Capstone & Sherwood Announce Combination to Create Intermediate Copper Producer

Sherwood Copper Corporation (TSX VENTURE:SWC)(TSX VENTURE:SWC.DB) and Capstone
Mining Corp. (TSX:CS) have entered into a Letter Agreement to combine, by way of
a plan of arrangement or other form of business combination, to create a
well-funded, low-cost, growth-oriented, copper company with two producing mines
in mining friendly jurisdictions in North America. The two companies have agreed
to combine on an "at-market" basis whereby each Sherwood shareholder will
receive 1.566 shares of Capstone (based on the 20-day volume weighted average
share price of the two companies). The boards of directors of Sherwood and
Capstone have unanimously approved the terms of the transaction.


Transaction Rationale

Capstone and Sherwood believe this merger will realize significant benefits for
each of the company's shareholders, including:


- Significant production growth, with forecast production of 85 million pounds
of copper in 2008, increasing to 110 million pounds in 2009, with significant
by-products of gold, silver, lead and zinc, as previously disclosed;


- Low cost production with forecast total cash costs of under US$1.00 per pound
of payable copper in 2008 and 2009, including all off-site costs and net of
by-product credits, generating significant free cash flow to fund corporate
growth opportunities;


- An aggressive, growth oriented company focused on maximizing the value of its
existing high grade mines, Cozamin and Minto, through sequential increases in
resources, reserves and production; the pursuit of value through continual
improvements at its operations; the advancement of the high grade Kutcho project
towards a production decision and accretive merger and acquisition
opportunities.


- Diversification of operational and geographic risk with the high grade open
pit Minto copper-gold-silver mine in Canada and the high grade, underground
Cozamin copper-silver-zinc-lead mine in Mexico.


- Increased market capitalization that should improve trading liquidity for
shareholders of the combined company.


- Continued focus on optimization and cost reduction strategies, with the
Cozamin mill throughput set to increase to 3,000 tonnes per day and Minto to
3,200 tonnes per day by the end of 2008. Minto will also reduce exposure to high
fuel costs for electrical power generation by connecting to grid power in Q4/08.


- Excellent exploration upside at both the Cozamin and Minto mines, where high
grade resources have been increased by 47% and 140%, respectively, over the past
two years, exclusive of the results from major exploration programs completed in
2008, many of the results for which are still pending. Sherwood completed 120
holes at Minto and 81 holes at Kutcho in 2008, the results for approximately
half of which remain to be reported, while Capstone has completed 7,000m of
underground and 25,000m of surface drilling at Cozamin, the results of which are
to be incorporated into an updated resource and reserve estimate.


- A combined management team with complementary experience and a proven track
record of building and profitably operating mines to create shareholder wealth,
supported by a seasoned and experienced board of directors.


- Exposure to the potential development of the high grade Kutcho
copper-zinc-gold-silver project in northwestern British Columbia, where a
preliminary economic assessment (see Sherwood news release dated June 12, 2008)
indicated potential for production of 45 million pounds of payable copper per
year at a cash cost of less than $1.00 per pound (net of by-product credits) and
outlined several opportunities for further project enhancements.


- Strong balance sheet to support growth strategies.

- Enhanced market exposure for Sherwood's shareholders through access to
Capstone's TSX listing and increased weighting in the TSX composite index.


- Broadened research coverage for Capstone's shareholders through Sherwood's
analyst coverage, presently at nine firms across the spectrum of Canadian
brokerages.


Capstone and Sherwood further believe that their shareholders will benefit from
the tax-effective combination of the two companies and allow for participation
in the upside from the significantly enhanced business platform.


Board & Management

The board and management structure of the combined company will draw on the
expertise of both companies and the board will include four current Sherwood
directors, one current director of Capstone and one nominee of Capstone. Colin
K. Benner has agreed to serve as non-executive Chairman. Darren Pylot (currently
President & CEO of Capstone) will become Vice Chairman and CEO and Stephen Quin
(currently President & CEO of Sherwood) will become President & COO of the
combined company. Richard Godfrey (currently Chief Financial Officer of
Sherwood) will become Chief Financial Officer of the combined company; other
senior management from both companies will be integrated into the senior
management of the combined company, retaining many of the same responsibilities.
Capstone and Sherwood intend to capitalize on the success of their respective
strategies for the operation, expansion and exploration of the high grade
Cozamin and Minto copper mines, located in Zacatecas, Mexico, and Yukon, Canada.


