mineralization similar to that hosting MintoEx’s nearby Minto Mine. In addition, Northern Tiger and MintoEx have entered into a Regional Exploration Alliance Agreement (“REAA”), which provides for input and cooperation on planning and executing exploration programs and long term strategies for the area, sharing of proprietary technical expertise to assist in exploration and project advancement, and access to MintoEx’s infrastructure to facilitate exploration in the region. As consideration for the transfer of the exploration properties, historical database and the support provided to Northern Tiger through the REAA, Northern Tiger has issued to MintoEx 4,343,878 class “A” common shares in the capital of Northern Tiger at a price of C$0.30 per share, such shares to be held in escrow pursuant to a TSX Venture Exchange Form 5D Value Security Escrow Agreement. These shares equate to approximately 18% of the outstanding shares of Northern Tiger as at June 30, 2008 and have been classified as held for trading for accounting purposes. MintoEx is entitled to appoint one member to the five member board of directors. MintoEx’s holding in Northern Tiger will give its shareholders exposure to an exploration company focused on exploration targets generally located outside of, but in proximity to, the Minto Mine. In addition to its equity holdings in Northern Tiger, MintoEx retains back-in rights to acquire a 65% interest in any of Northern Tiger’s projects located within a 50 km radius that are found to have mineralization amenable to processing in MintoEx’s existing Minto Mine facilities.

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Kutcho Project (British Columbia) – Technical Information

The third of the Company’s material mineral properties is its 100% owned Kutcho copper-gold project located in the Liard Mining Division of Northern British Columbia (the “Kutcho Project”). Technical information contained in this Annual Information Form was extracted from a preliminary economic assessment report (the “Kutcho Report”) prepared by SRK dated May 31, 2008, entitled “Preliminary Economic Assessment Kutcho Project British Columbia”. The Kutcho Report is available for viewing under Kutcho Copper Corp.’s profile on the SEDAR website at www.sedar.com. Some of the information contained in the Kutcho Report has been updated for events occurring subsequent to the date of the Kutcho Report. Where appropriate, updates have been discussed in footnotes as well as under the heading “Kutcho Project – Exploration Program Update and Status”. The updated information has been prepared by or under the supervision of Stephen P. Quin, P. Geo., President and CEO of the Company. The exploration activities at the Kutcho Project are carried out under the supervision of Brad Mercer, P. Geo., Vice President Exploration (Canada) with the Company. See “Experts – Names of Experts” and “Experts – Interests of Experts”. Mr. Quin and Mr. Mercer are “Qualified Persons” for the purposes of NI 43-101. Property Description and Location

The Kutcho property is located in Northern British Columbia, approximately 100 km east of the town of Dease Lake, within NTS map sheet 104I/1. The centre of the Kutcho Main deposit is located at approximate UTM coordinates 537500E and 6452000N, and the geodetic coordinates for the center of the claim area are 58°12’N and 128°22’W. The Kutcho property is comprised of 26 mineral claims covering 7,183 hectares. Kutcho Copper acquired the claims through two separate purchase agreements. One of these purchase agreements is with Barrick and AMI for all claims exclusive of the 16 SMRB and 30 KC claims. The other purchase agreement was reached with Sumac (see below for additional details).

Kutcho Property Mineral Claims

Tenure Number

Tenure Type Claim Name

Map Number

Good To Date Status

Mining Division Area Tag Number

221863 Mineral LIN NO 1 FR 104I028 2017/jan/31 GOOD LIARD 25 38345 222120 Mineral JEFF 114 FR 104I019 2011/jan/31 GOOD LIARD 25 72858 227872 Mineral LIN #11 104I028 2017/jan/31 GOOD LIARD 25 459823M 227884 Mineral KC 3 104I028 2017/jan/31 GOOD LIARD 25 248603M 227886 Mineral KC 5 104I028 2017/jan/31 GOOD LIARD 25 248605M 227888 Mineral KC 7 104I028 2017/jan/31 GOOD LIARD 25 248607M 227896 Mineral KC 18 104I028 2010/jan/31 GOOD LIARD 25 248618M 552782 Mineral 104I 2017/jan/31 GOOD 306.8708 552785 Mineral 104I 2017/jan/31 GOOD 409.3374 552792 Mineral 104I 2017/jan/31 GOOD 153.5012 552794 Mineral 104I 2017/jan/31 GOOD 597.0909 552796 Mineral 104I 2017/jan/31 GOOD 494.7866 552805 Mineral 104I 2017/jan/31 GOOD 1074.737 552809 Mineral 104I 2017/jan/31 GOOD 136.4219 552812 Mineral 104I 2017/jan/31 GOOD 136.3734 552814 Mineral 104I 2017/jan/31 GOOD 357.8988 552816 Mineral 104I 2017/jan/31 GOOD 306.7685

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Tenure Number

Tenure Type Claim Name

Map Number

Good To Date Status

Mining Division Area Tag Number

552820 Mineral 104I 2017/jan/31 GOOD 340.9153 552823 Mineral 104I 2017/jan/31 GOOD 921.8274 552911 Mineral PASS1 104I 2017/jan/31 GOOD 136.4055 552913 Mineral ADD1 104I 2017/jan/31 GOOD 17.0478 552914 Mineral ADD2 104I 2017/jan/31 GOOD 17.0617 556552 Mineral ADD3 104I 2017/jan/31 GOOD 374.8772 556555 Mineral ADD4 104I 2017/jan/31 GOOD 102.2875 569607 Mineral 104I 2009/nov/07 GOOD 1090 585957 Mineral MOTHER 1 104I 2009/jun/07 GOOD 426.6447 585958 Mineral MOTHER 2 104I 2009/jun/07 GOOD 409.5531 585959 Mineral MOTHER 3 104I 2009/jun/07 GOOD 375.2927 586844 Mineral ACCENT 1 104I 2009/jun/25 GOOD 426.4722 586846 Mineral ACCENT 2 104I 2009/jun/25 GOOD 273.0236 586848 Mineral SOUTH FORK 1 104I 2009/jun/25 GOOD 426.915 586849 Mineral SOUTH FORK 2 104I 2009/jun/25 GOOD 426.8777 586850 Mineral SOUTH FORK 3 104I 2009/jun/25 GOOD 426.8306 586851 Mineral SOUTH FORK 4 104I 2009/jun/25 GOOD 426.8585 586852 Mineral TRONDHJEMITE 1 104I 2009/jun/25 GOOD 426.6518 586854 Mineral TRONDHJEMITE 2 104I 2009/jun/25 GOOD 426.6946 586855 Mineral TRONDHJEMITE 3 104I 2009/jun/25 GOOD 426.5532 Total 12047.6

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LOCATION MAP

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CLAIM AREA

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Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Kutcho property is located approximately 100 km east of Dease Lake, BC. Dease Lake is a community of about 650 people and has basic services such as an airstrip, medical clinic, school, restaurants, college extension campus, grocery store and hotels. The Dease Lake area offers a pool of potential project employees that would be supplemented with people from outside the region. Dease Lake is reachable via a good all weather road, Highway 37 North, to Smithers (600 km to the south) and Watson Lake (250 km to the north). Dease Lake is 400 km from the port of Stewart. A marginal, seasonal road runs to the property but is only suitable for summer access with special equipment. The property is accessible by helicopter, typically from Dease Lake or Smithers. Access by fixed wing aircraft is via a 900 m gravel airstrip located at the junction of Kutcho and Andrea Creeks. A 10 km road, navigable by four-wheel drive truck, allows access to the deposit from the airstrip. The property can also be accessed by four wheel drive or vehicles along a track road from Dease Lake. However access along this road is typically only possible during dry periods (late summer and early fall) due to extremely muddy sections. The property is located within the Cassiar Mountains, north of the continental divide separating the Arctic and Pacific watersheds. The area is mountainous and moderately rugged, with elevations in the 1,400 to 2,200 metre range. Vegetation is alpine forest, with the tree line at roughly 1,500 metres elevation. Snow cover, particularly on north facing slopes, can persist for nine months of the year. Summer weather conditions are cool and moist; winters are commonly cold and dry. The average annual rainfall is 250mm, with an average snowfall of approximately two metres. The average annual temperature for the area is -1°C. Topography in the region has been moderated by a combination of structural fabric and the last two periods of glaciation, resulting in an intersecting pattern of east-west and north-south ridges and till and outwash filled valleys. The open pit mine, waste rock dumps, dry-stack tailing location, plant site and employee accommodation are all planned to be located within an area outlined by Andrea, Sumac and Playboy Creeks. Power for the project is proposed to be self-generated using turbines. Water sources for the project have not been specifically defined but possible options include run-off collection, wells and drawing from creeks. History

On May 27, 2008, Sherwood acquired 100% ownership in Western Keltic Mines Ltd. (“Western Keltic”) by amalgamating Western Keltic with a subsidiary so that the amalgamated company, Kutcho Copper Corp., owns the Kutcho property. Mineralization was first discovered by Imperial Oil Ltd. on what is now known as the Kutcho property in 1968 in the course of prospecting follow-up of a regional stream sediment anomaly. Twenty claims were staked over the as yet undiscovered massive sulphide deposit, but these lapsed with the dissolution of a joint venture exploration program of the region between Imperial Oil and its partner. Sumac subsequently conducted stream sediment sampling and staked 16 claims covering an anomalous stream and the immediate regional geological strike. Imperial Oil (later known as Esso Minerals Canada Ltd.) staked a much large area that encompassed the Sumac claims. Successful exploration work by both companies resulted in additional staking; by 1982 the property configuration was established roughly as it is at present, a combined 60,000 metres of drilling was

