Capstone-Mining-Corp-2014-Sustainability-Report_ENGLISH

Sustainable Thinking from the ground up

sustainability report 2014

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MINING CORP

http://www.capstonemining.com

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“Capstone Mining Corp. shall safeguard the health and safety of people, minimize the impact of its activities on the ecosystem and respect the conditions of the natural environment and communities in which it operates, while safeguarding the assets of the company. According to its principles and values, Capstone Mining Corp. recognizes sustainable development as a foundation of its business strategy, incorporating integrated resource protection into all activities of the corporation.”

Capstone Mining Corp. Integrated Environmental, Health, Safety and Sustainability Policy

IntroductIon 1CEO Message 2About Capstone 4About this Report 6

our ApproAch to SuStAInAbIlIty 7Our Values 8Governance 8Risk Management 8Stakeholder Engagement 9Materiality 9

our operAtIonS And projectS 11Pinto Valley 12Cozamin 14Minto 16Santo Domingo 18Kutcho 20Exploration 20

report on 2014 performAnce 21material Aspects 22 • Health and Safety 22• Environmental Compliance and Permitting 26• Mining Waste 28• Energy 32• Water 34• Community Impacts 36• Employment 38• Economic Impacts 41• Compliance with Laws and Standards 43material Watchlist 44• Air Quality 44• Biodiversity 45• Training and Education 45• Labour/Management Relations 45• Emergency Preparedness 46• Closure Planning 46

GloSSAry 47GrI Index 48

cApStone mInInG corp. SuStAInAbIlIty report 2014

ON THE COVER: Santo Domingo Project

CapSTone mining Corp. SuSTainabiliTy reporT 2014 1

IntroductIon our ApproAch to SuStAInAbIlIty our operAtIonS And projectS report on 2014 performAnce

“Sustainable Thinking – From the Ground Up” reflects how we are working

to integrate sustainable practices at all stages of our operations, from greenfield

exploration to copper production. This report aims to illustrate our commitment

to sustainable thinking. We developed this report framework by asking ourselves

what sustainable performance means for us on the ground at our operating sites,

such as how and what we measure. It shows us where we can improve and gives

us a baseline for evaluating future progress.

Introduction sustainable thinking – from the ground up



CEO MessageI am pleased to introduce Capstone Mining Corp.’s first sustainability report, “Sustainable Thinking, From the Ground Up.”

From our beginnings in 2004, when we purchased the Cozamin property that became our first mine and formed the foundation of Capstone, we have grown into an international copper producer with a workforce of 1,820 at five locations, with three producing copper mines in three different countries. It is our vision to be the best managed copper company within our peer group, delivering industry leading returns. We commit to operate to the same high standard of integrity and responsibility wherever we work. Our core values have grown with us, and are now an integral part of our culture, built on a cornerstone commitment to health, safety and environmental stewardship.

The acquisition of the Pinto Valley Mine in October 2013 was a transformational transaction for Capstone, significantly increasing our size and scope. Throughout the growth of our portfolio, “Sustainable Performance” has been a key driver of our business

strategy and an integral component of our decision-making process. It guides us to run our operations with consistent standards, supports our social licence to operate and allows us to proactively manage risk. We’ve now reached an appropriate point in our development cycle to more formally set targets, measure our performance and communicate how we manage this key aspect of our business.

In 2014, our Board of Directors approved Capstone’s integrated Environmental, Health, Safety and Sustainability Policy. This signals commitment from the highest level of our organization to integrate sustainable thinking into all aspects of our work, from the ground up.

In keeping with Capstone’s culture, we are applying a measured and disciplined approach to sustainability reporting. We completed our first materiality assessment this past year to identify the material aspects of our business that are the focus of this report. This is the first time we are communicating our management approach on such a wide range of parameters and establishing performance baselines for many of them.



It has been a challenging period in the copper sector, with ongoing uncertainty about global growth affecting commodity prices over the past few years. There is little we can do to influence the macro- economic factors that affect copper prices and the mining cycle as a whole. As we continue to focus on sustainable performance and relationship building with our stakeholders, we are forming a solid foundation to sustain our business and weather the volatility of the copper market over the long term.

I do personally want to address a tragedy that occurred in June 2014, when a contract miner was fatally struck by a falling rock underground at our Cozamin operation. All of us at Capstone were deeply saddened by the accident. In the face of this tragedy we took a number of steps to increase our ground support and enforce adherence to our standards.

In 2014, we were faced with an operational setback, with the permitting process for the final phase of mine life at Minto taking longer than expected. As a result, we revised our mine plan while we continue with the permitting application.

In 2015, we are continuing to focus on implementing standardized manage-ment protocols throughout our organization, including protocols for tailings, energy management and stakeholder engagement. While we are approach-ing these goals from a sustainability perspective, they are also important to us in how we manage risk and directly link to our goals around day-to-day operating efficiencies.

Our sustainability reporting will be a process of continuous improvement as more systems are put in place to support meaningful performance targets that help manage our impacts. Our goal for this report is to help you gain a better understanding of Capstone, our values, our operations and our path forward. We welcome any feedback that you may have for us.

Yours truly,

Darren Pylot, President & CEO and Director

Throughout the growth of our portfolio, ‘Sustainable Performance‘ has been a key

driver of our business strategy and an integral component of our decision-making

process. It guides us to run our operations with consistent standards, supports

our social licence to operate and allows us to proactively manage risk.

Darren Pylot, President & CEO and Director



About CapstoneCapstone Mining Corp. is a Canadian base metals mining company headquartered in British Columbia, Canada, engaged in the production, development and exploration of copper resources.

We have three producing copper mines that are 100% owned and operated by the company: Pinto Valley Mine in Arizona, US; Cozamin Mine in Zacatecas State, Mexico; and Minto Mine located in Yukon, Canada. Capstone also has two development projects: the Santo Domingo Project in Region III, Chile, that is 70% owned in partnership with Korea Resources Corporation (KORES); and the 100% owned Kutcho Project in British Columbia, Canada. In addition to ongoing exploration at our existing operations, Capstone is conducting early stage base metal exploration activities, presently focused in Chile.

Our primary product is copper, with base metal by-products of zinc, lead, molybdenum, as well as precious metal by-products of silver and gold. The primary markets for our products are smelters and refineries in Asia for concentrates, and manufacturers in the US for cathodes. At the end of 2014, Capstone had 1,820 employees and contractors located in Canada, the US, Mexico and Chile.

Capstone is a publicly traded company listed on the Toronto Stock Exchange. KORES is Capstone’s largest shareholder, holding an 11% interest. For capitalization and other financial information, please refer to the financial statements available on our website. There were no significant changes in size, structure or ownership during 2014. Pinto Valley was acquired in October 2013.

2014 copper production (tonnes)

Pinto Valley

Copper in concentrates 62,700

Copper cathode 2,400

Pinto Valley total 65,100

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minto


totAl copper productIon 103,300

SANTO DOMINgORegion III, Chile

MINTO Yukon, Canada

KUTCHOBC, Canada

PINTO VAllEyArizona, US

COzAMINZacatecas, Mexico

HEAD OffICEBC, Canada

http://capstonemining.com/investors/financial-reporting/default.aspx





External Initiatives and MembershipsCapstone participates in external initiatives and industry associations that enable us to enhance our knowledge of industry trends, research, best practice and evolving regulatory requirements. We maintained the following memberships in 2014:

• Prospectors and Developers Association of Canada • European Copper Institute • Canadian Mining Industry Research Association • Mineral Research Deposit Unit, University of British Columbia • Mining Association of British Columbia

Pinto Valley Mine, Arizona, US



About this Report This report has been prepared in accordance with the G4 core level of the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. It covers the period from January 1 to December 31, 2014. We plan to publish future reports on an annual basis.

This report covers our management and performance in relation to material aspects of Capstone’s three operating mines in Canada, the US and Mexico. It also includes our Santo Domingo Project in Chile. Following the acquisition of the Pinto Valley Mine in 2013, we determined that our Kutcho Project, a small-scale development property located in British Columbia, no longer fits with Capstone’s growth strategy. There is no activity on the property and the asset is currently held for sale; therefore Kutcho is not covered in the performance section of this report. The scope of this report reflects our annual financial statements.

Exploration activities have a lighter footprint than development or operations. Accordingly, sustainability performance for exploration projects is only included where data is available. We plan to increase the coverage for measuring exploration performance in future reports, particularly since exploration personnel and activities are the first point of contact in many of the communities in which we may ultimately operate.

Our operations personnel played a significant role in preparing this report, including data collection and compilation of site-specific information and perspectives. Senior members of our mine management teams participated in materiality assessment workshops. The 2014 report has not been externally assured. However, we completed a detailed internal review of the report, including review by operations managers, the senior management team and the disclosure committee.





Measuring and evaluating ourselves with regard to sustainable performance is fundamental to our values. This inaugural report has been driven by the desire to put the same transparency and rigour into our environmental, health and safety, and social performance reporting as we do with our financial performance reporting. As such, the publication of this report was set as a corporate objective for sustainable performance in 2014.

In 2014, our Board of Directors approved an integrated Environment, Health, Safety and Sustainability (EHSS) Policy. The EHSS Policy

formalized a clear commitment to sustainability and combined our existing environment and health and safety policies. The integrated policy has formed a new foundation for us to work from, providing a guideline for best practices.

We are committed to operating in every jurisdiction in accordance with Capstone’s standards. As safety is a top priority, there has been continued focus on continuously improving our health and safety performance. In 2014, we also worked to expand Capstone’s standards to include other key areas of our business, starting with tailings and energy management.

We have a well-defined and focused corporate strategy supported by specific objectives in three critical categories: 1) operational performance, 2) strategic initiatives and 3) sustainable performance.

Our Approach to Sustainability

Minto Mine, yukon, Canada

http://capstonemining.com/responsibility/default.aspx



OUR ValUESA commitment to responsible mining and business ethics is a cornerstone of Capstone’s business philosophy. Our values guide everything we do:

• always accountable: We take ownership for ourselves, and our work. We “do the right thing” for the business and our stakeholders.

• Execute with Excellence: We measure our performance and strive to excel at every level.

• Deliver Results: We make decisions and are responsible for our outcomes. We work openly and effectively with each other, leveraging the strength of the team.

• Work Responsibly: Safety is non-negotiable. It ensures the well-being of our people and our business.

Our Values and Ethics Code of Conduct Policy (“Code of Conduct”) set the standard for behaviour in business ethics, financial practice, health and safety, and environment. The Code of Conduct outlines an official complaint procedure, and we also have a Fraud Reporting and Investiga-tion (Whistleblower) Policy in place to ensure there are multiple avenues for employees to raise concerns or report incidents. All new employees review and sign the Code of Conduct. It is signed off annually by directors, executives and employees and is available in English and Spanish. Our Anti-bribery Policy complements our Code of Conduct with additional guidance on compliance with applicable anti-bribery and corruption laws and regulations.

Capstone’s vision and values are central to our strategy for sustainable performance.

GOVERNaNCECapstone’s Board of Directors has eight members — seven are independent and the eighth is our CEO. Information about our Directors is available on our website.

Capstone’s Board committees include: • Environment, Health, Safety and Sustainability (EHSS) Committee

• Audit Committee

• Technical Committee

• Corporate Governance and Nominating Committee

• Human Resources and Compensation Committee

The EHSS Committee has oversight of Capstone’s EHSS Policy and meets at least quarterly. Accountability for ensuring that our operations comply with sustainability requirements rests with the Chief Operating Officer and Vice President North American Operations. As sustainable performance is largely site driven at Capstone, our mine General Managers are responsible for overseeing day-to-day activities and implementing continuous improvement at our operations.

