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FINAL TRANSCRIPT

Capstone Mining Corp.

Third Quarter Results Conference Call

October 27, 2017

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CORPORATE PARTICIPANTS Cindy Burnett Capstone Mining Corp. — Vice President, Investor Relations and Communications Darren Pylot Capstone Mining Corp. — President and Chief Executive Officer Jim Slattery Capstone Mining Corp. — Senior Vice President and Chief Financial Officer Gregg Bush Capstone Mining Corp. — Senior Vice President and Chief Operating Officer CONFERENCE CALL PARTICIPANTS Alex Terentiew BMO Capital Markets — Analyst Stefan Ioannou Cormark — Analyst Robert Reynolds Credit Suisse — Analyst Craig Hutchison TD Securities — Analyst

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PRESENTATION

Cindy Burnett — Vice President, Investor Relations and Communications, Capstone Mining Corp.

Thank you. I’d like to welcome everyone on the call today. The news release announcing Capstone’s 2017 third quarter financial results is available on our website, along with an updated corporate presentation with summary information on the Company and our financial and operating results. Also on the website are webcast slides to accompany our commentary today.

With me today are Darren Pylot, Capstone’s President and CEO; Jim Slattery, Senior Vice President and Chief Financial Officer; and Gregg Bush, Senior Vice President and Chief Operating Officer.

I would like to advise you that this call is being recorded for replay through our conference call provider and is being broadcast live through an Internet webcast system. Following our brief remarks, there will be an opportunity for questions.

Comments made on the call today will contain forward-looking information. This information, by its nature, is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please see Capstone’s relevant filings on SEDAR.

And finally, I’ll just note that all amounts we will discuss today will be in US dollars, unless otherwise specified.

Now I’ll turn the call over to Darren Pylot.

Darren Pylot — President and Chief Executive Officer, Capstone Mining Corp.

Thank you, Cindy, and good morning, everybody. Jim will start off by reviewing the financial performance, followed by Gregg to give us an update on our operations, and then I’ll comment on our corporate activities, followed by your questions.

So to get started, I’ll turn the call over to Jim.

Jim Slattery — Senior Vice President and Chief Financial Officer, Capstone Mining Corp.

Thank you, Darren. Our net income was $20.2 million in the third quarter. Adjusting for a $13.6 million gain on the sale of marketable securities and a $20.6 million impairment reversal at

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Minto, which reflected the mine life extension there, we reported an adjusted net loss of $11.4 million.

Our operating cash flow before changes in working capital was $41.4 million for the quarter and $91.6 million year to date.

We repaid another $14 million on our revolving credit facility subsequent to the quarter-end, which brings our total debt reduction for the last four quarters to $64 million. $20 million dollars in proceeds from the sale of our Kutcho project, which is now anticipated to close in the fourth quarter, are also intended to be directed to further debt reduction.

Costs in the third quarter and year to date at Pinto Valley and Cozamin are in line with our current guidance through to the end of the year. At Minto, costs were higher than anticipated due to the delay in underground mining in the quarter.

As this delays the mine plan, we are projecting higher costs to come in the fourth quarter at Minto. The benefit from the stripping and underground costs that we will expense in the fourth quarter will largely come in future periods. We also intend to capitalize an additional $3 million related to Minto underground infrastructure that will push up our Minto all-in costs for the year.

Now I’ll turn the call over to Gregg for the operational update.

Gregg Bush — Senior Vice President and Chief Operating Officer, Capstone Mining Corp.

Thanks, Jim. Staring with Pinto Valley, production was lower than we planned for the quarter, as we experienced downtime due to extended outages both in August and September. Electrical issues led to a four-day outage in August.

The plant has been operating on a temporary repair since the August outage. The new circuit will be commissioned in the next couple of days without any further process interruptions. The second brief power outage in September precipitated issues in the tailing circuit that contributed to a week of restricted mill throughput.

A portion of our sustaining capital will be directed towards electrical system upgrades over the next few years. We have completed an external review of electrical infrastructure to assess risk and set priorities, and we are comfortable that our program will minimize this type of risk going forward as part of our planned maintenance program.

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I did want to comment on Pinto Valley recoveries. The reported recoveries were unusually high during the quarter for a number of reasons related to work-in-progress inventory movement. For forecasting, we are continuing to use approximately 88 percent recovery going forward.