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completed by both companies, and three massive sulphide lenses were defined. Both companies completed environmental, metallurgical and engineering work on the deposits under the auspices of a 50/50 joint venture covering development work. A prefeasibility study was completed by Wright Engineers Ltd. in 1985. The study indicated that an 11% internal rate of return would be realized at a copper price of US$0.95/lb; based on this, the companies shelved the project pending further and favourable exploration results. Limited work and additional geophysical surveys by Esso between 1985 and 1988 did not enhance the project’s economic potential. In 1989, Homestake Canada Ltd. (“Homestake”) bought most of Esso’s mining assets, and in 1990, Homestake optioned the Kutcho property to American Reserve Mining Corporation (“ARMC”). In 1990, ARMC funded a C$1.1 million exploration program with Homestake as the operator. The program included 28 drill holes for 7,031 m, designed to test the presence and extent of favourable geology and alteration in outlying target areas. The program was successful in this regard, but failed to identify additional potentially economic mineralization. ARMC carried limited engineering work, but no further exploration and in 1993 relinquishing the option while retaining a 20% interest in Homestake’s property. Teck optioned the property in 1992, and carried out UTEM surveys over the Esso West Zone and along favourable strike extensions. These surveys were unsuccessful in defining additional conductors, largely due to the presence of extensive and conductive argillaceous sediments in the hanging wall. Teck eventually dropped their option. The discovery of the Kutcho deposits prompted Noranda to stake the Kutcho formation west of Kutcho Creek. Noranda conducted geophysical surveys and carried out a small drilling program. The claims were eventually allowed to lapse. They were re-staked in 1995 by Gary Belik, who optioned the claims to Atna Resources Ltd. (“Atna”) in 1997. Atna conducted UTEM geophysical surveys and an extensive drilling program. Weak to moderately mineralized and altered zones were intersected, but Atna ultimately terminated the option, concluding that mineralization was too structurally complex and lacked clear geophysical signatures. Results of Atna’s work were mixed, and although no deposits were discovered, significant but weak to moderately mineralized alteration zones were intersected. Structural complexity and lack of clear geophysical targets prevented additional work and the option was terminated. Homestake was purchased by Barrick in 2003. In that same year, Western Keltic entered into negotiations to purchase the Kutcho property from Barrick and Sumitomo. The purchase was completed in 2004, and over the next three years, Western Keltic carried out diamond drilling within the Main and Esso deposits. In 2004, drilling focused on confirming historical results and obtaining material for metallurgical studies. In 2005, drilling by Western Keltic tested the Main deposit’s up-dip and down dip extension potential, as well as potential western extensions to the Esso deposit. The Sumac deposit was also drilled in 2005 to test for higher grade zones. A third round of drilling in 2006 focused on infill drilling within the five-year pit area of the Main deposit. The Kutcho property was entered into the Mine Development Review Process in 2006 and Environmental Assessment (“EA”) studies were initiated by Rescan to provide baseline data for provincial and federal EA reviews. On May 27, 2008, Sherwood acquired 100% ownership in Western Keltic by amalgamating Western Keltic with a subsidiary to create Kutcho Copper, and Kutcho Copper owns the Kutcho property. Geological Setting

The Kutcho property lies within the King Salmon Allochthon (“KSA”), a narrow belt of Permotriassic island arc volcanic rocks and Jurassic sediments. The KSA is sandwiched between two northerly-dipping east-west thrust faults; the Nahlin fault to the north, and the King Salmon fault to the south. Structural fabrics, including penetrative foliation and axial planes of major folds, parallel these east-west trending faults. The volcanic component of the KSA is thickest in the area where it hosts the volcanogenic massive sulphide (“VMS”) deposits. The thickening of the belt is attributed partially to primary deposition, but also to stratigraphic fold and possibly thrust fault repetition. The Kutcho

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strike-slip fault terminates the KSA to the east near the eastern edge of the property (Gabrielse, 1978); to the west, the KSA extends for hundreds of kilometres. However, Kutcho Formation rocks thin to the west. They do not occur or are under-exposed 10 km to the west of Kutcho Creek. Stratigraphy of the KSA consists primarily of the Kutcho Formation. These rocks are overlain by upper Triassic Sinwa Formation limestone, which in turn is overlain by Lower Jurassic Inklin Formation sediments (predominantly argillites). Major folds are preserved and evident in the Sinwa limestone, or at the contact between the Kutcho and Inklin Formations. Stratigraphy Stratigraphy of the Kutcho property has been described by Bridge (1984), Thorstad (1983), and Holbek (1985) and will only be briefly reviewed here. The stratigraphy in the upper part of the Kutcho Formation is best understood where units are better exposed and drill information is available. Conversely, lack of drill hole data and poor exposure lends a poor understanding to the footwall stratigraphy. The lowest rocks in the section are exposed on the southern ends of Imperial and Sumac Ridges. These rocks include interbedded basalts, basaltic tuffs and wackes, rhyolitic lapilli tuffs, and possible trondhjemite. The mafic rocks are fine to very fine-grained, chloritic, equigranular to weakly porphyritic, and are therefore commonly termed greenstone. The lapilli tuffs are pale grey and siliceous, and commonly contain very fine quartz phenocrysts and lenticular fragments from 0.5-3.0 cm in length. Textures can only be seen on weathered (but lichen-free) surfaces. The trondhjemite unit is described as a fine-grained, equigranular, plagioclase-rich unit (Pearson and Pantaleyev, 1975 and Bridge et al., 1983), but it is very similar to some of the tuffaceous units as well. It can be discerned by a weak but pervasive carbonate-chlorite-pyrite or propylitic alteration.

“Ore sequence” rocks, which include lapilli tuffs, crystal-lithic tuffs, and quartz and quartz feldspar crystal tuffs, overlie the greenstone-lapilli tuff package. These rocks tend to be thin, interbedded units, and are variably but weakly altered distal to the deposit, with a distal exhalative zone typically marked by a fine quartz-crystal ash tuff with silica rich laminations and rare thin zones of ferroan dolomite. Additional facies changes have been observed within the ore sequence rocks; lapilli fragments and phenocrysts are much coarser grained in the vicinity of the mineralization and become progressively finer grained to the south and west. The quartz-feldspar crystal tuff grades from quartz-rich to more feldspar-rich in a southerly direction away from the deposit. Sulphide mineralization occurs at or near the contact between footwall lapilli tuff and hanging wall quartz-crystal tuff.

A large zone of feldspar crystal tuff with almost no free quartz occurs a few hundred metres south of the sulphide zones. It is unclear as to where these rocks fit into the stratigraphic sequence. A coarse breccia textured rock, interpreted as a debris flow, immediately overlies the sulphide zones. The fragments are poorly sorted (fragments are 2 to 30 cm in size) subrounded, and identical to the crystal tuff matrix, but with a much higher epidote content.

The Tuff-Argillite Unit (“TAU”) refers to a sequence of gabbroic to basaltic intrusive sills and dykes, greywackes, and argillite that separate the ore sequence from the overlying conglomerate unit. In the deposit area, the gabbroic units (metagabbro) are commonly coarse-grained, and become much finer grained to the east, west and up sequence. An increase in the volume of argillite to the west suggests that this is the direction towards the marine basin. Drill hole data and data collected from the adit support the inference that the base of the TAU is a thrust fault. The basal thrust plane does not cause significant offset of the Sinwa limestone in the fold nose to the west, implying a scissor-type action with increasing movement to the east.

The TAU is overlain and truncated to the west by the Kutcho Conglomerate. The conglomerate is poorly sorted, heterolithic, clast-supported and composed of sub-rounded clasts derived from all of the underlying lithologies. The conglomerate is conformably overlain and transitional into the Sinwa

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limestone, which in turn appears to be conformably overlain by Jurassic aged Inklin Formation argillite.

Structure Kutcho Formation rocks are generally characterized by an axial planar foliation that has a relatively constant strike direction of west to west-northwest (270–290°) with moderate to moderately steep northerly dips (45–65°). Variations in the foliation from east to west suggest low amplitude warping or buckling of the regional fold axis. A shallowing in the dip of the foliation with structural depth may indicate that the axial planes are convex to the south. Rocks may be either tightly or openly and asymmetrically folded. The folds are inclined and verge to the south, and plunge shallowly to the west. Folds are most evident in the western part of the property where well-bedded competent units predominate.

Stratigraphic interpretation within the Kutcho Formation has been further complicated by inferred foliation parallel thrust faults. Although the frequency and magnitude of these faults are indeterminate, their presence is consistent with the style of regional deformation, and can be inferred from missing stratigraphy, shearing, contact geometry and topographic evidence. Because these thrust faults are largely inferred, interpretation of the stratigraphy within and outside the deposit remains open. This has obvious and inherent implications for control and distribution of sulphide mineralization within the deposit area and the belt. Structural and stratigraphic interpretations in the vicinity of the sulphide deposits may be further complicated by lithological competency contrasts producing disharmonic folding (Holbek and Heberlein, 1986), and variations in fold amplitudes (due to variations in the thicknesses of specific stratigraphic units).

Exploration

No new exploration work had been carried out by Kutcho Copper since the submission of the Kutcho Report except that, on April 28, 2008, an infill program of diamond drilling commenced on the Main Deposit and was completed on August 3, 2008. As a result of this work a new NI 43-101 mineral resource estimation was completed on February 10, 2009 on the Main Deposit and similar NI 43-101 mineral resource estimations were also completed on the Sumac and Esso deposits. The latter two estimates were undertaken despite no new drilling in the area in order to bring all mineral resource estimations on the property into line with respect to a similar methodology. The results are summarized below. A total of 9,905 metres of HQ size core was drilled in 2008by 669856 B.C. Ltd., doing business as SCS Diamond Drilling, of Kamloops, BC. The drill contractor was under the direct supervision of Kutcho Copper personnel who were also responsible for supervising temporary employees and contractor geologists in core logging, sample collection, sample preparation, QA/QC programs and preparation of sample shipments to various analytical facilities for either assay or metallurgical testing. The principal objectives of the drill program were to:

• Infill gaps in previous resource drilling programs and enlarge the assay database;

• Better define and test higher grade trends for expansion within the Main deposit;

• Demonstrate grade continuity in order to support a better resource classification;

• Provide material for extensive metallurgical testing that will relate to a revamped mine plan (extensive samples were collected but the metallurgical testing remains to be completed);

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• Provide geotechnical information for open pit design and for assessment of infrastructure locations; and

• Provide information to support project permitting activities and to develop a mine closure plan.