RISk MaNaGEMENTCapstone follows an enterprise risk management framework to identify, evaluate and manage risks to Capstone. Risk management is linked to strategy, business objectives and decision making. Risk assessments are a required business practice and are updated by operations and management before being reported to the Board of Directors on a quarterly basis. These assessments consider operational, environmental, health and safety, and social risks to Capstone and help us evaluate the inherent risk of an activity and the actions required to mitigate that risk.

Our sustainability reporting process is closely aligned with our risk management process, in that our materiality analysis incorporated the results of operations and corporate risk assessments. However, our materiality assessment also considers perspectives of our stakeholders.

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http://capstonemining.com/company/business-ethics/default.aspx

http://www.capstonemining.com/company/board-of-directors/default.aspx

http://www.capstonemining.com/company/board-of-directors/default.aspx



STakEhOlDER ENGaGEMENT Stakeholder engagement underpins our approach to sustainable thinking. It provides valuable feedback and helps us to understand and address emerging concerns, areas of sensitivity, community perceptions and local traditions. Regular engagement is part of both daily activities and strategic objectives at each of our operations and typically involves many different roles. This year, for the first time we defined stakeholder groups for Capstone as a whole, with the perspective that these broad categories capture our existing stakeholder relationships.

• Communities • Employees and contractors • Governments• Indigenous groups• Non-government organizations• Shareholders and potential investors• Unions

Our operations have their own processes and practices in place to define local stakeholders and the basis for engagement. In 2015, we plan to build on this by implementing a stakeholder engagement standard across the organization. This will help us to better understand our stakeholders’ needs and perspectives and ensure best practice and continuous improvement during all project phases.

Our operations have their own processes and practices in place to define local stakeholders and the basis for engagement. In 2015, we plan to build on this by implementing a stakeholder engagement standard across the organization.

MaTERIalITyWe completed our first materiality analysis in 2014, and the results have determined the content of this report. For Capstone, materiality is an indication of the significance of sustainability aspects to our stakeholders and our business.

We followed the GRI guidance and designed a process that included identifying, prioritizing and validating material aspects from both a business and stakeholder perspective. We first conducted a detailed analysis of material aspects for Capstone generally and for each operation. This analysis was based on GRI aspects, considered the sustainability context of those aspects as they relate to Capstone, and included operation-specific risks. As this was our first materiality analysis, we limited the assessment to aspects relevant within Capstone, and not our wider value chain.

Through on-site workshops we tested and refined each operation-specific “base case” with input from local senior management teams. These workshops included managers responsible for key stakeholder relationships. While we did not involve stakeholders directly in the process, we used the experience of our management teams and prioritized aspects from both Capstone and stakeholder perspectives. For future reports we plan to engage stakeholders directly to check our understanding of their interests and concerns.

We combined materiality results from our operations and validated them in a workshop with senior management to produce our consolidated Capstone materiality matrix shown on page 10. “Material” aspects are material for all our operating mines.

We defined the thresholds for our 2014 material aspects using a combination of quantitative and qualitative assessment to ensure the most significant issues to Capstone and our stakeholders are captured in our reporting. The coverage in this report reflects the degree of materiality. For our “material” aspects, we describe our management approach and use data to evaluate our performance. For our “watchlist” aspects, we include a description of our management approach and will continue to monitor these aspects for an indication that materiality is increasing for us. “Other” aspects include a range of topics presented by GRI that are sometimes material for mining companies. Our assessment showed that these are less material for Capstone, considering the location and nature of our operations and the priorities of our stakeholders.



Material aspects A Health and Safety B Environmental Compliance and Permitting C Mining Waste D Water E Energy F Community Impacts G Employment H Economic Impacts I Compliance with Laws and Standards

Watchlist J Air Quality K Biodiversity L Training and Education M Labour/Management Relations N Emergency Preparedness O Closure Planning

Other P Environmental Expenditures Q Transport R Materials Stewardship S Procurement Practices T Anti-corruption U Security Practices V Lobbying and Advocacy W Diversity and Equal Opportunity X Aboriginal Relations Y Human Rights Management Z Artisanal and Small-Scale Mining Z1 Forced or Compulsory Labour Z2 Young Workers Z3 Resettlement

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We completed our first materiality analysis in 2014, and the results have determined the content of this report. for Capstone, materiality is an indication of the significance of sustainability aspects to our stakeholders and our business.



The primary activities at a mining operation are the extraction and processing of raw materials, which require a supply chain of organizations, people, information and resources to move products to market.

Capstone’s supply chain includes a broad range of products and services, which differ slightly at each of our operations. General categories for supplies and service include fuel and energy, processing and extraction materials (explosives, reagents, etc.), heavy equipment and light vehicles, transportation for supplies, people and products, and contract mining and camp services at our remote Minto Mine. We engage qualified contractors where required to provide us with design, engineering and specialized operating expertise. There were no significant changes in our supply chain during 2014.

This section provides an overview of each of our operating mines and key projects. Consolidated performance information for material sustainability aspects is covered in the 2014 Performance section.

Our Operations and Projects




The Globe-Miami mining district has a long history of mining and is one of the most productive mining regions in the US, with several former and current operating mines in close proximity to Pinto Valley. The mining industry is recognized as a key component of the local economy in this region. Production commenced at the Pinto Valley Mine in 1974. Ownership has changed multiple times and the mine has been shut down several times for extended periods. The most recent re-start was in December 2012, by BHP Billiton, prior to Capstone’s acquisition of the mine and the associated San

Manuel Arizona Railroad Company in October 2013. In addition to open pit mining and milling infrastructure, Pinto Valley also has a heap leach facility and associated solvent extraction and electrowinning (SX/EW) plant to process low-grade ore into copper cathode.

Pinto Valley is Capstone’s largest producing mine, providing 63% of Capstone’s copper production and 58% of total revenue in 2014. Engineering studies are underway to confirm the potential of extending the mine life beyond current estimates.

PINTO VallEy aRIzONa, US

Location Arizona, uS

Type of mine Open pit

Current mill throughput (tonnes per day) 52,000

Product shipment Concentrate trucked to San Manuel Arizona Railroad Company (SMARRCO) for rail transport to Port of Guaymas, Mexico; cathode trucked throughout uS

Mine life remaining (years) 11

Workforce (including contractors) 682

Access Accessible from a public highway; workforce commutes to site daily

Closest communities Miami (10 km; pop. 1,800); Globe (18 km, pop. 7,500); Greater Globe-Miami area (pop. 19,000, many outside municipal limits)

Climate Dry and semi-arid

Locally significant aspects Health and safety, water management, environmental permitting and compliance (for more information refer to 2014 Performance)

Key operAtIonAl fActS

local Communities and Stakeholder Engagement Pinto Valley is in the vicinity of established communities and plays a key role in supporting the local economy by engaging locally based suppliers and con-tractors, providing opportunities for local hiring and supporting community infrastructure.

Pinto Valley is active in community outreach by regularly sponsoring local causes and charities. We encourage employees to actively participate in local volunteer opportunities as

an additional way to support the community. In 2014, Pinto Valley spearheaded an initiative to create a consortium of local businesses that will pool their resources towards larger- scale, longer-term community development projects in the surrounding area.

Locally significant aspects are health and safety, water management, environmental permitting and compliance. All of these aspects are also material for Capstone as a whole, so they are covered in the 2014 Material Aspects section.

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OUR VAlUES IN ACTION: Execute with Excellence“Shortly after Capstone took over at Pinto Valley, the management team engaged a consulting company to lead a 30-week improvement plan, aimed at accelerating progress towards increasing throughput, reducing variability and realigning the organization. A group of us named the project Standing on Stable Ground, which represented our desire to build an efficient operation that could keep costs down and withstand the test of time. To date we have achieved a projected cost savings of $6 million in supply related initiatives alone. Many of us here have seen many ups and downs with the fluctuating copper price over the years, so it’s been encouraging to see the results of our efforts in declining cash costs in 2014.”

Rudy Dominguez, Business Services Manager, Pinto Valley Mine




Location Zacatecas, Mexico

Type of mine underground


Product shipment Concentrate trucked to port of Manzanillo, Mexico

Mine life remaining (years) 6


Access Accessible from public highway. Workforce commutes to site daily.

Closest communities Hacienda nueva (3 km, pop. 3,400); Zacatecas City (3.6 km, pop. 138,200); Morelos (5 km, pop. 11,500 ); Veta Grande (5 km, pop. 9,400 ); Guadalupe (15 km, pop. 160,000)

Climate Dry and semi-arid

Locally significant aspects Health and safety, water management, employment (for more information refer to 2014 Performance)


The Cozamin Mine is close to zacatecas City and is accessible to existing infrastructure. The Zacatecas region has a strong mining tradition, dating back to the 1500’s, positioning the Cozamin Mine within a community both knowledgeable and skilled in mining.

Modern operations on and adjacent to the Cozamin Mine began in 1982. Capstone acquired Cozamin in 2004 and commercial production restarted in 2006 after being shut down in 1996. Com-mercial production has expanded from an initial three-year mine life at 1,000 tonnes per day (tpd) in 2006, to more than 3,200 tpd with

a six-year life remaining. Brownfield exploration is ongoing at the mine, targeting additional resources that could extend the mine life.

local Communities and Stakeholder Engagement Cozamin is very close to neighbouring communities. The mine is located within the Hacienda Nueva and La Pimienta Ejidos. This area has well-developed infrastructure including schools, hospitals, utilities, government agencies and major mining suppliers and contractors. The close proximity to the community requires good working relationships with local stakeholders and a focus on social responsibility. Cozamin focuses on

COzaMIN zaCaTECaS, MExICO

local hiring, training opportunities and contributing to the develop-ment of local infrastructure.

Cozamin is proud of its programs for social responsibility and community development and its commitment to sustainable development. Cozamin is recognized as a “Family-Responsible Company” developed by the Secretariat of Labor and Social Welfare (Secretaría del Trabajo y Previsión Social) that recognizes a company that, in addition to achieving its business objectives, brings benefits to its partners, suppliers, families of its workers and the environment.

In April 2014, Cozamin was recognized for the third consecutive year by the Mexican Centre for Philanthropy (CEMEFI) with the “Social Responsible Company” certification. This honourable distinction is awarded to companies demonstrating a voluntary commitment to social and environmental responsibility and integrating a continuous improvement model as part of its culture and business strategy.

Locally significant aspects are health and safety, water management and employment. All of these aspects are also material for Capstone as a whole, so they are covered in the 2014 Material Aspects section.

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OUR VAlUES IN ACTION: Working Responsibly“I have seen a great maturity in the safety mindset over the seven years I have worked at Cozamin, and appreciate the freedom to express ideas to improve our work environment every day.”

Carlos Castro, Purchasing, Cozamin Mine

Cozamin Mine, zacatecas, Mexico



Location yukon, Canada

Type of mine Open pit / underground


Product shipment Concentrate trucked to Skagway port in Alaska

Remaining mine life (years) 7


Access Remote, accessible by air and ground transportation; workforce on rotation and stays on site in camp facilities

Closest communities Pelly Crossing (35 km, pop. 300); Carmacks (75 km, pop. 500); Whitehorse (240 km, pop. 28,000)

Climate Sub-arctic, seasonal temperature variations include short summers and long, cold winters with extreme temperatures

Locally significant aspects Health and safety, effluents and waste, environmental compliance and permitting (for more information refer to 2014 Performance)


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Minto is a remote camp-based operation situated on land owned by Selkirk First Nation (SFN). Depending on the time of year, Minto is accessible by ground transportation from a public highway, via barge or ice bridge across the Yukon River to a mine access road. Employees and contractors commute to the site by bus or airplane (during spring and fall seasons when the river is freezing or thawing), typically on a two-week-in/two-week-out rotation.