Cozamin operations continued to operate very well in the third quarter, with both production and development ahead of plan. We also continue to have good results with our brownfield drilling, and this quarter announced a unique transaction with Endeavour Silver. The arrangement gives us access to their ground for base metals exploration, and provides them with access on our side of the property boundary to explore for precious metals. We have been following the Footwall Zone up to the boundary, and with this new agreement are now able to follow it across.

At Minto, we did fall behind in the quarter due to a halt in underground mining for a period of time in order to upgrade the emergency response capacity in the current stoping areas. This pushed up our costs significantly, and we adjusted our Minto guidance upward. We are back on track and advancing our extended mine plan, which creates significant value in a high copper price scenario.

With that, I’ll turn the call back over to Darren.

Darren Pylot

Thanks, Greg and Jim. So just summarizing the key points in the third quarter; having three mines definitely has contributed to flexibility with Cozamin outperforming and Minto and Pinto Valley underperforming. But we do still expect to make the lower end of our production guidance range for the year with no changes to our costs at PV and Cozamin.

But while behind at Minto with higher costs as a result, as Gregg mentioned, work is well underway at Minto for the mine life extension, with a new mine plan all ready to be worked into our 2018 guidance. The higher 2017 costs, don’t forget, also include the development and infrastructure costs have all been expensed to date. And some of those costs will benefit future periods.

We continue to have exploration success at Cozamin and, as Gregg mentioned, we obtained access to additional highly prospective ground through agreements with neighbouring property owners.

Subsequent to the quarter, we repaid another $14 million of debt, bringing our total debt reduction to $64 million since we began the program back in the fourth quarter of 2016. And we are

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on track to meet our net debt target of $100 million by the end of 2018 at these current metal prices.

So as we move into the fourth quarter and next year, our operations are all set up for obviously extended mine lives and extended operations. We’re very pleased with the excellent exploration results to date at Cozamin, and those results are increasing our confidence in the potential for a mine life extension there. We do expect to increase exploration expenditures next year, given the positive results of the drilling program this year.

We’re also very optimistic of our closing of our Kutcho property sale that we expect to take place in Q4 this year. And we will continue to direct any free cash flow from the proceeds of that sale or from our operations towards our debt reduction targets.

The last of our hedging program rolls off in December of this year. We have no plans to put any additional hedges in place in 2018 or beyond that would cap our upside, which positions us to 100 percent exposure to our copper upside starting in January of next year and beyond.

So, Operator, that concludes our prepared remarks. And we’re now prepared to take any questions that are there.

Q&A

Alex Terentiew — BMO Capital Markets

Yeah. Hi, guys. Good morning. I’ve got a few questions. I’ll just ask a couple, then I’ll get back in the queue. But I just want to start with Pinto Valley. I remember a couple quarters, a few quarters ago, you guys had talked about looking at some of the properties nearby, I think other BHP properties adjacent to Pinto Valley and seeing if there are opportunities there. Is that still something you guys are looking at? Or what’s become of that process?

Darren Pylot

Yes. Good morning, Alex. Yes. We are still looking at prospective ground next door. As we said before, there’s a lot of property next door that production was taken off-line in the early 1970s when copper was obviously a lot lower than it is now. So there is a lot of prospective ground. That comes with environmental issues and a lot of other things that we’re working through to kind of

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understand, so it’s a longer-term process. But we definitely like the region and we like, obviously, the neighbouring ground. So we are still continuing on that program.

Alex Terentiew

Okay. Great. Thank you. And I’ll save Minto for later, or I’m sure somebody else may ask some questions on that. But just at Cozamin then, you guys got some exploration success; talking about extending the mine life. Is your priority now or what do you think your focus may be on? Would it be looking at more zinc tonnes to maybe add to 2018 or beyond? Or would you rather just focus on finding more copper tonnage and extending the mine life by another few years? Or both?

Darren Pylot

Alex, actually we’re focused on both. We’ve been doing, obviously, a drill program on our San Rafael zinc area that we are now finalizing the last bit of met work that needs to be done before we can put it into the mine plan. So the goal is to get some of it into the mine plan at the end of next year and beyond. So we are working on the zinc, and feel confident that there’ll be additional zinc relative to what we’ve been producing previously into the mine plan in 2018 and beyond.