The program was designed principally to increase the assay sample density and to provide material for further metallurgical and environmental testing. The 2008 drill program in-filled gaps in earlier work that had already defined the limits and overall geometry of the mineralized zone. The latest program did not result in a material change to these limits or the geometry of the resource model, but it did result in a more robust and higher graded mineral resource estimate for the Main deposit. This also provided more confidence in, and thus increased, the classification levels for much of the overall mineral resource. The 2008 drill program was initiated as a basis of support to ultimately advance the Kutcho Project toward completion of a techncial study to support a production decision. The Main deposit is one of three known mineral deposits comprising the Kutcho Project, it is by far the largest of the three deposits and the closest to surface. It was the focus of the Kutcho Report, the results for which were announced on June 12, 2008. The Kutcho Report identified a number of opportunities to significantly enhance the project economics versus those set out in the Kutcho Report, with increased resources within the production model and improved metallurgical recoveries being two of the most significant. The 2008 drill program therefore assisted in completing this aim. Mineralization

The three known deposits that comprise the Kutcho Project form a westerly plunging linear trend. From east to west, the deposits are termed the Main (previously known as Kutcho), Sumac, and Esso deposits. The Main deposit outcrops at its eastern end; the Esso deposit occurs at depths about 400 m below surface. Main Deposit The Main deposit has an elliptical, lenticular shape and is approximately 1,500 m long and 260 m wide (down-dip), with a maximum thickness of 36 m. The long axis of the deposit plunges to the west at about 12°, just slightly less than the regional fold axes. The deposit is conformable with stratigraphy, and dips moderately to the north. The dip of the deposit changes from east to west and north to south, due to a gentle warping of the deposit. The deposit is narrowest at its up-dip edge, where it eventually pinches out. The down-dip edge is thicker, giving the deposit a flattened arrowhead shape in cross-section. The Main deposit is composed of three depositional cycles; the first pyrite rich cycle is interpreted to have been followed by a copper-rich cycle, in turn followed by a zinc-rich cycle. These are separated by cycles of silica or carbonate-rich exhalative. The morphology of the sulphide zone, along with observed volcanic and depositional textures suggests a depositional environment akin to a structural depression, such as a half graben like structure. Interlayering of fine sulphide, carbonate, silica and volcanic ash detritus suggests a roughly sedimentary depositional mode at the seafloor-seawater interface. Sulphide mineralogy of the deposit is relatively simple, consisting of pyrite, chalcopyrite, sphalerite, and bornite, with minor sulphide minerals chalcocite, tetrahedrite, diginite (and related minerals), galena, idiaite, hessite, and electrum. Gangue minerals include quartz, dolomite, ankerite, sericite, gypsum, and anhydrite. Fluorite and barite are very minor constituents. Detailed drill core logging along a single longitudinal section of drill holes was used to determine the internal stratigraphy of the Main deposit (Holbek and Heberlein, 1986). The depositional cycles as

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described above have been overprinted by continued hydrothermal activity resulting in sulphide replacement mineralization, irregular depositional surface, localized slumping of sulphide mineralization or chimney collapse, and late stage (post depositional) hydrothermal activity. Vent area indicators such as late overprinting by oxidized copper species and enrichment in precious metals are interpreted as indicators of vent areas, suggest venting along a linear trend on the down-dip side of the deposit; no well-defined areas of classical footwall stringer mineralization have been identified by drilling. The upper contact of the sulphide mineralization is sharp, with almost no primary sulphide minerals occurring in the hanging wall rocks, but intense sericite and carbonate alteration of feldspar can occur for up to 50 m above the sulphide contact. The base of the deposit consists of nearly barren massive pyrite with interstitial quartz, and its contact with the upper mineralized zone can be sharp or gradational. Quartz-sericite schist with bands of generally barren massive to semi-massive pyrite occurs below the footwall pyrite zone. In drill core, the footwall material typically exhibits “poker chip” cleavage, although it is quite competent in the underground adit. Sumac Deposit Due to its relatively low grade, the Sumac deposit has little attention historically. The Sumac deposit sits within a local depression relative to the Main and Esso deposits, and is very nearly continuous with the Esso deposit. The shape of the deposit was determined largely from conductance contours generated by a chargeability geophysical survey conducted in the mid-1980’s and from 14 drill holes drilled at 100–200 m spacing. The Sumac deposit is finely banded massive, and has the highest sulphide content (+90%) of the three deposits. Alteration of the host stratigraphy around it is very similar to that of the other two deposits. Some of the better intercepts include 1.45% Cu, 2.56% Zn, and 23.7 g/t Ag over 26.1 m, and 1.37% Cu, 1.9% Zn, and 26.2 g/t Ag over 23.4 m. Western Keltic drilled an additional four holes in the western part the Sumac deposit in 2005 to establish the western cut-off of the deposit. Esso Deposit The Esso deposit was discovered in the course of drilling favourable stratigraphy west of the Main and Sumac deposits. The deposit occurs as an elongate lens at depths between 400 and 520 metres below surface, and measures approximately 580 m in length, up to 100 m in width, and up to 21 m in thickness. Historical drill holes are spaced at approximately 10–30 m along 60 m and 120 m spaced sections. Western Keltic completed 16 drill holes and wedge branches in the Esso deposit area in 2005 within and peripheral to the deposit. Current and historical drilling is sufficient to define the overall size and geometry of the deposit. Other Mineralization Other zones of mineralization include the Footwall Zone (“FWZ”), and the Jenn Area. The FWZ is a 2 to 5 metre thick zinc-rich zone that occurs approximately 100 m stratigraphically below the Main deposit. Drilling by Sumac and more recently by Western Keltic indicates that the FWZ has insignificant strike or down-dip extension potential. The Jenn Area located at the eastern end of the property, consists of significant alteration and localized mineralization intersected in a number of drill holes by Esso Mining Company (“EMC”). Structural and stratigraphic complexities, along with the absence of untested airborne geophysical anomalies, limit the economic potential of the Jenn Area.

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Drilling

Since the discovery of the Kutcho deposits, approximately 97,000 m of diamond drilling in 443 drill holes and 43 wedge branches has been completed on the property. The bulk of this drilling was completed by EMC and Sumac from 1974 to 1983. ARMC and Homestake drilled 7,031 m in 28 exploration holes completed in 1990. Between 2004 and 2006, 87 holes for approximately 16,000 m were completed by Western Keltic. A further 78** holes were completed by Kutcho Copper in 2008.

A summary of diamond drilling per deposit and by each company, including pilot and wedge holes drilled in the Esso deposit is summarized in the table below. There is sufficient drilling to determine the shape and outline the margisn of the main and Esso deposits. The general shape of the Sumac deposit was determined from both drill data and chargeability geophysical survey data, as there are only 14 drill holes in and around the deposit.

Summary of Drill Holes to the end of 2008

Company Main Deposit

Sumac Deposit

Esso Deposit

Exploration/ Other Total

Sumac 102 10 17 129 EMC 49 24 (+39*) 48 121 (+39*)

ARMC 2 26 28 WKM 68 4 11 (+4*) 4 87 (+4*)

Kutcho Copper 78** 78 Total 299 14 35 (+43*) 95 365 (+43*)

* wedge braches off pilot holes; **81 holes were collared but three were abandoned

Drill collar and claim locations surveys (in mine-grid coordinates) were conducted by McElhanney Engineering Services Limited (“MESL”); however surveying was only periodic until 1983. In 2006, MESL surveyed all later holes drilled by Western Keltic, and surveyed or resurveyed many of the historical holes at the same time. These later survey plus the resurvey points were completed in UTM coordinates; survey points that were not resurveyed were converted to UTM grid points by MESL.

Most of the drill sites have been reclaimed, although many collars are still locatable and most of the drill core is stored on the property. Western Keltic has recovered all available historical data and has generated two separate master databases for resource work and exploration. The Main deposit was initially drilled at 120 m spaced sections with drill holes spaced approximately 60 m along section lines. This pattern was subsequently infilled to approximately 30 m spaced drill intersections along 60 m spaced sections; recent drilling by Western Keltic and Kutcho Copper has reduced the drill spacing to 30 m or less in most areas. Recoveries were generally very good in the historical holes (mostly BQ size core) with only rare core loss in minor fault zones. The more recent drilling has been a combination of HQ and NQ in the Main deposit and NQ (or BQTW in wedge branches) within the Sumac and Esso deposits. The majority of holes were drilled at dips between -45° to -60° to ensure that mineralized intersections were close to true width.

Main deposit drill holes were assayed for copper, zinc, silver; most holes were assayed for gold and more than half of the holes have sulphur assays. Copper, zinc, silver and gold were assayed in Sumac and Esso deposit drill holes. The historical database also includes specific gravity (“SG”) data for all three deposits. The sample intervals were generally longer on the Esso side; Sumac used sulphide type and sulphide content as main parameters in breaking out samples, resulting in overall lower assay intervals.

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The 2008 drill program commenced on April 28th and was completed in August 2008; it was designed to infill the Main deposit resource area, principally to increase confidence in the resource classification, better define higher grade trends and provide sufficient sample material to conduct more extensive metallurgical sampling in support of a mine plan. Additional data such as measured bulk densities, fracture density, and other geotechnical data were recorded as well to aid in this evaluation. The overall aim was to produce a more robust geological, geotechnical and resource model that could support a feasibility study. The program was conducted in two concurrent phases; Phase 1 was comprised of HQ-size core drilling concentrated on providing metallurgical sample material and increasing the assay data in gaps in the current resource. Phase 2 was NQ2-size core designed to infill gaps in the resource where further metallurgical sampling was not required but where additional assay data would improve the existing resource model. Approximately 9,904.95 metres of drilling in about 81 boreholes, including three abandoned (lost) holes, were drilled in 2008 to infill the Main deposit in an area between sections 537,300E and 538,200E, and from elevations 1400m ASL to 1,600 m ASL. The objective was to increase the overall pierce point density to a nominal 30m x 30m in the parts of the deposit that have a reasonable expectation to be mined based upon previous mine plans and assuming a positive feasibility study. All new exploration holes were drilled on an azimuth of 180o and range in length from 55 m to 200 m and with inclinations ranging from -90o to -45o but averaging -60o to -45o. This average or typical inclination ensures that most mineralized intercepts are at or near perpendicular to the enveloping hanging wall and foot wall surfaces and therefore the mineralized intercept can be expected to be at or close to true widths. Sampling Method and Approach

Initial drilling of the Main deposit by EMC and Sumac was carried out simultaneously in the summer of 1974, although within different areas of the deposit. The deposit was subsequently grid drilled, with both companies utilizing a common grid consisting of 60 m spaced north-south grid lines. Western Keltic completed a large diameter (HQ) core drilling in the Main deposit in 2004 to verify historical data, obtain metallurgical samples and to infill areas of lower drill hole density. Later drilling in 2006 concentrated on infilling the starter pit area on approximately 30 m centres. Initial sample cutting by both EMC and Sumac was carried out using a mechanical splitter, with both companies subsequently switching to a diamond core saw. Sampling methods throughout all drilling programs on the property were essentially the same; variations in sampling methodology is noted within mineralized zones, as discussed in the following section. It is the opinion of Garth Kirkham, P.Geo., an author to the Kutcho Report, that sample methods as performed by EMC and subsequently Kutcho Copper, as reported within the Wardrop (2007) pre-feasibility study, were performed in a professional manner and are well within industry standards. The 2008 season resulted in 9904.95 metres of additional drilling, including new assay data in addition to new metallurgical holes. Much of this new data will replace historic drilling results which current industry best practices adhered to. Sampling and Analysis

Western Keltic contracted AMEC to perform due diligence on the sample database of the Kutcho property and to assess whether the historical data was suitable for use in resource and reserve estimates. The scope of this work included data verification and quality control and quality

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assurance. AMEC also worked with company personnel so that the current work and modern data would comply with current standards of quality assurance and quality control.