Minto reached commercial production in 2007 and was acquired by Capstone in 2008. The Minto deposit is spread over

a series of high-grade areas interspersed with large deposits of low-grade material. The mine plan was designed for the highest-grade deposits to be mined sequentially in a series of small pits supplemented with additional ore from underground. Production has increased from the original mill throughput of 1,800 tpd to a current mill throughput of 3,850 tpd. Mines in Yukon require a Quartz Mining Licence and a Water Licence to operate, and these permits need to be amended for changes to operations. Permitting activities are currently underway for the final phase of mining. Minto received the Quartz Mining

Licence in December 2014. The water use licence is expected in the first half of 2015.

local Communities and Stakeholder Engagement Yukon is one of the most sparsely populated jurisdictions in Canada. Minto lies closest to Pelly Crossing, the primary SFN community. There is minimal local infrastructure to support the mine with the exception of grid power and public highway access to the barge landing near the Yukon River.

A productive working relationship with SFN is essential. Minto and SFN have executed a Cooperation

Agreement that guides all interactions. Communication and information sharing is facilitated by regular meetings between SFN and Capstone leadership, in addition to regular community meetings and a Minto community liaison based in Pelly Crossing. Minto provides cultural awareness training and educates employees and contractors on the relationship, including SFN’s role as landowner.

Locally significant aspects are health and safety, effluents and waste, and environmental compliance and permitting. All of these aspects are also material for Capstone as a whole, so they are covered in the 2014 Material Aspects section.




OUR VAlUES IN ACTION: Always Accountable“Since I started at Minto six years ago I’ve seen Capstone take a number of steps to improve site conditions both for the business and our stakeholders, including construction of a reagent building for storage of chemicals, sourcing a high value critical spare parts inventory to reduce potential down time, and implementing ongoing enhancements to our water treatment plant.”

Doug Harris, Maintenance Operations Foreman, Minto Mine



Location Atacama, Region III, Chile

Proposed type of mine Open pit

Proposed mill throughput (tonnes per day) 60,500 life-of-mine average

Proposed product shipment Copper concentrate trucked to Santo Domingo port; magnetite iron concentrate transported to Santo Domingo port by pipeline

Estimated mine life (years) 18.5

Estimated workforce Average demand of 1,550 personnel and a maximum of (including contractors) 4,060 jobs during construction; average of 1,055 direct/indirect jobs during operations

Proposed access Accessible by public highway

Closest communities Mine site: Diego de Almagro (7 km, pop.15,200) Road/pipeline infrastructure: Chanaral (70 km, pop. 13,700) Port: Caldera (42 km, pop. 17,500)

Climate Arid desert climate

Locally significant aspects Health and safety, water management, community impacts, economic impacts (for more information refer to 2014 Performance)


SaNTO DOMINGO REGION III, ChIlE

The proposed Santo Domingo Project is located in the atacama region of Chile, approximately 100 km inland at a relatively low elevation of approximately 1,000 metres. The Atacama region has a long mining tradition and is currently one of the most produc-tive copper regions in Chile. Capstone acquired the Santo Domingo Project in 2011.

A positive feasibility study for Santo Domingo was released in 2014, which indicates the proposed operation is economically viable. The Environmental Impact

Assessment (EIA) was filed in October 2013 and is anticipated to be complete by the end of the second quarter in 2015.

local Communities and Stakeholder Engagement Local communities are well informed and understand the mining industry. Communities demand proper mitigation measures to manage potential impacts and enhance benefits. The close proximity of the project infrastructure (mine site, transportation route and port facility) to communities increases the magnitude of potential impacts.

Santo Domingo has engaged stakeholders through an extensive engagement process that started in the early stages of the Feasibility Study and EIA preparation to ensure concerns were identified and mitigated early on. This included stakeholder mapping and identification, conducting open houses and surveys, and making a commitment to developing a community relations plan in consultation with local stakeholders.

Santo Domingo employees are most proud of the community

relations strategy that has helped to build relationships with local stakeholders. A community relations plan has been developed through consultation with local communities that includes potential areas for community investment during project execution in the areas of health, education, sport and culture.

Locally significant aspects are health and safety, water management, community impacts and economic impacts. All of these aspects are also material for Capstone as a whole, so they are covered in the 2014 Material Aspects section.

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OUR VAlUES IN ACTION: Delivering Results“We have good communications between our project groups, and speak openly about problems and solutions on a daily basis. It’s very important to try to anticipate challenges on a project team, especially related to our objectives for keeping costs down. Besides good leadership, my team needs to keep open ears to listen to all the proposed ideas, and then analyze them in order to deliver results that will have the biggest impact on sustainable performance.”

Leonardo De la Hoz Cardenas, Infrastructure Engineer, Santo Domingo Project

Santo Domingo Project, Region III, Chile



kUTChO BC, CaNaDaThe kutcho Project is a proposed high-grade copper-zinc development project. Kutcho is located approximately 100 km east of Dease Lake in northwestern British Columbia, Canada. The Project is located on traditional territory of the Tahltan and Kaska Nations. There is no activity on the property and the asset is currently held for sale, though we continue to maintain the camp facilities and environmental baseline monitoring.

ExPlORaTIONExploration is an integral part of Capstone’s growth strategy. Ongoing brownfield exploration initiatives at our Cozamin mine focuses on discovering new resources and increasing mine life. Capstone maintains a portfolio of early-stage base metals exploration projects in mining friendly jurisdictions, typically focused in North and South America. In addition to our own exploration properties, we have made investments in partnerships with exploration-focused companies and evaluate additional opportunities on a continuing basis.

PROVIDENCIA ExPlORATION PROjECTCapstone’s largest greenfield project is the Providencia Exploration Project in Region III, Chile located approximately 50 km east from Taltal. Capstone has an option agreement with Sociedad Química y Minera de Chile S.A. (SQM) to earn up to a 70% interest. The initial option is on 350,000 hectares and would be reduced over time to a maximum of 50,000 hectares if a joint venture is ultimately formed.



Report on Performance

Our 2014 report on performance is divided into two sections: our Material Aspects and our Watchlist.For our Material Aspects, we describe how we are managing them and how we performed in 2014, including performance data. We focused our data collection effort where we have the most impact — at our operating mines. However, where applicable or meaningful we have included data on the Santo Domingo Project, exploration and corporate activities. The second section addresses the aspects on our Watchlist. These are sustainability issues that may become material that we are monitoring. For these aspects we describe our management approach only.




mAterIAl ASpectS

Why ThIS MaTTERS Health and safety risks are inherent to mining operations. Potential hazards at mine sites include working around heavy equipment, explosives or areas of exposed rock faces either on surface or underground.

Health and safety also includes industrial hygiene, which refers to diseases or injury resulting from exposure to certain physical elements (e.g. noise and dust). Ensuring the health and safety of our employees, contractors and local communities is a central component of our business approach.

Working responsibly is one of our core values, it states that safety is non-negotiable. Our performance data includes all personnel working at our operations, development and exploration projects.

hOW WE MaNaGE ITOur management approach starts with a commitment from the highest level of our organization in our EHSS Policy.

Capstone’s goal is zero harm. Our EHSS Policy guides us to safeguard the health and safety of people while safeguarding the assets of the company. We set

annual corporate objectives for continuous improvement in the number of health and safety incidents.

Each of our operations has a dedicated health and safety team. These teams coordinate training on general safety awareness, task and specific hazard training. The teams also lead the emergency response programs and work to integrate safety into the work culture.

We empower employees and contractors to take responsibility for their own safety. We train our workforce

to evaluate the risks associated with their tasks prior to commencing work. Any employee or contractor has the right to refuse work in an environment they consider unsafe.

We measure our health and safety performance. Our health and safety teams measure perfor-mance by evaluating a number of leading and lagging indicators and tracking incidents and corrective actions. We communicate results across the workforce on a daily, weekly and monthly basis.

Health and Safety

OUR VAlUES IN ACTION: Working ResponsiblyCapstone started formally measuring health and safety performance in 2010. We use the Workplace Safety North (Ontario) statistics as an industry benchmark. Overall, in the last five years we have seen consistent improvement in the health and safety performance at our operations. In 2014, we were aligned with or below our industry benchmark. Lost time incident frequency rate (LTIFR) and total reportable incident frequency rate (TRIFR) help us measure our performance against industry standards and can be used as a common comparison between jurisdictions with different health and safety legislation.



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We focus improvements on critical risk areas and audit the results. Capstone adopted a standardized Loss Control Management System for managing health and safety improvements in early 2013. The management system targets compliance across 20 different elements in order to reduce incidents, including a critical risk inventory that identifies high-risk activities.

This risk-based approach focuses first on evaluating and improving the most critical areas of health and safety. Each operation advances based on its own assessment of critical areas.

hOW WE PERFORMEDIn 2014, although Capstone improved safety on many fronts, we failed to meet our corporate objective of Zero Harm for health and safety performance due to the fatality at Cozamin. In June 2014, a contract miner was struck by a falling rock while working in an active mine face underground.

Our investigation indicated that safety procedures for working under an active mine face were not followed. Prior to the fatality we had purchased additional ground support equipment and had modified safety procedures

to ensure that an active face is properly secured. After the fatality we modified ground support standards to add mesh to active areas. We also implemented a requirement for a physical observation and sign off that scaling and bolting activities have been completed to Capstone’s standard prior to commencing work. We reviewed safety practices at our other mine sites as part of company-wide due diligence and response to this incident.

2014 was the first year that greenfield exploration and

Santo Domingo safety statistics were formally tracked.

WhaT’S NExT Our 2015 health and safety objectives will be for consolidated performance of operating mines, advanced development activities at Santo Domingo and exploration.

• 15% reduction rolling 12-month LTIFR < 0.47

• 15% reduction of 2014 TRIFR < 2.06

2014 health and Safety objectives

operation 2014 objectives1 2014 results

pinto Valley2 Rolling 12-month LTIFR < 0.96 0.69 Achieved

Rolling 12-month TRIFR < 2.00 3.74 not achieved

cozamin3 Rolling 12-month LTIFR < 0.49 0.21 not achieved


minto Rolling 12-month LTIFR < 0.23 0.83 not achieved


1 Capstone uses the lagging indicator guidance published by Workplace Safety north, a consortium of three Ontario safety associations representing the natural resource sector, for comparative purposes. Our annual performance objectives for these indicators are based either on mining summary statistics published by Workplace Safety north, or historical performance at Capstone, whichever is lower.

2 Limited historical data to apply Capstone criteria; objective based on operational data collected under previous owner.3 Although the LTIFR and TRIFR were achieved, Zero Harm was not achieved because of the fatality.

hEalTh aND SaFETy

2014 reSulTS



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hEalTh aND SaFETy

2014 reSulTS

pinto Valley cozamin minto Santo domingo total 2014 total 2014 operations1 exploration

Medical Aid 2 22 1 16 0 39 0

Lost Time Accidents3 5 2 3 1 11 1

Fatalities 0 1 0 0 1 0

LTIFR4 0.69 0.21 0.83 2.42 0.52 2.03

TRIFR5 3.74 0.31 5.25 2.42 2.38 4.06

Lost Day Rate6 29.24 86.71 66.38 0 60.94 58.87

health and Safety

Pinto Valley Cozamin Minto Santo Domingo Capstone Industry Benchmark

total reportable Injury frequency rate (trIfr)

hIStorIcAl heAlth And SAfety performAnce

1 Capstone includes all personnel on site in calculation of operations health and safety statistics, including brownfield exploration activities at Cozamin and field activities at Santo Domingo. Greenfield exploration is included in Total 2014 Exploration.