And as well, we’re going to step up the exploration program for more copper, following up on the successes that we have had to date this year at Cozamin. So we’ve had some fairly large step-out drill holes intersect nice copper grades and widths. So we obviously want to follow up on that as well. So we’re going to do both.

Alex Terentiew

All right. Great. Thanks, guys.

Stefan Ioannou — Cormark

Great. Thanks very much, guys. Just curious, from the marketable securities side do you guys have any more sort of investments that you may be looking to liquidate here to help bring some extra cash in to pay down more debt? Or is that kind of done now?

Jim Slattery

That’s mostly done now.

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Stefan Ioannou

Okay. Great. And just on the timing of the Kutcho sale, like just hypothetically if you do sort of close it this quarter on your anticipated time line, would we see the debt repayment actually happen this quarter? Or just given the mechanics of it, would it be more like a Q1 thing?

Darren Pylot

I think that whenever—depending on the timing of the close. If it’s closer to the end of the year and it’s Christmas-type thing, it’d probably be in January. But as soon as we can put the proceeds onto the revolving facility, we would to lower our interest costs. We can always draw the debt back if we need to use it.

So there’s no point of us keeping an excess of kind of $80 million to $100 million on the balance sheet. So anything above that automatically goes at the end of each month, so to speak, would go onto the revolving facility to bring it down.

Stefan Ioannou

Okay. Great. And just at Minto, just given the increase in the cash cost guidance and sort of just the outlook going forward, I mean obviously copper’s had a nice run here, but can you sort of comment on sort of what you guys—what sort of breakeven copper price you actually are comfortable with in terms of Minto’s profile through, call it, 2021.

Darren Pylot

Well, Stefan, with a higher-cost mine, as you said, it does bring in a higher expectation for copper. Although you would have—if you had—I know you guys have been busy, so I don’t know if you had time to read the note that we’ve adjusted the Silver Wheaton—silver Precious Metals agreement to allow for more gold if copper goes below $2.50 a pound. So if copper does drop below $2.50, we end up getting essentially a higher price for the copper with the more gold credit. So it gives us the confidence to invest in Minto over the next four to five years with what we see with mine life, and know that if the copper price drops we still have a healthy enough margin to continue to operate.

Stefan Ioannou

Okay. Great. Thanks very much, guys.

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Robert Reynolds — Credit Suisse

Good morning, guys. I guess a couple questions. My first one’s just on the, I guess, hedging strategy. I see your hedges are running off in Q4 this year. But sitting at above $3 per pound copper, I’m wondering what your thoughts are around, I guess, locking in this price for next year until you get the balance sheet down to at least to where you want it to be on a longer-term basis?

Jim Slattery

Our intention is not to do any hedging in 2018 moving on. Our shareholders and we prefer to be unhedged.

Robert Reynolds

Okay. And then just on the Minto mine life extension, I guess it was extended another year to 2021 from 2020. Could you just talk about, I guess there’s a number of zones coming in; I think there’s some permits required along the way. What’s critical path for you to extend Minto over the next 12 to 18 months?

Gregg Bush

We don’t need any permits for the next 12 to 18 months. To get the full mine life after 2021, there are a couple of underground ore bodies that would need to be licensed and our quartz mining licence, and we’re working on those now. So we don’t anticipate that to be the critical path.

I think our critical path on this mine plan at Minto is just the timing on—the various underground deposits are a fair distance apart, so the timing on getting the development started for each phase is critical.

Robert Reynolds

Okay. And then just in terms of the cost cadence for Minto in 2018 versus 2017, I guess my impression last quarter was there’s a lot of stripping going on this year to set up for better costs and cash flow in 2018. But what should we be thinking in terms of a fully loaded or all-in cost at that asset next year because it sounds like there might be additional underground development now? Or any colour there would be helpful.

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Gregg Bush

Yeah. Well, certainly the underground development will continue next year, and there’s another open pit to be developed. The one—we’re currently developing another phase in Area 2 that will start producing a small amount of ore in December, and most of the ore is produced in the first quarter of next year. And the second - cost next year, we’re not ready to give guidance, but certainly we’re not going to be looking at the kind of costs we’re seeing this year.

Robert Reynolds

Okay. That’s helpful. That’s it for me. Thanks.