Historical drill hole data, obtained in digital ASCII format were obtained from Barrick. The original drill hole was edited in ASCII format in order to load into Surpac Vision, a program from Surpac Software International. Drill holes that were not in the database were manually entered from the drill logs. New drill hole sections were generated for comparison with sections in the EMC and Sumac report. Where original assay lab reports were not available, as was the case with Sumac data, analytical results were obtained from the original typed logs.

AMEC confirmed that while neither EMC nor Sumac documented their sampling and analytical protocol, both companies employed the highest industry standards of the time. Evidence of pulp sample duplicates, for example, was gleaned from some of the EMC drill logs; AMEC noted that the duplicate samples exhibited acceptable variances between duplicates. There is no documentation of any analytical problems.

Variations in drill hole deviation was also examined by AMEC. Drill hole deviation (specifically flattening rates) were similar for both EMC and Sumac. This can be attributed to the fact that both companies drilled mostly at the same azimuth of 180°, used roughly the same range of inclinations (-45° to -90°), the same drills (Longyear 38 Flyable), and the same core diameter (BQ). Western Keltic experienced a lower degree of flattening due to improvements in drill and bit technology.

AMEC noted EMC and Sumac physically sampled drill core to different standards. EMC geologists tended to take longer samples, and omitted shouldering mineralized zones in the earlier exploration years, although these practices were corrected in the later years. AMEC concluded that while it is unlikely that EMC missed sampling of significant grade intervals, the degree of dilution would be difficult to estimate. Sumac used geological and sulphide mineralogical criteria to constrain sampling intervals and collected shoulder samples throughout. Both companies used different analytical labs for most of their assaying. AMEC concluded that the sampling and analytical methodology employed by both companies were within acceptable industry standards.

Western Keltic carried out three diamond drilling programs on the Kutcho Project between 2004 and 2006. In 2004, they drilled 21 HQ drill holes in the Main deposit to verify historical drilling and to collect material for metallurgical testing. This program also included ten NQ drill holes and four BQTW wedge branches in or proximal to the Esso deposit, and seven HQ drill holes in the FWZ. The 2005 drill program consisted of 16 NQ drill holes in the Main deposit; four NQ drill holes in the Sumac deposit; four HQ drill holes and two BQTW wedge branches in the Esso deposit and two other drill holes. In 2006, Western Keltic drilled 23 BQTW drill holes within the eastern part of the Main deposit. In all three drill programs, Western Keltic utilized similar sampling methodology and analytical techniques, with all routine analyses completed by Chemex. Copper, zinc and silver were analyzed within a 33 element suite by the induced coupled plasma (ICP) method. Where values for copper, zinc, and silver were above the ICP detection limits (10,000 ppm for copper and zinc; 100 ppm for silver), the samples were assayed by AA following an aqua regia digestion. Gold was analyzed by fire assay. Western Keltic inserted internal blanks and standard reference material into the sample stream at a rate of one per 10 to 20 samples. These were numbered consecutively with the core samples. Specific gravity (“SG”) measurements were taken on most drill core samples; highly altered rock was generally excluded for SG purposes. SGs were measured on site and calculated using the following formula:

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Sample weights were accurate to the nearest tenth of a gram. It is Mr. Kirkham’s opinion that sample preparation and analysis performed by Kutcho Copper and reported within the Wardrop (2007) pre-feasibility study were performed in a professional manner and are well within industry standards. The 2008 drilling campaign incorporated protocols and procedures currently being successfully implemented at the Minto Mine. The analytical method for copper, zinc and silver includes aqua regia digestion followed by ICP-AES (atomic emission spectroscopy). If either copper or zinc reports over 2500ppm (0.25%), ore grade analysis is conducted for copper, zinc and silver. Gold is measured using fire assay followed by atomic absorption spectroscopy. When visible gold is noted in drill core samples or regular fire assay values exceed five grams per tonne, the pulp and screen metallic assay method is used to determine total gold content and gold content of different size fractions. This is considered industry best practice when dealing with coarse gold mineralization where a nugget effect is suspected. The result of the pulp and screen metallic assay is accepted as the most representative value and used in the assay database for resource calculations. All analytical work is carried out by Chemex. Blanks and standard reference materials are used for QA/QC. If more than two check samples assay outside the expected ranges, the entire work order is re-assayed. After the completion of the planned drill programs at the Kutcho Project, random check assays will be carried out by Acme Analytical of Vancouver.

Security of Samples

Drill core was transported from the drill by truck or helicopter to the core logging facilities, situated adjacent to the Kutcho airstrip approximately eight km west of the drill area. Core was geotechnically processed, geologically logged and marked and tagged for sawing. Metallurgical testing and studies was performed on approximately 70% of the deposit intersection. Metallurgical samples consisted of sawn half-core which were collected by a geologist and sealed in a labeled, nitrogen-filled bag. The remaining half-cores were then sawn into quarter core samples. These were collected by the geologist, who recorded their specific gravities, placed the samples in plastic bags, and heat-sealed the bags closed. For non-metallurgical samples, the process was the same, but the bags were not packed with nitrogen. The bagged samples were then placed into labeled rice bags and shipped to Dease Lake or Smithers by aircraft to the aircraft hangar. They were then transported to the laboratory by the trucking company. Mineral Resource and Mineral Reserve Estimates

Mineral Resource Estimate The mineral resource estimate for the Main deposit at Kutcho was completed by Garth Kirkham, P.Geo., of Kirkham Geosystems Ltd., using industry standard methods that conform with NI 43-101 and utilizing MineSight™ Software incorporating results from 78 new drill holes completed on the main deposit in 2008. Mr. Kirkham also updated the resource estimations for the ESSO and Sumac deposits where no new drilling was conducted. The purpose of these updates was to maintain as much consistency as possible to the estimation methodology for all deposits on the property as the aim is to use these mineral resources as the basis of a property wide economic evaluation. These mineral resource estimates are based upon a database of 429 drill holes supplied to Kirkham Geosystems Ltd. by Kutcho Copper Corp. and summarized in the tables below.

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Mineral Resource Estimate at a 1.5% Copper Cut-Off for All Deposits (1)

Grade Contained Metal Class Tonnes

(000’s) Copper (%)

Zinc (%)

Gold (g/t)

Silver (g/t)

Copper Equiv.(%)(2)

Copper (millions lb)

Zinc (millions lb)

Gold (000s oz)

Silver (000s oz)

Measured (M) 5,421 2.15 2.86 0.34 31.4 3.70 256.6 341.8 59 5,482

Indicated (I) 4,994 2.14 2.83 0.39 33.5 3.74 235.8 312.0 62 5,376

M & I 10,415 2.14 2.85 0.36 32.4 3.72 492.4 653.8 121 10,857 Inferred 1,893 2.09 2.93 0.46 33.6 3.78 87.3 122.4 28 2,047 (1) Numbers may not total due to rounding (2) Equivalent copper grade calculated using these metal prices in US$: Cu=$1.50/lb, Zn=$0.50/lb, Ag=12.00/oz, Au=$700.00/oz Kirkham Geosystems Ltd. prepared the mineral resource estimate for the three Kutcho deposits. Mr. Kirkham has reviewed pertinent geological information in sufficient detail to support the data incorporated in the resource estimate. Garth Kirkham, P.Geo. of Kirkham Geosystems Ltd. is the Independent Qualified Person under NI 43-101 responsible for the resource estimate.

The estimates for copper, zinc, silver and gold were completed for the Kutcho Report dated June 2008 using the MineSightTM 3-dimensional mine planning software system. The estimate was based upon a database comprised of 429 drill holes supplied by Kutcho Copper. The estimation process was constrained by a solid model based on lithological boundaries combined with grade contours and is summarized in point form below:

The database consists of a total of 429 drillholes which includes all holes prior to the drilling performed by Western Keltic and the drilling performed in 2004 for 40 drillholes, 2005 for 27 drillholes, 2006 for 23 drillholes and 81drillholes from 2008.

Drillhole data was composited to 2.5 meter intervals.

Specific gravities were estimated on a block-by-block basis for the Main Deposit. An

average S.G. of 3.14 was used for tonnage calculations for the Esso and the Sumac deposits.

Sectional interpretations were created for each on the Main, Esso and Sumac Deposits.

These sections were then wireframed to form a solid which were then edited to match the drillhole intercepts precisely in 3D. The solids were used to then code the drillhole assays and composites for subsequent geostatistical analysis and for block matching in the grade interpolation process.

Geostatistical analyses were performed on the assays and composites using no constraints

in addition to the coded intervals within the mineralized zone solids.

Therefore, for the purpose of the resource model, the solids zones were utilized to constrain the block model by matching assays to those within the solid and those outside the solid zones. The orientation and ranges (distances) utilized for search ellipsoids used in the estimation process were derived from the dimensions and orientation of the mineralized zones.

In terms of selectivity and estimation quality, it was decided that a 2.5m composite provided

the best compromise between number of composites available for estimation, and a reasonable degree of dilution and regularization.

15% Cu, 17.5% zinc, 100 gpt silver and 3 gpt gold was chosen as the most reasonable

threshold at which to cut grades for Main and 15% Cu, 20% zinc, 100 gpt silver and 8 gpt

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gold for Esso and Sumac. In addition, the range chosen at which to limit grades greater than threshold was 12 meters.

The ellipsoid direction chosen for the estimation process within the Main Deposit was

chosen to be 10 degrees azimuth and -45 degrees dip for the major axis, 100 degrees and 0 degrees for the minor axis and 10 degrees and 45 degrees for the vertical axis. Sumas and Esso was chosen to be 0 degrees azimuth and -50 degrees dip for the major axis, 90 degrees azimuth and 0 degrees dip for the minor axis and 0 degrees azimuth and 40 dress dip for the vertical axis.

The block size chosen was 5m x 5m x 5m oriented orthogonally in an effort to adequately

decretitize the mineralized zones so as not to inject an inordinate amount of internal dilution and to somewhat reflect drill hole spacing available.