2 Medical Aid: refers to an incident where a worker involved needed medical assistance off site. These incidents are reported to authorities.3 Lost Time Accidents: an incident that resulted in a worker missing time on the job. These incidents are reported to authorities.4 LTIFR: Lost Time Injury Frequency Rate. Calculated by the number of Lost Time Accidents x 200,000/number of hours worked.5 TRIFR: Total Reportable Injury Frequency Rate. Calculated by adding Medical Aid and Lost Time Accidents x 200,000 / number of hours worked.6 Lost Day Rate: Severity of incident based on days lost from regular duty. Calculated by number of lost days x 200,000/number of hours worked.

lost time Injury frequency rate (ltIfr)

2.5

2.0

1.5

1.0

0.5

0.02010 2011 2012 2013 2014

ltIf

r

10.0

8.0

6.0

4.0

2.0

0.02010 2011 2012 2013 2014

trfI

r



mAterIAl ASpectS

OUR VAlUES IN ACTION: Working Responsibly“I am proud that safety is involved in all aspects of our operations at Cozamin, as an ingrained value, not a priority that can change over time. We are encouraged to point out safety hazards to others, no matter what rank the person may be, and stop to correct it right away.” David Ivan Perez, Warehouse Chief, Cozamin Mine

Cozamin Mine, zacatecas, Mexico



mAterIAl ASpectS

Why ThIS MaTTERS Environmental permits set the performance standard that we are measured against to determine we are operating in a manner that does not significantly impact the environment. Permits are required to build new projects or expand existing operations and maintain continued operation in every jurisdiction. A consistent track record of permitting compliance demonstrates our commitment to sound environmental performance. Incidents of non-compliance can also be costly and affect our ability to obtain future permits.

hOW WE MaNaGE IT Our EHSS Policy sets out commitments to continuously improve our environmental performance, establish environmental programs and operate in compliance with applicable legislation as minimum requirements.

We set annual objectives to drive continuous improvement and reduction in the number of environmental incidents. Incidents are reported internally as soon as they happen and compiled on a weekly and monthly

frequency for management reporting purposes (“non-report-able”). There is also regulatory reporting required for spills of certain materials over certain quantities, or exceedance of regulatory criteria, which varies by jurisdiction (“reportable”).

Dedicated environment teams are in place at our operations. Our environment teams provide environmental awareness training to the workforce. They deliver task-specific training and communicate compliance requirements to personnel and contractors with

direct responsibilities related to permit requirements. Mine and environmental personnel work closely on daily operations, expansion proposals and long-term closure requirements to integrate environmental considerations into the mine plan.

We focus on prevention and treat any spill as a learning opportunity. Our spill prevention approach emphasizes training and preventive maintenance on equipment. We require all workers to report any spill, no matter how small, so that we can learn

Environmental Compliance and Permitting

OUR VAlUES IN ACTION: Execute With ExcellenceCozamin achieved its second Clean Industry Certification from Mexico’s Federal Attorney for Environmental Protection (Procuraduría Federal de Protección al Ambiente (PROFEPA). This voluntary environmental audit program promotes self-regulation and continuous improvement. A third-party, government-accredited auditor is engaged to conduct an audit with a scope approved by PROFEPA. The audit determines the level of compliance with applicable environmental legislation and results in an Action Plan with a timeframe to address any actions required to remain in compliance. Benefits to Cozamin include recognition of compliance and access to PROFEPA training programs. Cozamin will be seeking renewal of this certification in 2015.



mAterIAl ASpectS

from it. Each operation has spill management procedures in place. Environment teams also conduct inspections to ensure appropriate spill prevention practices are in place for activities.

Corrective action following an incident could include additional training, revision of standard operating procedures or repairing/replacing equip-ment. Remediation for spills may include collecting and managing impacted material.

2014 environmental objectives

operation 2014 objectives 2014 results

reportable non-reportable reportable non-reportable

pinto Valley1 < 5 < 200 3 39 Achieved

cozamin 0 < 165 0 68 Achieved

15% improvement on 2013 incidents

minto < 6 < 58 5 52 Achieved

15% improvement on 2013 incidents

1 Objectives set based on historical Capstone performance. As limited historical data was available, the Pinto Valley objective was based on data collected by the previous owner.

hOW WE PERFORMED In 2014, there were no environ-mental fines or non-monetary sanctions issued to any of our operations. We met or exceeded our environmental objectives at all operations.

In 2014, our operations showed overall improvement in spill prevention. Efforts continued in engagement and training the workforce in environmental awareness and best practice. As part of capital projects, liners were installed in

spill-prone areas of the sites to improve containment, (e.g. lay down and wash bay areas).

Minto had five reportable spills in 2014 totalling 1,802 litres of diesel and 140 litres of antifreeze. Pinto Valley had three reportable exceedances of water quality standards detected during routine sampling. Two incidents were related to greywater from the sewage treatment plant on site and the third exceedance was resampled wth results in the

compliant range. These exceed-ances were contained on the property. In 2014, we also started formally tracking reportable incidents for exploration — there were none.

WhaT’S NExTOur 2015 objectives include:• Consolidated performance

by our operations of a 15% improvement in the number of reportable/non-reportable incidents (<7 reportable/ <137 non-reportable)

ENVIRONMENTal COMPlIaNCE aND PERMITTING

2014 reSulTS



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Mining Waste

Why ThIS MaTTERS Mining operations generate large quantities of waste materials, such as tailings and waste rock. Mines may also need to discharge process water or effluent.

All mine waste must be carefully managed to minimize long-term environmental impacts. Many aspects of mine waste disposal are governed by the terms of our permits and licences.

Significant resources are required to design and manage mining waste.

Monetary and reputational costs from any incidents related to the improper functioning of a tailings facility can seriously impact the long-term viability of an operation. In response to major tailings failures in Canada and elsewhere, both industry and the public are paying close attention to tailings facilities; from design and construction to responsible operation and closure.

As our most material impact is through these operational wastes, we do not include domestic waste in this report.

hOW WE MaNaGE IT Tailings and waste rock: The mine plan determines the amount of ore that will be processed through the mill and how much of the mined material is waste. Fundamental considerations in mine design are the volume, storage and disposition of tailings and waste rock. The mine plan is the driver for all activities on site and is presented to government agencies during permitting. The resulting permits outline requirements for design, operation, monitoring and closure of tailings and other waste facilities.

If the mineral deposit has potential for metal leaching or acid rock drainage (ML/ARD), the mine plan will consider this as well. ML/ARD are naturally occurring processes and represent a risk associated with long-term storage of tailings and waste rock. We routinely test rock material for ML/ARD potential during the feasibility assessment of projects and operational expansions.

Some waste rock and overburden material is also stockpiled for closure and construction of other

OUR VAlUES IN ACTION: Always Accountable“Minto Mine operates near the Yukon River. I’m a fisherman myself so I really care what we do to mine responsibly and ensure we are not damaging the environment as we go. We take accountability to continuously monitor groundwater, plants and animals around the mine site to ensure we are not spilling or discharging water or chemicals that will have a long-lasting effect on the environment.

Javad Azanchi, P. Eng., Chief Metallurgist, Minto Mine



mAterIAl ASpectS

site facilities if it is confirmed to be non-acid generating. We track quantities of overburden, waste rock and tailings generated at all operations.

Discharge/Effluent: The need to discharge process water, or effluent, is largely dependent on site-specific conditions such as climate and local hydrology. If there is excess water that cannot be safely stored on site, it must be discharged. Minto is our only operation with permit conditions related to discharging mine effluent. Before Minto discharges effluent (mainly to Minto Creek upstream from the Yukon River), the effluent is treated and tested. This ensures it meets the water quality standards set in the water licence issued by the Yukon Water Board.

Our operations conduct routine sampling at locations designated in regulatory permits to ensure water quality criteria are met. See the Water section to learn more about how we manage water quantity at our operations.

Sludges and other hazardous waste: Reagents or other consumables required for typical mining processes may generate waste that requires special disposal. Our operations are registered as required by local legislation as hazardous waste generators. These materials are tracked and reported when they are picked up by a certified transport company and delivered to a certified disposal facility. For example, the Pinto Valley solvent extraction electrowinning plant that produces copper cathode

mining Waste

material (tonnes) pinto Valley cozamin minto total 2014

Overburden 0 0 31,000 31,000

Waste rock 932,037 0 1 2,858,274 3,790,311

Tailings 17,020,883 1,134,450 1,388,494 19,543,827

Sludges 4 0 0 4

1 Waste rock generated from the Cozamin underground operation is used as backfill material for ground support. For this reason, the 329,160 tonnes of material generated in 2014 and stored underground is not considered waste rock.

generates sludge. The sludge, considered hazardous because of concentrations of lead and sulfuric acid, is shipped annually to a lead smelter for recycling.

hOW WE PERFORMED In 2014, we started implement-ing a tailings management standard based on best practice guidance as an additional due diligence measure. This standard requires our operations to implement a tailings manage-ment system based on a plan-do-check-act framework. This will help us ensure continuous improvement in accountability and operational controls for managing compliance, training, risk and change.

Cozamin continued evaluating the feasibility of paste tailings. If

feasible, this plant would prepare tailings for storage underground which would improve under-ground stability and reduce the amount of tailings storage on surface.

WhaT’S NExT• Continue implementing our

tailings management standard.

MINING WaSTE

2014 reSulTS



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MINING WaSTE

CaSe STudy

pInto VAlley There are two operating upstream tailings storage facilities, both commissioned in the 1970s. Slurry is pumped from the mill and deposited behind a retention dam. There are two tailings facilities that are closed and partially reclaimed.

coZAmIn A modified centreline tailings storage facility stores slurry tailings. Two additional upstream dam raises are in the design phase. Through acquisition of neighbouring property rights, tailings facilities from historic mine operations are now located on the Cozamin property.

mInto Dry stack tailings were produced until 2012. This means that most of the water was removed from the tailings prior to compaction and storage on surface. The facility is now in closure. In-pit tailings deposition will continue through the remaining mine life. A tailings dam is part of the proposed mine expansion to increase storage capacity in the pit.

SAnto domInGo A downstream tailings dam design is proposed. Slurry will be pumped to a tailings thickener that will remove additional water from the tailings before pumping into the facility.

hOW DOES CaPSTONE MaNaGE TaIlINGS?Tailings: These are materials left over from the milling process after separating the valuable ore from the rock. Tailings can range from dry to paste to slurry depending on the amount of water.

Tailings storage facilities: The size and type of facilities are site specific. Design is determined by local conditions such as climate, amount of annual precipitation, topography and the characteristics of the ore that is being processed.

In-pit tailings deposition at Minto Mine

Wildlife habitat on a reclaimed tailings impoundment at Pinto Valley



mAterIAl ASpectS

deSIGn

ApproAch Proposed designs go through various phases of feasibility with progressive levels of engineering and field testing reviewed by regulators and stakeholders.

exAmpleS pInto VAlley initiated a geotechnical drilling program in late 2014 to investigate ground conditions at potential sites for the tailings generated in the potential mine expansion currently at the pre-feasibility study stage. An independent peer review committee was selected to review design options and existing tailings facilities at the mine in 2015.

SAnto domInGo engaged in early consultation with stakeholders on the proposed mine design prior to submitting the Environment Impact Assessment. The original proposed location of the tailings storage facility near Diego de Almagro was raised as a concern. In the final design, the TSF was relocated further from the community.

conStructIon And operAtIon

ApproAch Facilities require continuous monitoring to ensure stability and compliance with design requirements and permit conditions. The monitoring and inspection provide early detection of any issues that may occur with the structure.

exAmpleS Instrumentation, such as piezometers to measure water levels in the dams, are installed and monitored as required by approved designs, management plans and permits.