Darren Pylot

Well, [Robert], following up on your—on Jim’s question on the hedging, we exited the quarter at 1.2 times [net] debt to EBITDA, so we consider our balance sheet very strong and essentially where we’d like it. We’ve come up with this $100 million net debt target because we think that with three operations producing the kind of copper we do, we want to be at no more than 2 times [net] debt to EBITDA at what we think is a floor price of somewhere between $2.00 and $2.25 copper.

So that’s our target, but we consider our balance sheet very strong with the debt that we’ve been able to repay over the last five quarters and which allows us not to have to worry about hedging into the future.

Jim Slattery

And I guess the other point is that our operating costs, our guidance for this year for the fully loaded all-in costs are only between $2.50 and $2.60, and not over $3.

Robert Reynolds

Okay. Thanks.

Alex Terentiew

Yeah. Hi, guys, again. I just wanted to follow up on Minto there. So I understand you’re putting a new mine plan together; you’ll come out with guidance for next year. But just from a longer-term perspective, I mean is this—is 2017 16,000-tonne number kind of a run rate that we

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could expect, plus or minus, for the next few years? Or would this be a declining profile out towards 2021?

Gregg Bush

Well, the out years, the last couple of years certainly are going to look probably more like this year, but no, there’s some years in, say, in the 20,000 tonne range here.

Alex Terentiew

Okay. That’s good to hear. And I guess that’s grade-driven primarily from the underground?

Gregg Bush

Yes.

Alex Terentiew

Okay. And then one question on the costs; I know Stefan asked about this earlier, but trying to kind of get a breakeven number. But is the stream—the rejigged stream there of $2.50, is $2.50 kind of the all-in number where below that, maybe we can imply that below that without a stream adjustment this really doesn’t make sense? Maybe that’s kind of another way of looking at the breakeven? Is that a fair way of looking at it?

Darren Pylot

Yeah. I would say—I mean, I don’t have the numbers in front of me—but yeah, around that. That’s why we did it. I mean, as you know, an underground mine requires significant investment before you can recoup that capital through production because you have to develop so far ahead of when you actually get to produce that we wanted some insurance. And around that we obviously picked that $2.50 number because that’s a number that we would—we think is about breakeven.

So with that agreement it allows us—which when we calculated that it was all the way down to something like $2 copper—would allow us to operate at Minto with that adjustment to the streaming deal.

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Alex Terentiew

Okay. And I don’t know if you can say or if Silver Wheaton—or Wheaton Precious Metals is saying, but the new terms on that stream, are you—I mean, I think right now it’s 100 percent of the silver, gold, does that drop to, I don’t know, can you tell us what those details are? Or is that not possible?

Darren Pylot

Well, I mean, happy to go through it with you, but we’ll—I don’t have the details with me. It’s a sliding scale depending on gold and copper price. It just allows us to share more of the gold. So we’re happy to explain that to you, Alex. Give Cindy a call and we’ll line it up off-line, if you don’t mind.

Alex Terentiew

Sure. Thank you.

Craig Hutchison — TD Securities

Hey. Good morning, everyone. Question on the Kutcho sale. You said you were quite confident it closes in Q4. So what gives you that confidence? And your net debt target to end 2018, I think you said it’s around $100 million. Does that include the sale of Kutcho?

Darren Pylot

So first question is just dealing with obviously the party that’s purchasing the asset and understanding how they’re raising the finances has been coming along is giving us the confidence that they will be able to close in Q4. So that’s the first answer. The second one is, that does not include the proceeds of the Kutcho sale. That’s just generated—just looking at our forecast for 2018 of our copper production costs and the current copper price. So that would be—the US $21 million would be on top of what we’re thinking.

Craig Hutchison

And what sort of price are you using to kind of get to that $100 million net debt? Is it spot prices? Or a discount to spot?

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Jim Slattery

We use a range, but to get to—at current spot we are significantly below our targets, and we overachieve our target without the sale of Kutcho. $2.75 is what we’re using for longer-term planning purposes.

Craig Hutchison

Okay.

Jim Slattery

That’s really the price that we’re using.

Craig Hutchison

All right. Thanks, guys.

Operator

Thank you. Those are all the questions that we have today. I will now turn it back over for closing remarks.

Darren Pylot

Well, thank you, everybody, for joining us today. And as always, please don’t hesitate to contact any one of us with any additional questions you have.

Thank you very much.