The choice of interpolator was ordinary kriging for the Main deposit and inverse distance to

the 3rd power for the Esso and Sumac deposits. Nearest neighbour, inverse distance and ordinary kriging were run for all deposits for comparison and validation purposes.

The three estimation passes were used to estimate the Resource Model because a better

block-by-block estimation can be achieved by using more restrictions on those blocks that are closer to drill holes, and thus better informed. The three passes are based on increasing levels of information used to estimate blocks where each pass is done using being less constrained than the previous pass. Knowing which block was estimated with what level of information (on which pass) provides an indicator for resource classification.

• Pass 1 - A search ellipse with dimensions of ranges or 50 m along the major

axis, 50 m along the minor axis and 10 m along the vertical axis was used to find a minimum of 4 and maximum of 12 composites to estimate a block. In addition, a maximum of 2 composites per drillhole were allowed.

• Pass 2 - For blocks not estimated during Pass 1 the search ellipse was

expanded to 100 m, 100 m and 40 m with a minimum of 4 and maximum of 12 composites was required to estimate the block. In addition, a maximum of 2 composites per drillhole were allowed.

• Pass 3 - For blocks not estimated by Pass 3 the search ellipse was expanded to 200 m, 200 m and 80 m. A minimum of 3 and maximum of 12 composites were required to estimate the block. In addition, a maximum of 2 composites per drillhole were allowed.

Classification of resources is based on a number of criteria namely; distance to first

composite, average distance of all composites used in a block and the number of drillholes used to estimate a block. Therefore the Main Deposit:

• Measured blocks included those blocks that have a distance to first block of

30 meters, an average distance of all composites of 30 meters and minimum number of drillholes contributing is 3 which means that the minimum number of composites used is 5.

• Indicated blocks include those blocks that are as above however either have only 2 drillholes contributing and/or have an average distance of composites to drillholes of 30 to 60 meters. In addition, indicated blocks are those that have a distance to first composite of 30 to 60 meters and an average distance to composite of 30 to 60 meters.

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• Inferred blocks are those blocks that have a distance to first composite of 60 meters or greater. In addition, inferred blocks are those that have an average distance of greater than 60 meters.

All blocks within the Sumac Deposit are considered inferred.

For the Esso Deposit, indicated blocks are those blocks that have a distance to first

composite of 60 meters, have an average distance for all composites of less than 60 meters and have a minimum of 2 drillholes contributing and by default have a minimum of 3 composites. All other blocks are considered inferred.

Main Deposit - Mineral Resource Estimate at a 1.5% Copper Cut-Off (1)

Grade Contained Metal Class Tonnes

000’s Copper (%)

Zinc (%)

Gold (g/t)

Silver (g/t)

Copper Equiv.(%)(2)

Copper (millions lb)

Zinc (millions lb )

Gold (000s oz)

Silver (000s oz)

Measured (M) 5,421 2.15 2.86 0.34 31.4 3.70 256.6 341.8 59 5,482

Indicated (I) 4,043 2.04 2.54 0.35 31.2 3.48 181.4 226.0 45 4,049

M & I 9,464 2.10 2.72 0.34 31.3 3.60 438.0 567.8 104 9,531 Inferred 464 1.84 2.83 0.43 31.6 3.44 18.8 29.0 6 471 (1) Numbers may not total due to rounding (2) Equivalent copper grade calculated using these metal prices in US$: Cu=$1.50/lb, Zn=$0.50/lb, Ag=12.00/oz, Au=$700.00/oz Esso Deposit

The mineral resource estimate for the Esso deposit based upon historical data from 58 drill holes is tabulated using a copper cut-off of 1.50% in the table below. The Esso deposit lies 1,400m west of the western end of the Main deposit and the top of the Esso deposit lies approximately 225m below the bottom of the Main deposit.

Esso Deposit - Mineral Resource Estimate at a 1.5% Copper Cut-Off (1)

Grade Contained Metal Class Tonnes

000’s Copper (%)

Zinc (%)

Gold (g/t)

Silver (g/t)

Copper Equiv.(%)(2)

Copper (millions lb)

Zinc (millions lb)

Gold (000s oz)

Silver (000s oz)

Measured (M) - - - - - - - - - -

Indicated (I) 951 2.60 4.10 0.56 43.4 4.85 54.4 85.9 17 1,326

M & I 951 2.60 4.10 0.56 43.4 4.85 54.4 85.9 17 1,326 Inferred 803 2.57 4.15 0.61 37.6 4.80 45.4 73.4 16 970 (1) Numbers may not total due to rounding (2) Equivalent copper grade calculated using these metal prices in US$: Cu=$1.50/lb, Zn=$0.50/lb, Ag=12.00/oz, Au=$700.00/oz Sumac Deposit

The mineral resource estimate for the Sumac deposit based upon historical data from 17 drill holes and is tabulated using a copper cut-off of 1.50% in the table below. The Sumac deposit is approximately midway between the Main and Esso deposits, at depths of 160m to 440m below surface. While relatively lower grade, the Sumac deposit is also relatively under explored and represents an excellent exploration target that could readily be evaluated from underground in the future, were underground development to be extended from the Main deposit to the Esso deposit.

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Sumac Deposit – NI 43-101 Mineral Resource Estimate at a 1.5% Copper Cut-Off (1)

Grade Contained Metal Class Tonnes

(000’s) Copper (%)

Zinc (%)

Gold (g/t)

Silver (g/t)

Copper Equiv.(%)(2)

Copper (millions lb)

Zinc (millions lb)

Gold (000s oz)

Silver (000s oz)

Measured (M) - - - - - - - - - -

Indicated (I) - - - - - - - - - -

M & I - - - - - - - - - -

Inferred 626 1.67 1.46 0.29 30.1 2.70 23.1 20.1 6 606 (1) Numbers may not total due to rounding (2) Equivalent copper grade calculated using these metal prices in US$: Cu=$1.50/lb, Zn=$0.50/lb, Ag=12.00/oz, Au=$700.00/oz Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to Measured and Indicated Mineral Resource categories through further drilling, or into mineral reserves once economic considerations are applied.

Mineral Reserve Estimate The Kutcho Report is not at a preliminary feasibility study level and, therefore, does not support the re-categorization of mineral resources to mineral reserves (as per “CIM Definition Standards on Mineral Resources and Mineral Reserves – November 14, 2004”). At this stage of study, there are no mineral reserve estimates to report.

Preliminary Economic Assessement

The Kutcho Deposit was subject to a Preliminary Economic Assessment in 2008. The Preliminary Economic Assessment was prepared by SRK Consulting with input from various consultants. This report can be found on SEDAR but readers are cautioned that it was prepared before the most recent mineral resource estimates outlined above and outcomes will likely be significantly different once these resource estimates are incorporated and the approach to the development of the project reassessed. Following the release of the updated Kutcho mineral resource estimate based on the 2008 drill program, the Company is updating the Preliminary Economic Assessment. This is scheduled for Q2 2009.

DIVIDENDS

The Company has neither declared nor paid any dividends on its common shares, with a single exception: further to a June 2, 2006 corporate dividend transaction which facilitated the initial public offering of Silverstone Canada, a dividend-in-kind was distributed by the Company to its shareholders. The dividend-in-kind was paid on the basis of one unit of Silverstone Canada for every three shares of the Company held. The units consist of one common share in the capital stock of Silverstone Canada and one half of one transferable share purchase warrant to purchase common shares in the capital stock of Silverstone Canada. The Company has no present intention of paying dividends on its common shares, as it anticipates that all available funds will be invested to finance the growth of its business.

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DESCRIPTION OF CAPITAL STRUCTURE

Share Capital

The Company has an authorized capital of an unlimited number of Common Shares without par value, 164,704,878 of which were issued and outstanding as of December 31, 2008 and 164,759,576 of which were outstanding as of March 31, 2009. The holders of the common shares are entitled to receive notice of and to attend and vote at all meetings of the shareholders of the Company and each common share confers the right to one vote in person or by proxy at all meetings of the shareholders of the Company. The holders of the common shares, subject to the prior rights, if any, of the holders of any other class of shares of the Company, are entitled to receive such dividends in any financial year as the board of directors of the Company may by resolution determine. In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the common shares are entitled to receive, subject to the prior rights, if any, of the holders of any other class of shares of the Company, the remaining property and assets of the Company.

Stock Options

The Company has a stock option plan pursuant to which the directors of the Company are authorized to grant options to directors, officers, employees and consultants of the Company and its subsidiaries up to 16,475,957 common shares (being 10% of the issued and outstanding common shares at March 31, 2009).

As at the date of this Annual Information Form, the following options were outstanding under the stock option plan:

Number of Options/Shares Expiry Date Exercise Price(1) 12,528 April 8, 2009 $3.59515 100,000 June 11, 2009 $0.75 110,000 January 12, 2010 $0.95 100,000 March 1, 2010 $1.05 100,000 April 20, 2010 $0.95 626,106 August 3, 2010 $0.63857 20,000 January 23, 2011 $1.10 610,740 February 24, 2011 $1.27714 900,000 March 29, 2011 $1.57 62,640 April 6, 2011 $2.43934 117,450 June 27, 2011 $1.94764 11,745 September 19, 2011 $1.94764 39,150 October 4, 2011 $1.59642 156,600 October 11, 2011 $1.94764

1,098,811 October 30, 2011 $2.33078 93,960 January 24, 2012 $2.71392 548,100 February 22, 2012 $2.98212 490,000 March 14, 2012 $1.88 681,210 May 9, 2012 $3.35249 50,000 May 14, 2012 $2.32 6,264 July 20, 2012 $3.99106

25,000 August 21, 2012 $2.35 23,490 September 10, 2012 $3.54406 12,528 October 31, 2012 $2.47764 853,470 December 3, 2012 $3.56960 39,150 January 15, 2013 $3.22478 219,240 February 22, 2013 $3.39719 266,220 February 28, 2013 $3.55683 988,000 March 20, 2013 $3.16 187,500 March 20, 2013 $3.16 234,900 April 1, 2013 $3.19285

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Number of Options/Shares Expiry Date Exercise Price(1) 195,750 April 17, 2013 $3.57599 195,750 May 1, 2013 $3.35888 125,280 May 20, 2013 $3.57599 485,460 June 13, 2013 $3.19285 39,150 July 31, 2013 $3.19285 20,000 August 7, 2013 $3.27 86,130 November 18, 2013 $0.79183 78,300 December 12, 2013 $0.78

2,906,000 February 9, 2014 $1.30 12,916,622 TOTAL

(1) All exercise prices are in Canadian dollars. Convertible Debentures

The Company has outstanding C$4,729,000 aggregate principal amount unsecured convertible debentures. The Convertible Debentures mature on March 31, 2012 and interest is payable under the Convertible Debentures at a rate of 5.0% per annuam payable semi-annually and will be convertible at the option of the holder into common shares of Capstone at a conversion rate of 248.5715 common shares per C$1,000 principal amount of Debentures, which is equal to a conversion price of C$4.02 per common share.