All of our operations have regular inspections completed by a third-party engineer. Results are documented in annual reports which include any recommendations for improvement of conditions.

cloSure

ApproAch All of our operations must plan for eventual closure of tailings storage facilities. Pinto Valley and Minto currently have facilities in the closure phase. Facilities in this phase are routinely monitored for performance of closure mechanisms and stability.

exAmpleS Closure designs and requirements are developed well in advance of closure, reviewed with regulators and included in life-of-mine costs.

Creep movement of the dry stack facility at Minto has been observed and addressed by constructing a buttress to stabilize the facility and including it in ongoing geotechnical monitoring of site facilities.

hOW DOES CaPSTONE MaNaGE RISk aSSOCIaTED WITh TaIlINGS?Our operations have tailings facilities in various stages of design, operation and closure. Practices to assess and manage risk associated with the different phases are outlined below.

MINING WaSTE

CaSe STudy



mAterIAl ASpectS

Why ThIS MaTTERS Mines have large energy requirements and energy is a significant operating cost. A reliable energy source is a critical requirement for project viability. We also operate in jurisdictions that are actively managing high or competing demand for energy consumption.

Depending on the source of power, high energy use can also result in high air emissions,

including greenhouse gas (GHG) emissions. As our GHG emissions are primarily a direct result of electricity or fuel consumption to power our operations, we deal with them mainly through management of our energy use.

For our first sustainability report, we are considering all energy used on site to support extraction, processing and other associated activities. Our data does not include fuel requirements for

transportation of employees or concentrate to and from operations, as it is not material compared to energy requirements for extraction and processing.

hOW WE MaNaGE IT all of our operations use grid power. Grid power is derived from different sources in each jurisdiction. In Arizona, grid electricity is generated from a combination of nuclear, coal and hydro. The Mexican grid is powered

primarily by thermal sources and hydro. Cozamin needs to maintain energy consumption within authorized limits. In Yukon, grid energy is primarily from hydro that is supplemented by diesel generation in winter or drought conditions. Various power options including solar energy are being evaluated for Santo Domingo.

Fuel (primarily diesel and gasoline) is used to power heavy equipment, light vehicles and generators.

Energy

OUR VAlUES IN ACTION: Executing With ExcellenceWe apply innovation to reduce costs and support more sustainable operations. The Minto Mine made a remarkable effort in 2014 to reduce costs by developing an innovative long-hole drill mining technique. Part of the ore body, known as the M-Zone, was not accessible from the open pit because it required a significant amount of overburden stripping. This option was uneconomic, so the team at Minto designed a solution that gave access to the ore body and met the stability requirements to mine it safely. The approach uses pillars instead of backfill to provide stability and utilizes blasting techniques to isolate ore. This generates less waste rock which results in a huge cost savings in material handling and has allowed us to move to long-hole mining in other areas. As a result, the underground mining costs at Minto will be reduced 10-15% in 2015/16 by using both post pillar cut and fill and long-hole methods.



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We monitor energy closely.Energy consumption is monitored primarily as a cost driver through a combination of monthly billing and metering. Our operations identify energy efficiency initiatives such as purchasing energy-efficient motors, improving metering capability, upgrading aging equipment and ensuring appropriate maintenance. We monitor electricity use during peak demand periods so we can adjust our energy use during these times.

hOW WE PERFORMED In 2014, we initiated an energy management standard and designated Energy Management Teams at each operation. The energy management standard formalizes Capstone’s requirements for continuous improvement in our systems and decision-making processes related to energy. It will provide a framework to help us con-sistently evaluate our energy consumption and efficiency performance against our baseline. In addition, this

4% mine site general & administrative expenses 8% power 8% Diesel, gas & lubricants 13% Consumables 15% maintenance 25% Contractors & Consultants 27% salaries

capstone energy expenditures 2014

Energy expenditures represented 16% of Capstone’s production costs in 2014, spent predominantly on diesel and electricity.

energy consumption Within capstone and Associated GhG emissions

energy use (gigajoules) pinto Valley cozamin minto total 2014

Fuel1 752,400 105,256 311,841 1,169,497

Electricity 1,200,048 167,188 130,689 1,497,925

total energy consumption 1,952,448 272,444 442,530 2,667,422

energy-related GhG emissions (tonnes co2e)

Direct GHG Emissions2 52,658 7,795 21,468 81,921

Indirect GHG Emissions3 229,859 30,368 2,178 262,405

total GhG emissions 282,157 38,163 23,646 344,326

1 Fuel includes diesel, gasoline, propane and liquified petroleum gas.2 Direct GHG Emissions are related to fuel consumption for activities controlled by our operations. Emissions are calculated in carbon equivalent (CO2e) tonnes using

guidance required in local jurisdictions. Sources for emissions factors and global warming potential (GWP) over 100 years are: (Canada) nRCAn, (uS) EPA, (Mexico) PROFEPA. GWP values convert GHG emissions data for non-CO2 gases into units of CO2 equivalents.

3 Indirect GHG Emissions are related to electricity purchased from other organizations. Emissions are calculated in carbon equivalent (CO2e) tonnes using guidance required in local jurisdictions. Sources for emissions factors and global warming potential (GWP) over 100 years are: (Canada) nRCAn, (uS) EPA, (Mexico) PROFEPA.

GWP values convert GHG emissions data for non-CO2 gases into units of CO2 equivalents.

standard allow us to analyze the cost and benefit of energy efficiency projects in a systematic way and quantify performance targets to integrate energy use into management decisions. For the first time as an organization we have also quantified our GHG emissions associated with our energy use.

WhaT’S NExT• Continue implementing

our energy management standard.

ENERGy

2014 reSulTS



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Water

OUR VAlUES IN ACTION: Deliver ResultsOne of the key challenges at Cozamin is securing a continuous source of water in an arid climate while operating in close proximity to local communities. Cozamin considered stakeholder interests in coming up with an innovative solution for a sustainable, long-term water supply that is anticipated to meet requirements for the remaining life of the mine. Cozamin worked closely with the local municipal authorities on an initiative to build a pipeline from the municipal water treatment plant to recycle wastewater as a water source for the mine. Cozamin funded construction of a 10 km water pipeline from the treatment plant to the mine site, which was completed in April 2014. This initiative provided approximately 17.5% of the water consumed by mill in 2014, replacing a volume of water that we would otherwise have extracted from a groundwater well.

Why ThIS MaTTERSWater is a critical input to the mining process and is a finite resource significant to local communities and society. Water is a highly regulated aspect in all jurisdictions and is closely tied to our social licence to operate. Globally, fresh water is recognized as an increasingly scarce resource, so it is incumbent on us to make the best use of water wherever we operate.

Water is a key requirement in processing activities and a reliable source of water is required to keep our operations in produc-tion. Pinto Valley and Cozamin are located in arid regions with

water shortages, in relatively close proximity to local communities. In these jurisdictions, a monetary cost is attached to water use, which is a business consideration.

Conversely, Minto is in a remote location that experiences heavy spring runoff (freshet) and typically has a surplus of water on site from natural run-off that is collected. Minto needs to discharge water from time to time, ensuring sufficient storage capacity at the mine site to accommodate higher precipitation years and large storm events.

Our water performance data includes the quantity of water used by our operations.

hOW WE MaNaGE IT We secure a continuous source of water. This is an important component of water management practices at Pinto Valley and Cozamin, which are located in regions where water supplies are limited. It involves securing water rights or drilling additional wells. In practice, we minimize water use from shared sources. At Cozamin, the only water we use from the Zacatecas municipal supply is potable water for drinking and domestic use. Pinto Valley does not share any water sources with local communities; however, the groundwater wells we rely on are an important component of the regional water regime. Santo

Domingo is designed to use sea- water for processing. A desalination plant will be built at the mine site and a portion of this water will be supplied to Diego de Almagro. The community has limited water resources and this additional supply will cover anticipated growth in the community as a result of the project.

We model the balance of water. In development and during operations, we model the site “water balance” – the balance of water inputs (precipitation, surface water, groundwater, runoff, etc.) and outputs. This helps us understand the amount of water available in the environment, the amount of water

Water is used as part of the flotation circuit in the milling process (shown at left).



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required for operations and how much, if any, will be stored on site or discharged to the environment. Results of the water model dictate design specifications of site facilities, for example, storage areas sized to maximize capacity and practices to maximize the amount of water that can be recycled in the process.

We actively monitor water use. We meter water use in key areas and continually update the water model to guide decisions on a regular basis.

Other monitoring includes regular inspection and maintenance of storage catchments, pumps, pipes and wells, regular review and internal reporting activities. Minto reports water storage capacity and discharge capability internally

on a weekly basis to maximize lead time to address any storage capacity issues.

We implement best practices to conserve and maximize efficiency. We hold regular meetings to discuss water supply and applicable water conservation strategies. At Pinto Valley, key water conservation strategies include using an alternative, environmentally friendly product for dust suppression on roads instead of water and reminding employees to make water conservation an integral part of daily activities.

Maximizing the amount of water recycled from the tailings facility and/or stormwater catchments is a key management practice for Pinto Valley and Cozamin.

We keep clean water clean. Minto’s water management philosophy is “keep clean water clean.” This means that a network of ditches, detention structures and pipelines have been installed to divert “clean” water around the property to a water storage pond. Water that comes into contact with the disturbed area of the mine site is considered “impacted” and is conveyed to two storage ponds which act as the continuous water supply for the mill. Process water and tailings from the mill are pumped back to the mined-out pit for storage and the water is then recycled back to the mill. From this perspective, the water used for processing can be considered 100% recycled. Minto quantifies the storage capacity available and treats excess impacted water before discharging to the

environment. Minto does not calculate the amount of water recycled because there is an excess supply of water from precipitation runoff into disturbed areas. Minto does not draw on surface or groundwater sources for processing, and uses groundwater only for camp services.

hOW WE PERFORMED Water withdrawal refers to all water drawn into the site boundaries in a given year. In 2014, our operations maintained the water balance within inventory targets and process requirements. Continuous focus on conservation also yielded positive results. At Pinto Valley, using an alternative to water for dust suppression on site roads resulted in a savings of about 2,080 m3 of water per month.

WaTER

2014 reSulTS

Water Withdrawal by Source /Water recycled and reused

Volume (m3) pinto Valley cozamin minto total 2014

Surface water 0 0 0 0

Groundwater 8,630,421 437,570 11,156 9,079,147

Precipitation1 637,764 110,544 1,595,716 2,344,024

External waste water 0 120,245 0 120,245

Municipal or utility supply 0 11,628 0 11,628

total water withdrawal 9,268,185 679,987 1,606,872 11,555,044

Water recycled and reused 5,170,796 358,807 not measured2 5,529,603

recycled and reused as percentage of total water withdrawal 56% 53%

1 Includes rainfall and surface run-off collected and stored on site.2 Minto operates in a region where there is ample precipitation; therefore, a technique for measuring recycled water is not required

for water management as by design, the vast majority of impacted water is continually cycled through the system.



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Why ThIS MaTTERSAs a resource and labour-intensive industrial activity, mining has the potential for impacts on communities, both positive (we refer to these as benefits in this document) and negative. We are interested in creating and sustaining community benefits wherever we operate.

