Capstone Mining Mails Information Circular with Respect to Acquisition of Far West and Strategic Partnership and Joint Venture with Korea Resources Corporation

VANCOUVER, British Columbia, May 20, 2011 /PRNewswire/ -- Capstone Mining Corp. ("Capstone" or the "Company") (TSX: CS) announces the mailing of its Information Circular's with respect to the previously announced arrangement agreement (the "Arrangement Agreement") pursuant to which Capstone will acquire all of the issued and outstanding common shares of Far West Mining Ltd. ("Far West") (TSX:FWM) and Far West would be held through a newly-formed subsidiary of Capstone, to be owned 70% by Capstone and 30% by Korea Resources Corporation ("KORES").

Far West shareholders will be entitled to elect to receive, in exchange for each Far West share held, (i) 1.825 shares of Capstone and C$1.00 in cash, or (ii) 2.047 shares of Capstone and C$0.001 in cash, or (iii) C$9.19 cash, subject to proration on the basis of an aggregate maximum cash amount of approximately up to C$79 million and provided that no Far West shareholder that elects option (iii) above will receive less than C$1.00 in cash per Far West share.

Shareholders of Capstone and security holders of Far West will each vote on the Arrangement Agreement at special meetings to be held concurrently on June 13, 2011 and if it is approved at both meetings, the proposed transaction is expected to become effective on or about June 16, 2011. The directors, senior officers, Quadra FNX and certain other shareholders of Far West, representing 38% of the filly-diluted Far West shares outstanding as at May 11, 2011, have entered into voting support agreements with Capstone, whereby they have agreed to vote their Far West shares in favor of the Arrangement Agreement. Capstone's directors and senior management have entered into voting support agreements to vote their Capstone shares in favour of the Arrangement Agreement and Capstone's largest shareholder, Pala Investments Holding Limited, holding 19.6% of Capstone's issued and outstanding shares as at May 13, 2011, has advised Capstone management that it intends to vote its Capstone shares in favor of the Arrangement Agreement.

Capstone has also agreed to form a long-term strategic partnership with KORES for the development of Far West's Santo Domingo Project. Concurrent with the completion of the Arrangement Agreement, KORES (through an affiliated company) will (i) acquire a 30% interest in the entity that will own the Santo Domingo project for cash consideration of up to approximately C$210 million to Capstone, and (ii) subscribe for an approximate 11% interest in Capstone, at a price of C$4.35 per share, for aggregate cash consideration of approximately C$170-183 million subject to completion of the Far West transaction.

Full details of the proposed transaction are contained in the Information Circular that has been mailed to Capstone shareholders. A copy of the Information Circular and related documentation has been filed with Canadian securities regulators and is available at the SEDAR website at http://www.sedar.com under Capstone's profile.

Forward-Looking Statements

This document may contain "forward-looking information" within the meaning of Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). These forward-looking statements are made as of the date of this document.

Forward-looking statements relate to future events or future performance and reflect Capstone management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the timing and implementation of the proposed transaction and the integration of Capstone and Far West following the transaction. Assumptions upon which such forward-looking statements are based include that Capstone and Far West will be able to satisfy the conditions in the Arrangement Agreement, that the required approvals will be obtained from the shareholders of each of Capstone and Far West, that all third party, court, regulatory and governmental approvals to the transaction will be obtained, tax treatment of the transaction and that all other conditions to completion of the transaction will be satisfied or waived. Many of these assumptions are based on factors and events that are not within the control of Capstone and there is no assurance they will prove to be correct.

In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "potential", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Capstone to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of current exploration and development activities; changes in project parameters as plans continue to be refined; future prices of metals; possible variations in mineral reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in Capstone's interim and annual financial statements and management's discussion and analysis of those statements, all of which are filed and available for review on SEDAR at http://www.sedar.com. Although Capstone has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Capstone 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.

    
    For further information:
    Capstone Mining Corp.
    Cindy Burnett, VP Investor Relations
    Telephone: +1-604-637-8157
    Email: cburnett@capstonemining.com
    Website: http://www.capstonemining.com