Shareholder Rights Plan

The Company is a party to a shareholder rights plan agreement with Computershare Investor Services Inc. as rights agent, dated November 16, 2006 (the "Rights Plan"). The Rights Plan has the following objectives: (a) to prevent creeping acquisitions of control; (b) to give adequate time for shareholders to properly assess a take-over bid without undue

pressure; (c) to provide the Board of Directors time to consider value- enhancing alternatives to a take-

over bid and to allow competing bids to emerge; and (d) to ensure that shareholders of the Company are provided equal treatment under a take-over

bid. Under the Rights Plan, those bids that meet certain requirements intended to protect the interests of all shareholders are deemed to be "Permitted Bids". Permitted Bids must be made by way of a take-over circular prepared in compliance with applicable securities laws and, among other conditions, must remain open for sixty days. In the event a take-over bid does not meet the Permitted Bid requirements or a person otherwise acquires 20% or more of the outstanding common shares, subject to certain exemptions, the rights will entitle shareholders, other than any shareholder acquiring the common shares, to purchase additional common shares at a substantial discount to the market value at the time. As a result, the investment of the shareholder or shareholders making the acquisition will be greatly diluted if a substantial portion of the rights are exercised. The Board of Directors of the Company may waive the application of the Rights Plan in certain specified circumstances. The Rights Plan will terminate at the Company's next annual general meeting, unless re-approved by the shareholders of the Company. The Rights Plan is available under the Company's profile on SEDAR.

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MARKET FOR SECURITIES

Common Shares - Trading Price and Volume

The Company's shares are listed for trading through the facilities of The Toronto Stock Exchange under the symbol “CS”. During the 12 months ended December 31, 2008 and the two months ended February 28, 2009, the Company's shares traded as follows:

Month Volume High ($)(1) Low ($)(1) February 2009 7,457,640 $1.45 $1.05 January 2009 6,127,474 $1.38 $0.91 December 2008 14,614,350 $1.00 $0.69 November 2008(1) 9,377,627 $1.41 $0.65 October 2008 8,977,338 $2.35 $0.67 September 2008 9,301,193 $3.00 $2.06 August 2008 5,207,885 $3.54 $2.79 July 2008 3,158,526 $4.05 $3.19 June 2008 5,901,352 $4.39 $3.80 May 2008 10,790,663 $4.47 $3.35 April 2008 3,531,216 $3.90 $3.12 March 2008 3,811,263 $3.79 $3.00 February 2008 4,613,724 $3.97 $2.87 January 2008 4,563,274 $3.22 $2.26

(1) All market prices are in Canadian dollars. Debentures - Trading Price and Volume

The Company's Debentures are listed for trading through the facilities of the Toronto Stock Exchange under the symbol “CS.DB”. During the 12 months ended December 31, 2008 and the two months ended February 28, 2009, the Company's Debentures traded as follows:

Month Volume High ($)(2) Low ($)(2) February 2009 - - - January 2009 1,162,000 $100.85 $100.11 December 2008 1,617,000 $100.11 $99.51 November 2008(1) 327,000 $99.75 $99.50

(1) Before November 2008, the Debentures were convertible debentures of Sherwood Copper Corporation. (2) All market prices are in Canadian dollars.

DIRECTORS AND OFFICERS

Name, Occupation and Security Holding

The name, province or state, country of residence, position or office held with the Company and principal occupation during the past five years of each director and executive officer of the Company are described below:

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Name and Address

Office or Position

Held

Previous Service as a

Director

Principal Occupation during past five years

Darren M. Pylot British Columbia, Canada

Vice Chair, CEO and Director

Director since February 13,

1995

CEO, Vice Chair and Director of the Company since February 1995; President, CEO, Chairman and Director of Silverstone Resources Corp. from April 2005 to present; Director of East Asia Minerals Corporation from January 2004 to present; Director of Phage Therapeutics Inc. from May 1998 to March 2005; President of Stealth Investments Corp. from March 1996 to present.

Stephen Quin

British Columbia, Canada President,

Chief Operating Officer and

Director

Since November 24,

2008

Professional Geoscientist. President & COO of the Company from November 2008; previously President and CEO of Sherwood Copper Corporation from September 2005 until November 2008; prior to Sept.1, 2005 Executive Vice President of Miramar Mining Corporation. Current director of Mercator Minerals Ltd., Rare Element Resources, Kimber Resources, Bear Lake Gold, Troon Ventures.

D. Bruce McLeod(2)

British Columbia, Canada Director Since

November 24, 2008

Professional Mining Engineer; senior officer and director of Tenajon Resources Corp., International Northair Mines Ltd., Troon Ventures Ltd.; previously Chair of Sherwood Copper Corporation.

Colin K. Benner(1)(2) British Columbia, Canada

Chair and Director

Since November 24,

2008

Currently Chairman of the Company and Chairman of PBS Coals Corp.; Vice Chairman and CEO of Skye Resources Inc. from March 1 to August 26, 2008; Prior to this was Vice Chairman of Lundin Mining Corp.; Vice Chairman and Chief Executive Officer of Lundin Mining Corp. from November 2006 to April 2007; Vice Chairman and Chief Executive Officer of EuroZinc Mining Corporation; President & CEO of Breakwater Resources Ltd., President of Base Metals for Curragh Resources Inc. and Executive Vice President of Mining for Denison Mines Ltd. Currently serves on the Board of Lundin Mining, PBS Coals Corp., Tahera Diamond Corp. and HudBay Minerals Inc.

Lawrence Bell(1)

British Columbia, Canada Director Since

November 24, 2008

Businessman; director of Goldcorp Inc., GrowthWorks Capital Ltd., International Forest Products Inc., Shato Holdings Ltd., Silver Wheaton Corp. and Chair of Canada Line Rapid Transit Project; Chair of BC Hydro from 2001 to 2007.

John Wright(1)(2) British Columbia, Canada

Director Since November 24,

2008

Consulting Engineer.

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Name and Address

Office or Position

Held

Previous Service as a

Director

Principal Occupation during past five years

Brenda Nowak British Columbia, Canada

Corporate Secretary

NA Corporate Secretary of the Company from November 2008; Corporate Secretary, Northair Group of Companies, which includes International Northair Mines Ltd., Tenajon Resources Corp., New Dimension Resources Ltd. and Troon Ventures Ltd. since January 2007; Corporate Secretary of Stornoway Diamond Corporation since January 2007; previously Corporate Secretary of Sherwood Copper Corporporation from January 2007 to November 2008; Legal Assistant, DuMoulin Black LLP, July 2003 to January 2007.

Richard Godfrey British Columbia, Canada

Chief Financial Officer

NA Chief Financial Officer of the Company from November 2008; previously Chief Financial Officer of Sherwood Copper Corporation from May 2007 until November 2008 and Chief Financial Officer of Northair Group of Companies from May 2007 until January 2009; VP Finance of EuroZinc Mining from 2006 to March 2007; Chief Financial Officer of Breakwater Resources Ltd. from 2003 to 2006.

Peter Hemstead British Columbia, Canada

Treasurer NA Treasurer of Capstone since November 2008; previously Treasurer of Sherwood Copper Corporation from October 2006 to November 2008 and Senior Manager at PricewaterhouseCoopers LLP from January 1997 until October 2006;

Kevin Weston British Columbia, Canada

Vice-President, Operations (Canada)

NA Vice President, Operations (Canada) for Capstone since November 2008; previously Chief Operating Officer of Sherwood from January 2008 to November 2008; VP NVI Mining for NVI Mining, a subsidiary of Breakwater Resources and General Manager Myra Falls Mine from November 2005; Mining Contractor and President for Ross Finlay 2000 Inc. from August 2003.

Robert Barnes South Dakota, USA

Vice President

Operations (Mexico)

NA Vice President Operations (Mexico) for Capstone since November 2008; previously Vice Presidents Operations of the Company from 2005 until November 2008; 2001 to 2004, mine manager, construction manager for tailings expansion, plant and infrastructure construction supervisor, and underground development coordinator of La Colorada underground silver mine of Pan American Silver Corp.

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Name and Address

Office or Position

Held

Previous Service as a

Director

Principal Occupation during past five years

Brad Mercer Alberta, Canada

Vice President

Exploration (Canada)

NA Vice President of Exploration (Canada) for Capstone since November 2008; previously Vice President of Exploration for Sherwood Copper Corp. from April 2008 until November 2008 and Exploration Manager of Sherwood since July 2005 to March 2008; Director of Northern Tiger Resources Inc.

Hugh Willson British Columbia, Canada

Vice President

Exploration (Mexico)

NA Vice President of Exploration (Mexico) for Capstone since November 2008; previously Vice President Exploration for the Company from March 2004 until November 2008; Self-employed consulting geologist from May 1991 to March 2004.

Jason Howe British Columbia, Canada

Vice President, Business

Development

NA Vice President Business Development for Capstone since March 2009; previously Vice President Finance for the Company from November 2008 to March 2009 and Chief Finance Officer of Capstone from April 2004 to November 2008; previously Tax Manager at PricewaterhouseCoopers LLP from November 2000 to April 2004.

(1) Denotes members of the Audit Committee. (2) Denotes members of the Human Resources and Compensation Committee. Control of Securities

As at March 31, 2009, the directors and executive officers of the Company as a group beneficially owned, directly or indirectly, or exercised control or direction over, an aggregate of 1,941,324 common shares of the Company, representing approximately 1.2% of the issued and outstanding common shares of the Company. In addition, the director and executive officers of the Company as a group held incentive stock options for the purchase of an aggregate of 7,414,225 common shares in the capital of the Company, which options are exercisable at between C$0.64767 and C$3.57599 per common share and expire between March 1, 2010 and February 9, 2014.

Committees of the Board of Directors

The committees of the board of directors of the Company and the directors serving on each of the committees are described below:

Audit Committee

The members of the Company's Audit & Risk Management Committee are Lawrence Bell (Chairman), Colin K. Benner and John Wright. The Audit Committee oversees the Company's financial reporting obligations, financial system and disclosures. It reviews the quarterly and annual financial statements, monitors and assesses the integrity of the Company's internal control systems, meets with the Company's auditors and liaises between the board of directors and the auditors.