The greatest opportunities are mainly through employment, training and community investment opportunities. Refer to Employ-ment and Economic Impacts sections for more information about community benefits. In this

Community Impacts

OUR VAlUES IN ACTION: Always AccountableWe have involved the surrounding communities in the Santo Domingo development process. We designed the Early Citizen Participation Program to allow local communities to better understand the major project components and to gather community feedback. The process consisted of surveys and open houses conducted over two years and resulted in a number of changes to the proposed project that were incorporated into the Environmental Impact Assessment and Feasibility Study, summarized below:

• Relocation of the tailings storage facility 8.5 km southeast of Diego de Almagro • Construction of a bypass road to accommodate mine traffic to reduce traffic congestion • Development of a hiring plan for local workers to outline training programs and capacity

building in local technical schools • Definition of requirements for a community relations plan based on concrete feedback• Building permanent access to coastal areas near the port to ensure unrestricted access

for local seaweed collectors

section we address the potential for negative impacts — how we understand and manage them.

The proximity of these communities to our operations increases the potential for environmental or socio-economic impacts. In the regions near our operations, there are long traditions of mining and many of the neighbouring communities were established to support mining. Communities are familiar with the challenges and operational requirements of mining. Still, it is important for us to work together to identify,

understand and mitigate potential concerns and impacts.

hOW WE MaNaGE IT We consider the potential for impacts on communities during various phases of the project life cycle. While we don’t have a formal community engagement system in place for grassroots exploration activities, we recognize exploration as our first opportunity to build local relationships. Our Providencia property is located in an area remote from the nearest community. At this early stage we have made efforts to provide local

opportunities for employment in field work or procurement of services and supplies.

We engage communities in project development through direct consultation. For example, Minto established a bilateral technical working group to integrate Selkirk First Nation feedback into design concepts and to address concerns in advance of filing permit applications for its Phase V/VI expansion proposal. Regulatory processes in Yukon, Mexico, Arizona and Chile have opportunities for public input and participation.



mAterIAl ASpectS

COMMUNITy IMPaCTS

2014 reSulTS

Each operation establishes and maintains relationships with local communities and other stakeholders. While the approach to understanding concerns differs slightly between operations, it includes similar elements: • Designating personnel that

liaise with the local community and stakeholders

• Compiling a stakeholder engagement plan and documenting outcomes

• Conducting regular meetings with local authorities, leaders and stakeholders

• Responding to any grievances or complaints

Our operations are still some years from closure. We expect

our assessments of potential impacts on communities at closure will be reviewed with our stakehold-ers through existing communication mechanisms.

hOW WE PERFORMEDWe considered input from our General Managers and local community relations teams to help evaluate our performance. There were no disputes in 2014 relating to land use, customary rights of local communities and indigenous peoples.

The regulatory processes for Minto and Santo Domingo required us to complete environmental and socioeconomic impact assessments

and these provide a basis for understanding and mitigating impacts. Our local stakeholder engagement practices also identify impacts.

At Pinto Valley and Cozamin, where regulatory processes have not resulted in a formal impact assessment, we have identified the impacts our operations are managing. Refer to the Water Quality and Air Quality sections for information on how we are progressing on those aspects, where available.

For Minto and Santo Domingo, local stakeholders have some concern about how mining could affect community dynamics, traditional

livelihoods and their way of life. See our sidebar story on page 36 to see how we’re addressing this at Santo Domingo.

At Minto, a Tripartite Socio- economic Monitoring Agreement was executed by Minto, the SFN and the Yukon Government in July 2014. This agreement is the first of its kind in Yukon. It sets out requirements for ongoing monitoring of potential socio-economic impacts of the mine on Pelly Crossing and the SFN. Each group will contribute data to an annual report that will be completed by a third party. Results will be presented to community members on a regular basis.

community Impacts

operation/project community characteristics proximity to nearest community (km) Impacts requiring mitigation1

pinto Valley Established with a long history of mining 10 Water quality in Pinto Creek

Other economic activity in the area Water quantity in surrounding area

Dust

cozamin Established with a long history of mining 3 Dust

Other economic activity in the area Limited access to water

minto Remote community; Minto is first mine in the region 35 Dust

Water quality in Minto Creek

Changes to community life

Santo domingo Established with a long history of mining 7 Water

Other economic activity in the area Dust

Changes in community life

1 These impacts correspond to stakeholder concerns our operations have identified.



mAterIAl ASpectS

Employment

Why ThIS MaTTERSDeveloping a skilled and engaged workforce is critical to our business success. It can be difficult to hire and retain qualified employees in a competitive market or in remote areas.

Local employment opportunities are a key benefit of mining operations, especially in remote areas. Employment opportunities contribute significantly to building capacity in local communities and regions by developing skills of local people and providing wages that increase opportunities for local spending.

hOW WE MaNaGE IT Our key objectives are attraction, retention and development. Our workforce strategies include:• Clearly defined and embedded

core values• Industry-competitive compen-

sation and benefits programs• Focus on local recruitment

at our operations• Annual performance reviews

and objective setting• Training and development

opportunities• Succession planning to

identify successors and high-potential employees

• People policies and programs

that clearly communicate our principles for equitable treatment and the expectations of employees and their rights

We have a program to measure and reward performance. We have a performance management program in place to help objectively measure and reward performance at the individual, department, operation and corporate levels. At the start of each year, our senior management team sets corporate objectives approved by the Board of Directors, which cascade to each of our operations and to all employees. Our corporate

objective results are communi- cated and linked to compensation of our employees. This program gives our employees a sense of ownership and contribution towards our performance as a company.

At our operations, maximizing local employment results in benefits for local communities. Local employment is more sustainable and there is typically less turnover. Each of our operations has unique challenges in managing employment. Pinto Valley has difficulty attracting skilled trades people due to high demand and competing industries.

OUR VAlUES IN ACTION: Execute with ExcellenceA group of our employees came together in Arizona last year to attend a commissioned course entitled “Sampling Theory, Sampling Practices and their Economic Impact.” The course was facilitated by an expert in sampling, statistical process control and total quality management. In addition to providing a valuable platform for collaboration, this exercise demonstrated our commitment to best practice across the organization. The course stressed the need to use the scientifically correct methodology versus convenient or traditional practices for compilation of mineral resource and reserve data. We believe it is of key importance for our people to be well trained in best practices and industry standards.



mAterIAl ASpectS

While Cozamin is well situated and able to engage a local workforce, retention efforts focus on strong leadership, transparent training initiatives and recognizing the importance of local traditions.

Minto is a camp-based operation with a rotational schedule where it can be challenging to attract and retain employees for a long period of time. Pinto Valley is our only operation with a collective bargaining agreement which covers 61% of Pinto Valley

employees, totalling 27% of Capstone’s employees. The existing agreement expired in June 2014 and discussions have been ongoing since that time.

hOW WE PERFORMED There were some variations in our workforce in 2014. The size of Capstone’s workforce increased significantly following acquisition of Pinto Valley, and in 2014 we focused on integrating Pinto Valley into our culture. During the course of the year,

EMPlOyMENT

2014 reSulTS

Minto’s workforce was reduced by 94 contractor positions when the next phase of surface mining was delayed because the permitting process took longer than expected. Minto slowed production and altered the mine plan to avoid a shutdown.

employment by region1 / local hiring

pinto Valley cozamin2 minto Santo domingo corporate3 total 2014

m f m f m f m f m f m f

Full-time permanent employees 503 99 417 41 146 20 19 10 43 24 1,128 194

Part-time permanent employees 0 0 0 0 0 0 0 0 0 3 0 3

Temporary employees4 0 0 0 1 2 4 4 2 4 3 10 10

Total employees by gender 503 99 417 42 148 24 23 12 47 30 1,138 207

total employees 602 459 172 35 77 1,345

Full-time contractors5 66 14 215 8 86 24 58 4 0 0 425 50

total workforce by gender 569 113 632 50 234 48 81 16 47 30 1,563 257

total workforce 682 682 282 97 77 1,820

Workforce6 from local7 community (%) 37% 94% 40% 16%

Percentage of senior management8 25% 14% 0% 33% from local community (%)

1 Includes full-time salaried and hourly employees that are employees of Capstone Mining Corp. (corporate) and its subsidiaries – Pinto Valley (Pinto Valley Mining Corp.), Cozamin (Capstone Services S.A. de C.V. and Capstone Mining S.A. de C.V.), Minto (Minto Explorations Ltd.), Santo Domingo (Minera Santo Domingo Chile SCM) and Chile Exploration (Capstone Mining Chile SpA).

2 Employees listed are employees of either Capstone Mining Services S.A. de C.V. or Capstone Mining S.A. de C.V., which are wholly owned subsidiaries of Capstone Gold S.A. de C.V.3 Includes employees of Chile Exploration.4 Includes employees with finite employment contracts.5 Includes contractors regularly on site performing core business functions.6 Total workforce for significant areas of operation (excluding corporate office). 7 “Local” is defined in the context of each of our operations and the communities that are directly economically, socially or environmental impacted by our operations. Refer to operation profiles. 8 Senior management includes direct reports to the Mine General Managers.



mAterIAl ASpectS

employee new hire rate1

pinto Valley cozamin2 minto Santo domingo corporate3 total capstone rate (%)

Employees at year end 602 459 172 35 77 1,345

Total new hires 124 41 84 6 17 272

new hire rate (%) 21% 9% 49%4 17% 22% 20%

new hires by gender

Male new hires 106 29 67 4 10 216 19%

Female new hires 18 12 17 2 7 56 27%

new hires by age

25 or younger 12 13 20 0 3 48 43%

26-35 32 24 25 0 6 87 22%

36-45 31 3 15 4 3 56 17%

46-55 21 1 14 0 3 39 14%

56 or older 28 0 10 2 2 42 18%

EMPlOyMENT

2014 reSulTS

employee turnover by region, Gender & Age1

pinto Valley cozamin2 minto Santo domingo corporate3 total capstone rate (%)

Employees at year end 602 459 172 35 77 1,345

Total departures 5 95 54 80 2 5 236

Turnover rate (%) 16% 12% 47%4 6% 6% 18%

departures by gender

Male departures 85 46 66 1 1 199 17%

Female departures 10 8 14 1 4 37 18%

departures by age

25 or younger 7 5 10 0 3 25 22%

26-35 22 25 29 0 1 77 19%

36-45 24 8 16 2 1 51 15%

46-55 12 6 16 0 0 34 13%

56 or older 30 10 9 0 0 49 21%

1 Includes full-time salaried and hourly employees that are employees of Capstone Mining Corp. (corporate) and its subsidiaries – Pinto Valley (Pinto Valley Mining Corp.), Cozamin (Capstone Services S.A. de C.V. and Capstone Mining S.A. de C.V.), Minto (Minto Explorations Ltd.), Santo Domingo (Minera Santo Domingo Chile SCM) and Chile Exploration (Capstone Mining Chile SpA).

2 Employees listed are employees of either Capstone Mining Services S.A. de C.V. or Capstone Mining S.A. de C.V., which are wholly owned subsidiaries of Capstone Gold S.A. de C.V.3 Includes employees of Chile Exploration.4 Minto experiences seasonal variation related to temporary contracts for ice bridge and barge operation and summer student programs. 2014 seasonal work also included a drill

program and temporary support personnel in the mill.5 Includes voluntary and involuntary departures between January 1 and December 31, 2014.

7% selkirk first nation 18% other first nations 18% other yukon 57% rest of Canada

minto employee Statistics

Minto focuses on hiring First nations and local yukon residents. This is an important strategy for a remote operation striving to build a sustainable workforce.



mAterIAl ASpectS

OUR VAlUES IN ACTION: Execute with Excellence“I’ve grown up in this community with both my parents working at the Pinto Valley Mine for most of their working lives. I was in business for myself before joining the mine operations team shortly before Capstone took over the mine. Having been a small business owner I have a strong understanding for what it takes to survive, being able to adapt to your environment and anticipate the needs of the business. I have seen a strong commitment from Capstone to build a strong future at Pinto Valley, with the completion of the PV2 mine plan and investment in new equipment to improve operational efficiencies.”