"Capstone and Sherwood have each looked at numerous merger and acquisition
possibilities over the past year and have concluded that this is the most
compelling consolidation opportunity in the sector," said Darren Pylot,
President & CEO of Capstone. "The combined management teams are a great fit,
with complementary skills and experience and a common focus on acquiring and
operating high grade, low cost operations in mining-friendly, politically stable
jurisdictions. Operationally, the high grade Cozamin and Minto copper mines are
tremendous assets, and each is undergoing a third expansion program and,
combined, should produce more than 100 million pounds of copper at cash cost of
less than a dollar per pound in 2009. These operations provide an excellent
platform for future growth."


"The combination of Sherwood and Capstone is a highly complementary
transaction," said Stephen Quin, Sherwood's President & CEO. "Capstone's strong
cash and investments and modest copper hedging program is complementary to
Sherwood's more leveraged balance sheet and larger copper hedging program
(through the end of 2011). Both Sherwood and Capstone have production expansion
opportunities at their Minto and Cozamin mines, which we aim to advance as soon
as practicable, and Sherwood offers significant organic growth potential through
continued exploration success at Minto and a high grade development opportunity
at its Kutcho copper project."


Transaction

Capstone and Sherwood anticipate that the transaction will be carried out by way
of statutory plan of arrangement of Sherwood whereby Capstone would acquire all
of the issued shares of Sherwood and Sherwood would become a wholly-owned
subsidiary of Capstone (the "Arrangement"). The transaction would be subject to
certain standard conditions including that not less than 66 2/3% of the issued
and outstanding shares of Sherwood being voted at a shareholders meeting being
in favour of the transaction. However, the parties may consider an alternative
form of transaction, such as an amalgamation or other form of business
combination, as mutually determined by Capstone and Sherwood.


Full details of the offer will be included in the formal Arrangement Agreement
and Management Information Circular to be filed with the regulatory authorities
and mailed to Sherwood shareholders in accordance with applicable securities
laws. Under the Arrangement Capstone will acquire all of the issued and
outstanding shares of Sherwood in consideration for the issue of Capstone shares
on the basis of 1.566 Capstone shares for every Sherwood share. The Arrangement
is an "at market" transaction with no premium to either party, based on the
20-day volume weighted average price of each of Capstone and Sherwood to
September 5, 2008. Based on the current Sherwood shares outstanding, the
transaction would involve the issuance of approximately 84 million Capstone
shares, which equates to 105% of Capstone's shares outstanding.


The proposed transaction is expected to be completed before the end of 2008 and
is subject to certain customary conditions, including receipt of all necessary
court and shareholder approvals and dissent rights to the Arrangement shall not
have been exercised prior to the effective date of the Arrangement by holders of
Sherwood shares representing in the aggregate 5% or more of outstanding Sherwood
shares at such time. It is anticipated that a special meeting of shareholders of
Sherwood (the "Meeting") will be held at a time yet to be determined to approve
the proposed transaction.


Under the terms of the Arrangement, each Sherwood shareholder will be entitled
to 1.566 Capstone shares for every one Sherwood share held. Sherwood's
outstanding options and warrants adjusted in accordance with their terms so that
the number of Capstone shares received upon exercise and the exercise price are
adjusted proportionately to reflect the exchange ratio described above.


The transaction is subject to the consent of Sherwood's lenders under the
provisions of its debt facilities.


Following a change of control event in Sherwood, Capstone must, within 30 days
of the occurrence of the change of control, make an offer to redeem all of
Sherwood's convertible debentures then outstanding. The offer to purchase must
be made at a purchase price equal to 101% of the principal amount of the
debentures, plus accrued and unpaid interest thereon, if any, up to but
excluding the date set for the completion of the offer to purchase. Capstone has
had indications of interests from a financial institution in providing a debt
facility up to the amount of the convertible debentures, should Capstone decide
it wishes to avail itself of this option.