Human Resources and Compensation

The members of the Company's Human Resources and Compensation Committee are Colin K. Benner, John Wright and D. Bruce McLeod. This committee is responsible for determining the

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compensation paid to the Company's executive officers and for determining stock option grants for employees.

Environmental, Health and Safety Committee

All directors make up the members of the Company's Environmental, Health and Safety Committee. This committee's mandate is to develop, implement and monitor the Company's environmental, health and safety practices.

Other Committees

In addition, the Company has a disclosure policy committee comprised of the Chief Executive Officer (Darren Pylot), the President (Stephen Quin), Chief Financial Officer (Richard Godfrey), and the Corporate Secretary (Brenda Nowak). This committee is responsible for overseeing the Company's corporate disclosure practices and the administration of the Company's policy on corporate disclosure, confidentiality and insider and employee trading.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

To the knowledge of the Company, no director or executive officer of the Company is, as at the date of this Annual Information Form, or was, within 10 years before the date of this Annual Information Form, a director, chief executive officer ("CEO") or chief financial officer ("CFO") of any company (including the Company) that:

(a) was the subject, while the director or executive officer was acting in the capacity as director, CEO or CFO of such company, of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days; or

(b) was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the director or executive officer ceased to be a director, CEO or CFO but which resulted from an event that occurred while the proposed director was acting in the capacity as director, CEO or CFO of such company.

To the knowledge of the Company, none of the Company's directors or executive officers or any shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company:

(a) is, as at the date of this Annual Information Form, or has been within 10 years before the date of this Annual Information Form, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets;

(b) has, within the 10 years before the date of this Annual Information Form, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder;

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(c) has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

(d) has been subject to any penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision;

except for:

• Colin K. Benner was a director of Tahera Diamond Corporation which, on January 16, 2008, was granted creditor protection by the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act (Canada) ("CCAA"). Mr. Benner resigned as a director of Tahera Diamond Corporation on September 29, 2008. Pursuant to a number of extensions, Tahera Diamond Corporation remains under CCAA protection.

Conflicts of Interest

Certain of the Company’s directors and officers serve or may agree to serve as directors or officers of other reporting companies or have significant shareholdings in other reporting companies and, to the extent that such other companies may participate in ventures in which the Company may participate, the directors of the Company may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the Company’s directors, a director who has such a conflict will abstain from voting for or against the approval of such a participation or such terms and such director will not participate in negotiating and concluding terms of any proposed transaction. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. Under the laws of the Country of Canada, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company. In determining whether or not the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time. See also “Describe the Business – Risk Factors”.

AUDIT COMMITTEE INFORMATION

Audit Committee Charter

The Company's Audit Committee has a charter (the “Audit Committee Charter”) in the form attached to this Annual Information Form as Schedule “A”.

Composition of the Audit Committee

The following are the members of the Audit and Risk Management Committee:

Lawrence Bell Independent(1) Financially literate(1)

John Wright Not Independent(1) Financially literate(1)

Colin K. Benner Independent(1) Financially literate(1) (1) As defined by Multilateral Instrument 52-110 (“MI 52-110”).

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Relevant Education and Experience

Lawrence Bell

Mr. Lawrence Bell is the Chairman of Canada Line (Rapid Transit) Project and served as the non-executive Chairman of British Columbia Hydro and Power Authority until December 2007. From August 2001 to November 2003, Mr. Bell was Chairman and Chief Executive Officer of British Columbia Hydro and Power Authority and, from 1987 to 1991, he was Chairman and Chief Executive Officer of British Columbia Hydro and Power Authority. He is also a director of Goldcorp Inc., International Forest Products Limited and Silver Wheaton Corp. and is former Chairman of the University of British Columbia Board of Directors. Prior to these positions, Mr. Bell was Chairman and President of the Westar Group and Chief Executive Officer of Vancouver City Savings Credit Union. In the province's public sector, Mr. Bell has served as Deputy Minister of Finance and Secretary to the Treasury Board in the government of British Columbia. He holds a Bachelor of Arts degree and a Ph.D. Honourary from the University of British Columbia. He also holds a Masters of Arts degree from San José State University.

John Wright

Mr. Wright is a metallurgical engineer (P.Eng), who has over 35 years experience in many facets of the exploration and mining industry. He has an Honourary B.Sc. of Applied Metallurgy from Queen’s University in Kingston, Ontario. Mr. Wright is and has served on the board of directors and the audit committees of many public reporting companies and from that, has gained experience in the reading and understanding of financial statements which has provided him with a strong understanding of general accounting principles.

Colin K. Benner

Mr. Benner is professional mining engineer (P.Eng) with over 40 years of experience in engineering, operating and general management in the Canadian and International mining industry. He is a graduate of the Haileybury School of Mines and has completed numerous courses in mine finance, business administration, accounting and Independent Corporate Director educational programs. He has held senior executive roles in the capacity of Chief Executive Officer, Vice Chairman or Chairman for several mining corporations and has been responsible for a number of mine finances, mergers and acquisitions. He has served, and continues to serve, on a number of public mining company boards and has been a member of audit, human resource, compensation, corporate governance and environment, safety and health committees. He also served on the Boards of and in an executive capacity on a variety of advisory committees for college and technical associations related to the mining industry.

Audit Committee Oversight

At no time since the commencement of the Company's most recently completed financial year was a recommendation of the Committee to nominate or compensate an external auditor not adopted by the Board of Directors.

Reliance on Certain Exemptions

At no time since the commencement of the 12 month period ended April 30, 2008 has the Company relied on an exemption in Section 2.4 of MI 52-110 (De Minimis Non-audit Services), Section 3.2 of MI 52-110 (Initial Public Offerings), Section 3.3(2) of MI 52-110 (Controlled Companies), Section 3.4 of MI 52-110 (Events Outside Control of Member), Section 3.5 of MI 52-110 (Death, Disability or Resignation of Audit Committee Member) or Section 3.6 of MI 52-110 (Temporary Exemption for Limited and Exceptional Circumstances), on an exemption from MI 52-110, in whole or in part, granted under Part 8 of MI 52-110 (Exemptions) or on Section 3.9 of MI 52-110 (Acquisition of Financial Literacy).

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Pre-Approval Policies and Procedures

The Audit Committee pre-approves all non-audit services to be provided by the Company's external auditor and has established policies and procedures accordingly.

External Auditors Service Fees (By Category)

The aggregate fees billed by the Company's external auditors in the last two fiscal years ended December 31, 2007 and 2008 are as follows:

Financial Year Ending Audit Fees Audit Related Fees Tax Fees All Other Fees

December 31, 2008 C$138,959 C$54,690 Nil Nil

December 31, 2007 C$115,400 C$46,100 Nil Nil

LEGAL PROCEEDINGS

The Company is not subject to any legal proceedings as of December 31, 2008, and was not subject to any proceedings throughout the recently completed financial year, except for:

• Ms. Amielle Lake, a former employee of Western Keltic, filed a lawsuit on May 12, 2008 in the Supreme Court of British Columbia against the Company, Western Keltic and a former senior officer of Western Keltic. Ms. Lake alleged that it was a term of her employment contract that she was entitled to receive a change of control payment of two times her annual salary, or C$190,000, upon the acquisition of Western Keltic by Sherwood. The Company disputed this claim. The matter was settled out of court in January 2009.

The directors and the management know of no active or pending proceedings against anyone that might materially adversely affect an interest of ours.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Except as otherwise disclosed herein, no director, executive officer or principal shareholder of the Company, or any associate or affiliate of the foregoing, have had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year prior to the date of this Annual Information Form that has materially affected or will materially affect the Company.

TRANSFER AGENT AND REGISTRAR

The Company's transfer agent and registrar is Computershare Trust Company of Canada, 2nd floor, 510 Burrard, Vancouver, British Columbia, V6C 3B9. The Company has appointed Computershare Investor Services Ltd., 4 King Street West, Suite 1101, Toronto, Ontario, M5H 1B6 as its co-transfer agent and registrar.

MATERIAL CONTRACTS

Contracts of the Company, other than contracts entered into in the ordinary course of business, that are material to the Company and that were entered into by the Company between January 1, 2008 and December 31, 2008 or that were entered into prior to that date but are still in effect are listed below:

1. Amended and Restated Agreement among the Company, Capstone Mexico, and Bacis dated for reference November 30, 2005, whereby it was agreed that Capstone Mexico assumed all responsibility for the payment of indebtedness to FIFOMI and that all payments

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by the Company to FIFOMI would be credited against any work expenditure required of Capstone Mexico. It was also agreed that the Company may accelerate the share payments required for the exercise of the option on the Cozamin property. Bacis also agreed to remove, at its own expense, the mortgage interest in favour of Banco Inverlat, registered against the Cozamin property and indemnify the Company in respect of any costs related to the mortgage interest removal and any amounts owing under such mortgage.

2. Option agreement between Capstone Mexico and Bacis dated for reference November 30, 2005; this option agreement became effective upon regulatory approval of the spin-off of the Silver Properties described. Upon becoming effective, this option agreement replaced the January 21, 2004 option agreement; the only difference was that under the November 30, 2005 option agreement, the Silver Properties were not included and the only property involved was Cozamin.

3. Management contract dated for reference November 30, 2005, between the Company and Silverstone Canada whereby the employees of the Company shall provide consulting services to Silverstone Canada.

4. Silver purchase agreement between Capstone Mexico and Silverstone Resources (Barbados) Corp. dated as of April 4, 2007 whereby the Company agreed sell, through Capstone Mexico, 100% of the silver production from the Cozamin Property for a period of 10 years.

5. Precious metal purchase agreement between MintoEx and Silverstone dated as of November 21, 2008 whereby Capstone agreed sell, through MintoEx, 100% of the gold and silver production from the Minto Mine for a period of 10 years.

6. Skagway Ore Terminal Operations Contract dated April 23, 2008 between MintoEx and Mineral Services Inc. whereby Mineral Services provides the long term operation and maintenance of the Skagway Ore Terminal.

7. Loan facility agreements with Macquarie Bank Limited dated October 25, 2006 among Sherwood and MintoEx for the provision of secured debt facilities as described under the heading "Description of the Business".

8. Forward Sales Agreements entered into by MintoEx during 2006 and 2007 regarding the delivery of silver and copper as described in the unaudited September 30, 2007 interim consolidated financial statements.