Leora Hunsaker, Administrative Assistant, Pinto Valley Mine

Economic Impacts

Why ThIS MaTTERSOur financial performance is the primary measure of our economic impacts. This represents our ability to achieve our business objectives and execute our strategy.

For our stakeholders, economic impacts have a broader meaning that include how our activities generate and distribute value in the communities and regions where we operate. The two are closely linked. Strong financial performance ensures we can continue contributing our direct investments and indirect economic benefits that have value to the

communities where we operate. Direct community investment is part of our overall strategy to support the communities where we live and work.

hOW WE MaNaGE IT We set and achieve operational and financial performance goals.This ensures our operations continue to generate cash flow, earnings and direct contributions to local economies.

as much as possible,we engage local suppliers and contractors to direct our spending locally. Pinto Valley engages local

suppliers and vendors in Globe-Miami. At Minto, our surface mining contractor, one of our largest suppliers, is a Yukon-based company. Cozamin is a member of our Zacatecas Mining Cluster that supports mining suppliers with the combined demand of multiple mines in the area.

We focus our community investment in the areas of health and social welfare, youth, education, environment and local communities. Preference is given to non-profit organizations and causes that

contribute to long-term benefit in the community. Our operations determine how the funds are best distributed in the local communities, and in many cases this is based on direct requests from within the communities themselves.

The US is the only country where we operate that is a candidate country under the Extractive Industries Transparency Initiative (EITI). Countries that implement EITI are committed to ensure full disclosure of taxes and other payments made by resources companies to governments.

https://www.eiti.org/countries





mAterIAl ASpectS

hOW WE PERFORMEDWe have not quantified our indirect economic impacts, but as employment is one of our main direct impacts, we see that an important indirect benefit is the spending by our workers, sometimes in remote areas.

Mining also uses considerable energy, materials and equipment, the production and distribution of which has ripple effects through-out the economies in the regions where we procure them.

We believe that our efforts to build skilled workforces at each of our operations, including the direct support of training initiatives, builds capacity of the workers, which in turn encourages additional economic activity.

We strive to understand both community perceptions and needs. In 2014, we completed studies in the Pinto Valley, Cozamin and greater Yukon area communities to help us better understand both community

economic Value Generated and distributed by region (000’s of uS $)

canada uS mexico chile other total 2014

direct economic value generated1

Revenue 138,121 377,971 140,106 0 0 656,198

economic value distributed

Operating costs 68,142 179,868 54,114 7,305 60 309,489

Employee wages and benefits 31,493 63,564 11,944 6,538 0 113,539

Payments to providers of capital 8,578 1,449 0 0 0 10,027

Taxes and other payments to (recoveries from) governments (64) 6,962 24,288 2 0 31,188

Community investments 546 243 105 19 0 913

total economic value distributed 108,695 252,086 90,451 13,864 60 465,156

economic value retained (distributed) 29,426 125,885 49,655 (13,864) (60) 191,042

1 Refer to audited financial statements.

ECONOMIC IMPaCTS

2014 reSulTS

perceptions and needs. The Pinto Valley study indicated youth and education as areas of need. Pinto Valley used the results to focus on longer-term initiatives that supplement charitable giving. The Cozamin study validated the community support programs already underway. Results of the greater Yukon study will be available in 2015.



mAterIAl ASpectS

OUR VAlUES IN ACTION: Delivering Results“The Santo Domingo Project is proceeding slowly but surely, with the environmental study following the different stages of a set framework and the port area development moving forward. These are good examples of delivering results and doing what we say in accordance with what is required.”

Pilar Madrid, Executive Assistant, Santo Domingo Project

Compliance With laws and Standards

Why ThIS MaTTERSOur employees, local communities, regulators and shareholders expect us to operate in compliance with the law. Our Code of Conduct demands it. Compliance with the Code of Conduct is a condition of employment at Capstone.

We discussed environmental compliance in the Environmental Compliance and Permitting section. This section covers compliance with non-environmen-tal laws and regulations at both the corporate and operations level such as securities laws, financial reporting, resource reporting, health and safety, and human resources.

hOW WE MaNaGE IT We monitor changes and audit compliance. In 2014, we added a senior leadership position with responsibility for Capstone’s legal, compliance and risk portfolio. We also engage legal advisors and maintain membership in local mining and professional associations to keep abreast of changes in key regulations.

We have governance and review processes in place. Our Board Audit Committee provides oversight on financial reporting, ensures effective internal financial controls are in place and reviews compliance of these systems with regulatory requirements. Regular financial

audits and site reviews are conducted to ensure compliance with applicable securities laws and adherence to key regulatory instruments such as National Policy 43-101 for disclosure of mineral resources.

hOW WE PERFORMEDThere were no fines or sanctions issued to our corporate entity, Cozamin or Minto. However, Pinto Valley received 128 citations for non-compliance with mandatory Mine Safety and Health Administra-tion (MSHA) standards. All citations were corrected. We revised our processes as required to ensure continuous improvement in training and work procedures. As a new operator in Arizona, and given the

health and safety record of the mine under previous ownership, we have been subject to rigorous inspection since our purchase of Pinto Valley in October 2013. Under MSHA regulations, operators have the right to contest citations once the final inspection assessment has been issued by MSHA.

For Pinto Valley, it is the perceived severity of the event that is con-tested, not whether the event occurred. The MSHA public registry of citations, including amount of fines, is adjusted with the results of the review process. We are contesting approximately 36 citations. In 2014, we paid $3,822 for 2013 citations that were contested and finalized.



mAterIAl WAtchlISt

Air QualityWhy ThIS MaTTERSThe primary air quality concern for our operations is dust, also known as particulate matter. Mining operations include activities to move and store large amounts of rock and soil (stripping, blasting, and maintaining unpaved haul and access roads) and mill processes (crushing) that typically generate large amounts of dust.

The main sources of dust from our activities are crushers, conveyor belts, roads, tailings and stockpiles. Dust is a concern to communities in close proximity

Our Material Watchlist

The aspects identified in this Material Watchlist section were determined to be moderately important in our materiality process. While we do not present performance data for these, we do manage them closely. These aspects will be assessed regularly for indications of increased materiality.

to mine sites as it relates to public health and deposition of dust on vegetation. Dust is also a concern for the health and safety of employees working in and around active mine areas. It is our most significant air emission.

hOW WE MaNaGE ITWe have implemented engineering solutions at our operations to capture dust from some equipment and use dust suppressants in other areas. Some techniques include dust suppressants and wet scrubbers on conveyor belts and sprinklers and spraying haul

roads with water and other dust suppressants, depending on the site and season. Pinto Valley uses many controls including dust suppression measures on roads and tailings dams, visual observa-tions and reporting.

Cozamin has procedures in place for applying dust suppressants on site. In 2014, Minto installed a chute on the crusher that extends to the stock pile and helps reduce dust when ore is deposited. We also monitor air quality in the immediate operations area for silica and other particulates to ensure

they do not exceed standards for occupational or public health.

While dust suppression measures are working, this continues to be a challenging aspect. Our operations continue to identify opportunities for improvement in dust suppression on roads and equipment, in response to regulatory changes.

We monitor other air emissions at our operations to meet local air quality standards, but our materiality analysis showed they are much less significant than dust.



mAterIAl WAtchlISt

BiodiversityWhy ThIS MaTTERSBiodiversity (biological diversity) refers to the variety of species and ecosystems and the ecological processes they support. Mining impacts on habitat, wetlands and water quality could affect different species of plants, fish or wildlife that are identified in the local area. Biodiversity is important for our stakeholders, especially those who live nearby or value the surrounding lands and natural resources, and figures prominently in many regulatory requirements. For our first report we are limiting the scope to areas immediately impacted by the physical extent of operations.

hOW WE MaNaGE ITOur first step in biodiversity protection is to develop an understanding of the biodiversity in the area that could be affected by the operation. We do this by conducting environmental baseline studies for the ecosystems that could be affected. These studies are required as part of the permitting process for planned expansions at our existing operations and new development at Santo Domingo. We use this information to determine how to minimize, monitor and manage impacts on plants, fish and wildlife and their habitat.

Our biodiversity programs vary from site to site, but generally include wildlife awareness training for employees and contractors, conservation and management plans, and careful selection of vegetation for reclaimed areas. We check the effectiveness of our programs by monitoring wildlife, vegetation and water quality. Cozamin has conducted an inventory of flora and fauna on the property. These field surveys have been used to inform conservation plans.

Training and EducationWhy ThIS MaTTERSMaintaining safe operations requires employees and contractors to be well trained in safe operating procedures. Training and education is important for attracting and retaining skilled personnel, and supporting our capacity for continuous improvement in all aspects of our business. Members of our neighbouring communities are also interested in developing skills, especially those that help secure work in mining.

hOW WE MaNaGE ITThe human resources, health and safety and environment teams

manage training programs at our operations. Health and safety training is the most extensive task-based, legislated training and varies for employees, contractors and visitors.

Programs include first aid, front line supervisor training, equipment handling, fall protection and confined spaces. We support cross training between our operations to share expertise internally. For example, Pinto Valley’s industrial hygiene specialist conducted an internal audit and training workshop at Minto in 2014.

Our operations work with local training agencies to identify opportunities to deliver training programs based on local needs. Our training and education programs are defined by need and vary across level and by operation. Development programs are an important retention and atttaction tool for us.

labour/Management RelationsWhy ThIS MaTTERSEmployees are one of our major stakeholder groups. Building and maintaining a productive relation-ship with our people is essential to productivity and employee

engagement. For Capstone, this includes union and non-union employees.

hOW WE MaNaGE ITWe are proactive in trying to understand the concerns of employees and communicate information about Capstone and our major activities. We encourage an open and honest management style at each of our offices and operations. We regularly communicate company and operations level objectives to the workforce as part of our performance management program.

We communicate information and collect employee feedback through a variety of mechanisms across the organization including quarterly CEO newsletters, “town hall” meetings with large groups, site newsletters and magazines, mass email communication, intranet message boards and collaborative forums, direct communication with supervisors and the installation of bulletin boards and television monitors throughout the organization that display important information.



mAterIAl WAtchlISt

Emergency PreparednessWhy ThIS MaTTERSThe inherent risks and hazards associated with mining may result in accidents or emergency situations that can affect employees, local communities or the environment. When emergencies happen in mining locations, especially remote ones, impacts on people and the surrounding environment can be serious. We prepare for worst-case scenarios through risk assessment, and ensure sufficient training and resources are readily available. Our emergency preparedness practices consider a wide range of emergency scenarios that may arise at our operations, including major natural disasters, mine accidents and spills.

hOW WE MaNaGE ITCapstone’s EHSS Policy directs us to maintain a high degree of emergency preparedness at our operations and corporate office. Our operations have emergency response plans in place, which may have regulatory requirements, that are reviewed annually. These plans have a clear link to our corporate crisis management plan, so that in the event of a serious incident,

all of our resources are triggered to address the situation. We train our people for their roles and conduct regular exercises and drills to ensure we are prepared for any emergency situation. Some of the scenarios include emergency medical incidents, surface and underground rescue, firefighting and hazardous materials response.

There is a strong link between training and emergency preparedness. While the full workforce is included in general training, there is designation and special training of mine rescue personnel at each site. At Pinto Valley and Cozamin, where the local communities are in very close proximity, the mines work with local emergency service providers as part of routine training and preparedness.