Capstone has engaged Scotia Capital as its financial adviser and Blake, Cassels
& Graydon LLP as its legal advisor in respect of this transaction. Sherwood has
engaged Haywood Securities Inc. as its financial advisor and Gowling Lafleur
Henderson LLP as its legal advisor in respect of this transaction.


Conference Call

Capstone and Sherwood will hold a conference call at 11:00 AM Toronto time (8:00
AM Vancouver time) on Tuesday September 9, 2008 to allow shareholders,
securities analysts and investors the opportunity to hear management discuss the
business combination outlined herein. The call can be accessed by dialling (toll
free) 1-866-334-3876 or at 416-849-4292. The call will also be webcast by Vcall;
the call and presentation can be accessed at Capstone's or Sherwood's websites
at www.capstonemining.com or www.sherwoodcopper.com, respectively. The call will
also be available for replay by dialling (toll free) 1-866-245-6755 or
416-915-1035 (Passcode 130485) for 14 days.


About Capstone Mining

Capstone is a Canadian based mining company currently operating the 100% owned
Cozamin copper-silver-lead-zinc mine located in Zacatecas State, Mexico. The
Cozamin Mine produced 6.7 million pounds of copper at a total cash cost of
US$0.90 per pound in the three months ended June 30, 2008. Capstone has
approximately 80.3 million shares outstanding and is well financed with no bank
debt, and approximately US$100 million in working capital and marketable
securities as of June 30, 2008, based on current share prices.


Additional information on Capstone Mining and its Cozamin Mine is available on
Capstone's website at http://www.capstonemining.com.


About Sherwood Copper

Sherwood Copper owns 100% of the high grade Minto copper-gold mine in Yukon,
Canada, which was built on budget and ahead of schedule in 2007. The Minto Mine
is one of the highest-grade open pit copper-gold mines in the world, and is
forecast to be a low cost producer. With 140% growth in resources in two years,
followed by a successful 2008 drilling program, Sherwood plans to evaluate
options for further significant production expansions. Sherwood also has a 100%
interest in the high grade Kutcho copper-zinc project in BC, Canada, which it is
advancing towards production. The Minto Mine produced 12.8 million pounds of
copper at a total cash cost of C$0.96 per pound in the three months ended June
30, 2008. Sherwood has approximately 53.8 million shares outstanding and, at
June 30, 2008, had approximately $51.7 million in project related debt, $43.6
million in convertible debentures, and $8.1 million drawn against a corporate
credit facility, after repaying US$16.9 million in the first six months of 2008.


Additional information on Sherwood and its Minto Mine can be obtained on
Sherwood's website at http://www.sherwoodcopper.com.


Forward-Looking Statements

This document may contain "forward-looking statements" within the meaning of
Canadian securities legislation and the United States Private Securities
Litigation Reform Act of 1995. These forward-looking statements are made as of
the date of this document and Capstone Mining Corp. and Sherwood Copper Corp.
(hereinafter referred to as the "Companies") do not intend, and do not assume
any obligation, to update these forward-looking statements.


Forward-looking statements relate to future events or future performance and
reflect management of the Companies' expectations or beliefs regarding future
events and include, but are not limited to, statements with respect to the
estimation of mineral reserves and resources, the realization of mineral reserve
estimates, the timing and amount of estimated future production, costs of
production, capital expenditures, success of mining operations, environmental
risks, unanticipated reclamation expenses, title disputes or claims and
limitations on insurance coverage. In certain cases, forward-looking statements
can be identified by the use of words such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or variations
of such words and phrases or statements that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or
the negative of these terms or comparable terminology. By their very nature
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Companies to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to actual results of current
exploration activities; changes in project parameters as plans continue to be
refined; future prices of resources; possible variations in ore reserves, grade
or recovery rates; accidents, labour disputes and other risks of the mining
industry; delays in obtaining governmental approvals or financing or in the
completion of development or construction activities; as well as those factors
detailed from time to time in the Companies' interim and annual financial
statements and management's discussion and analysis of those statements, all of
which are filed and available for review on SEDAR at www.sedar.com. Although the
Companies have 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. There can be
no assurance that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those anticipated
in such statements.


Accordingly, readers should not place undue reliance on forward looking statements.