9. Forward sales agreement enterted into by Capstone Gold and Standard Bank during 2007 regarding the delivery of copper.

10. Concentrate Off-Take Agreement between MRI Trading AG and MintoEx dated October 4, 2006, as amended on July 31, 2007 regarding the purchase of 100% of the concentrates produced by the mine.

11. Concentrate offtake agreements between Capstone Gold and Trafigura, MRI, and Louis Dreyfus.

12. User Agreement between the Alaska Industrial Development and Export Agency, Sherwood and MintoEx dated January 18, 2007, as amended on May 14 and 25, 2007, for the refurbishment, reconstruction and recommissioning of the Skagway Ore Terminal.

13. Power Purchase Agreement between Yukon Energy Corporation and MintoEx dated February 12, 2007 for the provision of grid power to the Minto mine site as described under the heading “Description of the Business”.

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14. Credit Agreement (2008 Corporate Facility) dated for reference March 7, 2008 between Sherwood and Macquarie Bank Limited providing a credit facility made available on a revolving basis in the principal amount of up to C$10 million.

15. Contract for mining services between Pelly Construction Ltd. and MintoEx dated August 1, 2007 for the provision of mining activities services.

16. Concentrate haul agreement between Canadian Lynden Transport Ltd. and MintoEx dated June 27, 2007 for the provision of concentrate hauling from the Minto Mine in the Yukon to Skagway, Alaska.

17. The Arrangement Agreement dated for reference as of April 17, 2008 between Sherwood and Western Keltic whereby Western Keltic agreed to seek the approval of its shareholders to the Arrangement Agreement and the Plan of Arrangement.

18. The Support Agreement dated for reference as of December 7, 2007 between Sherwood and Western Keltic whereby Sherwood agreed to complete the Western Keltic Arrangement and Western Keltic’s directors agreed to support the transaction.

19. Trust Indenture dated February 28, 2007 between the Company and Computershare Trust Company of Canada which sets out the details of Computershare acting as trustee for the Debentures.

20. Voting Agreement dated March 13, 2009 between Silver Wheaton and Capstone whereby Capstone has agreed to vote its shares in Silverstone in favour of the proposed plan of arrangement between Silverstone Resources Ltd. and Silver Wheaton whereby Silver Wheaton will acquire all of Capstone’s shares and special warrants in Silverstone.

21. Revolving Term Credit Facility dated for reference January 16, 2009 between Capstone and The Bank of Nova Scotia providing a credit facility made available on a revolving basis in the principal amount of US$40 million.

22. various Employment Agreements dated November 2008 with senior management of the Company.

EXPERTS

Names of Experts The following are the Qualified Persons under NI 43-101:

• Mr. Gordon Doerksen, P.Eng., of SRK Consulting (Canada) Inc., is responsible for Sections 2 to 9, 15, and all parts of Sections 18 to 25 not covered by other QPs of the Technical Report Minto Mine, Sections 1 to 5, 15, 18 and parts of 19 to 22 not covered by other QPs of the Kutcho Report and and all sections not covered by other QPs of the Area 2 Technical Report.

• Mr. Dino Pilotto of SRK Consulting (Canada) Inc., is responsible for the preparation of

Sections 17.5, 18.2, and 19.1 as well as providing input for Sections 1, 2, 20 and 21 of the Technical Report Minto Mine, responsible for parts of Sections 1, 17, 19 to 22 of the Kutcho Report and Sections 17.12, 17.13, 17.14, 19.1.3, 19.1.4, 19.2, 19.3 and 19.4.1 of the Area 2 Technical Report.

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• Mr. Ali Shahkar, P.Eng. of Lions Gate Geological Consulting Inc., is responsible for the Minto Mine Resource Estimation documented in Section 17 of the Technical Report Minto Mine.

• Ms. Susan Lomas, P.Geo. of Lions Gate Geological Consulting Inc., is responsible for the

Area 2, Area 118 and Ridgetop Mineral Resource Estimations documented in Section 16 of the Technical Report Minto Mine.

• Mr. Garth Kirkham P.Geo. of Kirkham Geosystems Ltd., is responsible for the mineral

resource estimate on the Kutcho Project.

• Mr. Stephen P. Quin, P. Geo., is responsible for certain information of a scientific or technical nature relating to the Minto Mine and Kutcho Project in this Annual Information Form.

• Mr. Guy Lauzier, P. Eng., Manager of Mining of the Minto Mine, is responsible for the

mineral reserve estimate in this AIF.

• Mr. Brad Mercer, P. Geo., is responsible for supervising the exploration activities at the Company’s Minto Mine and Kutcho Project.

• Mr. Robert Barnes, P.Eng., is responsible for the mine operations information in respect of

the Cozamin Mine in this AIF.

• Ms. Jenna Hardy, P.Geo., is responsible for the environmental and permitting sections of this AIF in respect of the Cozamin Mine.

• Mr. Robert Sim, P.Geo., is responsible for the development of the mineral resource model

for the Cozamin deposit (Feb 2009).

• Mr. Hugh Willson, P. Geo., is responsible for supervising the exploration activities at the Company’s Cozamin Mine.

• Randall Thompson, General Manager of the Minto Mine, and Kevin Weston, Vice President

Operations (Canada) of the Company are not Qualified Persons but have reviewed the information herein on the Minto Mine.

Interests of Experts

Except as otherwise disclosed below, none of the experts named under “Names of Experts”, when or after they prepared the statement, report or valuation, has received any registered or beneficial interests, direct or indirect, in any securities or other property of the Company or of one of the Company’s associates or affiliates (based on information provided to the Company by the experts) or is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or of any associate or affiliate of the Company. Stephen Quin, P. Geo., is the President, Chief Operating Officer and a director of the Company and, as of the date hereof, held 638,134 common shares of the Company and 1,258,750 stock options exercisable into common shares of the Company. Brad Mercer, P. Geo., is the Vice President, Exploration (Canada) with the Company and, as of the date hereof, held 11,454 common shares of the Company and 263,110 stock options exercisable into common shares of the Company.

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Guy Lauzier is the Manager of Mining of the Minto Mine and, as of the date hereof, held 30,000 stock options exercisable into common shares of the Company. Robert Barnes, P.Eng., is the Vice President, Operations (Mexico) with the Company and, as of the date hereof, held 92,250 common shares of the Company and 510,000 stock options exercisable into common shares of the Company. Hugh Willson, P.Geo., is the Vice President, Explorations (Mexico) with the Company and, as of the date hereof, held 155,300 common shares of the Company and 380,000 stock options exercisable into common shares of the Company. Jenna Hardy, P. Geo., as of the date hereof held 5,000 common shares and 10,000 stock options exercisable into common shares of the Company.

ADDITIONAL INFORMATION

Additional information relating to the Company may be found on SEDAR at www.sedar.com.

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, and securities authorized for issuance under equity compensation plans, where applicable, is contained in the Company’s Information Circular for its most recent annual general meeting of securityholders that involved the election of directors. Additional financial information is provided in the Company’s consolidated financial statements and management's discussion and analysis for the 12 months ended December 31, 2008.

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SCHEDULE “A”

CAPSTONE MINING CORP. (the “Corporation”)

AUDIT COMMITTEE CHARTER

1. Each member of the Audit Committee shall be a member of the Board of Directors, in good standing, and the majority of the members of the audit committee shall be independent in order to serve on this committee.

2. At least one of the members of the Audit Committee shall be financially literate.

3. Review the Committee's charter annually, reassess the adequacy of this charter, and recommend any proposed changes to the Board of Directors. Consider changes that are necessary as a result of new laws or regulations.

4. The Audit Committee shall meet at least four times per year, and each time the Company proposes to issue a press release with its quarterly or annual earnings information. These meetings may be combined with regularly scheduled meetings, or more frequently as circumstances may require. The Audit Committee may ask members of the Management or others to attend the meetings and provide pertinent information as necessary.

5. Conduct executive sessions with the outside auditors, outside counsel, and anyone else as desired by the committee.

6. The Audit Committee shall be authorized to hire outside counsel or other consultants as necessary (this may take place any time during the year).

7. Approve any non-audit services provided by the independent auditors, including tax services. Review and evaluate the performance of the independent auditors and review with the full Board of Directors any proposed discharge of the independent auditors.

8. Review with the Management the policies and procedures with respect to officers' expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the independent auditor.

9. Consider, with the Management, the rationale for employing accounting firms rather than the principal independent auditors.

10. Inquire of the Management and the independent auditors about significant risks or exposures facing the Company; assess the steps the Management has taken or proposes to take to minimize such risks to the Company; and periodically review compliance with such steps.

11. Review with the independent auditor, the audit scope and plan of the independent auditors. Address the coordination of the audit efforts to assure the completeness of coverage, reduction of redundant efforts, and the effective use of audit resources.

12. Inquire regarding the "quality of earnings" of the Company from a subjective as well as an objective standpoint.

13. Review with the independent accountants: (a) the adequacy of the Company's internal controls including computerized information systems controls and security; and (b) any related significant findings and recommendations of the independent auditors together with the Management's responses thereto.

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14. Review with the Management and the independent auditor the effect of any regulatory and accounting initiatives, as well as off-balance-sheet structures, if any.

15. Review with the Management, the independent auditors, the interim annual financial report before it is filed with the regulatory authorities.

16. Review with the independent auditor that performs an audit: (a) all critical accounting policies and practices used by the Company; and (b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with the Management of the Company, the ramifications of each alternative and the treatment preferred by the Company.

17. Review all material written communications between the independent auditors and the Management.

18. Review with the Management and the independent auditors: (a) the Company's annual financial statements and related footnotes; (b) the independent auditors' audit of the financial statements and their report thereon; (c) the independent auditor's judgments about the quality, not just the acceptability, of the Company's accounting principles as applied in its financial reporting; (d) any significant changes required in the independent auditors' audit plan; and (e) any serious difficulties or disputes with the Management encountered during the audit.

19. Periodically review the Company's code of conduct to ensure that it is adequate and up-to-date.

20. Review the procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters that may be submitted by any party internal or external to the organization. Review any complaints that might have been received, current status, and resolution if one has been reached.

21. Review procedures for the confidential, anonymous submission by employees of the organization of concerns regarding questionable accounting or auditing matters. Review any submissions that have been received, the current status, and resolution if one has been reached.

22. The Audit Committee will perform such other functions as assigned by law, the Company's articles, or the Board of Directors.