Minto continues to advance its expertise especially considering its remote location where emergency support is not immediately available. This has earned the Certificate of Recognition (COR) granted by the Yukon Workers Compensation Health and Safety Board. This designation recognizes employers who go beyond the legal requirements of the Workers Compensation

Act and Occupational Health and Safety Regulation by taking the “best practice” approach to implementing health and safety programs.

Closure PlanningWhy ThIS IS MaTTERSClosure is a key part of minimizing long-term environmental impacts and is important to our stakeholders. It requires design and operational considerations and is a significant project cost. Our approach includes maintaining closure plans and progressive reclamation activities. Under our current mine plans, we are not facing a closure scenario until at least 2020, but lead time is required to implement plans.

hOW WE MaNaGE ITPlanning for closure starts with project design. Material and cost requirements are considered from the beginning to ensure the chosen approach to closure is environmentally and financially feasible. Closure and reclamation plans cover all the activities needed to restore the area and leave it safe once mining is complete. This may include physical contouring of the land, surface and groundwater

management, revegetation and long-term monitoring. Closure plans may also consider a temporary closure scenario when the project is put into care and maintenance. In Yukon and Arizona, regulators require funds guaranteed for closure obligations.

All of our operations have closure plans with cost estimates that are updated regularly. Some of the actions in our plan are completed while operations continue, such as storing waste materials in accordance with approved mine plans, capturing affected water and removing obsolete infrastructure. We also progressively reclaim some areas and revegetate them while mine operations continue. By monitoring the results of these actions we can see if our closure plan is effective and make adjustments during operations if needed.


GloSSAry


Base metalsMetals that are not considered precious such as copper and zinc. In general, base metals corrode when exposed to air and moisture.

Brownfield explorationA term used to describe exploration that takes place at or near an existing mine.

Centreline tailings facilityA type of tailings storage facility. The term ‘centreline’ refers to a construction method where the centreline of the embankment or dam remains consistent as the dam is raised. This is in contrast to other common methods of tailings dam construction (upstream, downstream). When these methods are used, the centreline of the dam moves upstream or downstream as it is raised.

Copper cathodeCopper cathode is copper that can be produced from a solvent extraction and electrowinning plant. The resulting, nearly pure copper, is an excellent conductor and is often used in electrical wiring.

Copper concentrateCopper concentrate is the product resulting from ore that has been put through the mill process. It is composed of copper and minerals from the host rock that have been mined and undergone primary processing. Most copper concentrate is sold directly to smelting/refining companies. These intermediaries then process it into refined copper.

Downstream tailings facilityA type of tailings facility. The term ‘downstream’ refers to a construction method wherein the raises or lifts in the embankment or dam are placed in a downstream direction. This characterizes a construction method over other common methods of tailings dam construction (centreline, upstream).

EffluentWaste or process water that is discharged to the environment.

EjidoIn Mexico, lands held in the traditional system of land tenure of communal ownership with individual use.

Greenfield explorationA term used to describe exploration that takes place in an area where there has been no previous mining activity.

heap leachA process to extract precious metals, copper and uranium from ore, by placing them on a pad (a base) in a heap and sprinkling a leaching solvent such as acids over the heap. This process dissolves the metals and they collect at the bottom of the pad. The solution is then sent to a solvent extraction and electrowinning plant to process the copper in cathode.

lagging indicators Past health and safety incident statistics, including the number of reported incidents and the frequency and severity of injuries.

leading indicators A measure intended to drive activities that prevent injuries, including quality of employee observations, number of training hours and number of equipment inspections.

Metal leaching/acid rock drainageAcid rock drainage refers to the acidic water that is created when sulphide minerals are exposed to air and water and, through a natural chemical reaction, produce sulphuric acid. Elevated metal leaching is associated with acidic drainage due to high metal solubility and sulphide weathering rates under acidic conditions.

OverburdenRock or soil lying over a mineral deposit.

PiezometerAn instrument used to measure the pressure of a liquid or gas, or something related to pressure (such as the compressibility of liquid). Piezometers are often placed in boreholes to monitor the pressure or depth of groundwater.

ReagentsA substance or mixture for use in chemical analysis or other reactions, such as those that occur in milling or water treatment.

SludgeThe thick, soft, wet mud or a similar viscous mixture of liquid and solid components resulting from an industrial or refining process, such as water treatment.

SlurryA mixture of fine-grained particles of rock, suspended in a liquid, typically water. A common type of tailings.

Solvent extraction and electrowinning plantA facility where a two-stage process takes place on solution produced from a heap leach. First copper ions are extracted from low-grade leach solutions into a solvent containing a chemical that selectively binds to copper. An electrolytic procedure is then used to deposit pure copper onto cathodes.

Upstream tailings facilityA type of tailings storage facility. The term ‘upstream’ refers to a construction method wherein the raises or lifts in the embankment or dam are placed in an upstream direction. This characterizes a construction method over other common methods of tailings dam construction (centreline, downstream).

Waste rockNon-economic rock that must be fractured and removed in order to gain access to ore.

glossary



GrI Index

GrI G4 IndIcAtor deScrIptIon noteS / omISSIon pAGe

GenerAl StAndArd dIScloSureS

StrAteGy And AnAlySIS

G4-1 CEO Statement 2

orGAnIZAtIonAl profIle

G4-3 name of the organization 4

G4-4 Primary brands, products and services 4

G4-5 Location of organization’s headquarters 4

G4-6 number of countries where the organization operates 4

G4-7 nature of ownership and legal form 4

G4-8 Markets served 4

G4-9 Scale of the organization 4

G4-10 Employment overview 39

G4-11 Percentage of employees covered by collective bargaining agreements 39

G4-12 Supply chain description 11

G4-13 Significant changes during the operating period no significant changes in 2014. 4 and 11

G4-14 Application of precautionary principle Capstone does not explicitly address the precautionary principle. _ To learn more about the precautionary principle see The Rio Declaration on Environment and Development. Principle 15, united nations (un), 1992.

G4-15 External charters, principles or initiatives none. —

G4-16 Memberships of associations 5

IdentIfIed mAterIAl ASpectS And boundArIeS

G4-17 Entities included in financial statements Refer to Capstone’s 2014 Financial Statements for disclosure on entities included on Capstone’s financial statements. 6

G4-18 Process for defining report content 9

G4-19 Material aspects identified 10

G4-20 Aspect boundary within the organization 9

G4-21 Aspect boundary outside the organization For this first report, the aspect boundary has been limited to the organization. 9

G4-22 Restatements of information no restatements. First GRI-based report. —

G4-23 Significant changes from previous periods in scope or boundary no changes. First GRI-based report. —

http://www.unep.org/Documents.multilingual/Default.asp?DocumentID=78&ArticleID=1163



http://www.capstonemining.com/investors/financial-reporting/default.aspx

http://www.capstonemining.com/investors/financial-reporting/default.aspx



GrI Index


GenerAl StAndArd dIScloSureS

StAKeholder enGAGement

G4-24 List of stakeholders 9

G4-25 Basis for identification of stakeholders 9

G4-26 Approach to stakeholder engagement 9

G4-27 Key topics and concerns from stakeholder engagement 9

report profIle

G4-28 Reporting period 6

G4-29 Date of more recent previous report none. First GRI-based report. —

G4-30 Reporting cycle 6

G4-31 Contact point for questions on report Inside back cover

G4-32 Concordance with GRI 6 and this table

G4-33 Practice on external assurance 6

GoVernAnce

G4-34 Governance structure 8

ethIcS And InteGrIty

G4-56 Description of organization’s values and standards 8

SpecIfIc StAndArd dIScloSureS

cAteGory: economIc performAnce

ASpect: economic Impacts (note: This material aspect includes G4 aspects of Economic Performance and Indirect Economic Impacts. The G4 aspect “Market Presence” is covered under our material aspect “Employment”.)

G4-DMA General Disclosure on Management Approach 41

G4-EC1 Direct economic value generated and distributed 42

G4-EC8 Significant indirect economic impacts 42

cAteGory: enVIronmentAl

ASpect: energy (note: Our material aspect of Energy includes energy-related GHG emissions.)


G4-En3 Energy consumption within the organization 33

G4-En15 Direct Greenhouse Gas (GHG) Emissions (Scope 1) 33

G4-En16 Direct GHG Emissions (Scope 2) 33



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cAteGory: enVIronmentAl

ASpect: Water


G4-En8 Total water withdrawal by source 35

G4-En10 Percentage and total volume of water recycled and reused 35

ASpect: effluents and Waste (note: We call this “Mining Waste.” The G4 indicator “Total number and Volume of Significant Spills” is covered under our material aspect “Environmental Compliance and Permitting.”

G4-DMA General Disclosure on Management Approach 28 and Tailings Case Study

MM3 Total Amounts of overburden, rock, tailings and sludges 29 and their associated risks

ASpect: compliance (note: We call this aspect “Environmental Compliance and Permitting)


G4-En24 Total number and volume of significant spills 27

G4-En29 Monetary value of significant fines and total number of 27 non-monetary sanctions for non-compliance with environmental laws and regulations

cAteGory: lAbour prActIceS And decent WorK

ASpect: employment (note: Our materiality analysis indicated that local hiring is an indicator of Employment for Capstone)


G4-EC6 Proportion of senior management and total workforce hired from 39 the local community at significant locations of operation

G4-LA1 Total number and rates of new employee hires and employee 40 turnover by age group, gender and region

ASpect: occupational health and Safety

G4-DMA General Disclosure on Management Approach Jurisdictions where we operate have ratified the 22 ILO Convention 176 on Safety and Health in Mines.

G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, Some data is not available. Capstone does 24 absenteeism, and total number of work-related fatalities, by not track injury data by gender. Absenteeism is region and by gender. not tracked. Occupational disease is not tracked.



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cAteGory: SocIety

ASpect: local communities (note: we call this material aspect Community Impacts)


G4-SO2 Operations with significant actual and potential negative 37 impacts on local communities

MM6 number and description of significant disputes relating to land use, 37 customary rights of local communities and indigenous peoples

ASpect: compliance (note: we call this material aspect Compliance with Laws and Standards)


G4-SO8 Monetary value of significant fines and total number of non-monetary 43 sanctions for non-compliance with laws and regulations

mAterIAl WAtchlISt

ASpect: emissions (note: we call this watchlist aspect Air Quality and our focus is dust. We address GHG emissions under Energy.)


ASpect: biodiversity


ASpect: training and education


ASpect: labor/management relations


ASpect: emergency preparedness


ASpect: closure planning




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cAutIonAry note

CAUTIONARy NOTE REgARDINg fOWARD-lOOKINg INfORMATIONCertain statements in the report constitute “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 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 in this report include, but are not limited to, statements relating to our sustainability goals and plans and our expectations regarding those goals and plans, as well as statements regarding the life of certain operations. Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events that management believe to be reasonable, though inherently uncertain and difficult to predict. Some forward looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “outlook”, “guidance”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or 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. In this document, certain forward-looking statements are identified by words including “may”, “future”, “expected”, “intends” and “estimates”. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to operational problems, regulatory action, changes in law or regulations, natural disaster or adverse weather conditions, accidents, changes in commodity prices, general business and economic conditions, and future operation and financial performance of the company generally and other risks of the mining industry as well as those factors detailed from time to time in the Company’s interim and annual financial statements and management’s discussion and analysis of those statements, all of which are filed and available for review under the Company’s profile on SEDAR at www.sedar.com. The Company provides 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.

http://www.sedar.com

Suite 2100 – 510 West georgia Street Vancouver, BC, Canada V6B 0M3capstonemining.com TSx:CS

Sustainable Thinking from the ground up

Questions or feedback about this report?Please email: [email protected] or call: 604-684-8894 or toll-free 866-684-8894


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