Summary:
The Capstone Mining Corporation announced its final results for the year 2010. In 2010 the Capstone Mining Corporation earned a total of $301.3 million in gross sales revenue. The company sold 72.8 million pounds of copper, 15.0 million pounds of zinc, 9.4 pounds of lead, 25,460 ounces of gold and 1,582,033 pounds of silver. Overall the company earned a net income of $72.6 million and it was recorded in the operating activities section of the cash flow statement. The total amount of cash flow in the operating activities section is $86.3 million including net income. So as you can see the net income is responsible for most of the cash flow coming into the mining company. Capstone Mining Corporation produced a total of 73 million pounds of copper at a cost of $1.40 / pound in 2010 where in 2009 the company produced a total of 86.6 million pounds of copper at $1.03 / pound. In January 2011, the Capstone Mining Corporation fully repaid its debt of $17.4 million owing to Yukon Energy Corporation and to the main power lines serving the Minto mine, 7 years ahead of time. In the report, Capstone predicts that in 2011, production will range between 80 - 85 million pounds of copper at a total cost per pound of $1.30 - $1.35 per pound. This coming year is sure going to be a successful one for the Capstone Mining Corporation.
Connection:
The company that I analyzed was the Capstone Mining Corporation, comparing the operating activities in 2009 and 2010. Between 2009 and 2010 there was a decrease in cash from the operating activities of the cash flow statement. In 2009 there was a total of $112.1 million cash flowing in the operating activities section and in 2010, the amount from the operating activities decreased to $86.3 million. In the operating activities section, the net income in $72.6 million from selling copper while in 2009 there was a net loss of $18.3 million. Also there was a decrease in amount of inventory. In 2010 there was 73.0 million pounds of inventory and in 2009 there was 86.6 million pounds. When there is a decrease in inventory, the company spends less money on it, which indicates there is a positive cash flow. Also in January 2011, the Capstone Mining Corporation paid a major debt of $17.4 million owing to Yukon Energy and main powering lines serving the Minto mine. Since the debt (liability) is being paid off, the debt is decreasing which means that the cash flow also decreases. If you click on this link http://capstonemining.com/i/pdf/2011-03-CS-YearEnd-Financials.pdf, you will find its financial statements including the balance sheet and its balance sheet which is required to produce the cash flow statement. In the balance sheet you will see there is an increase in accounts payable. In 2010 the accounts receivable was $16,392 and in 2009 the accounts receivable was $6,946. Between those two years, the accounts receivable increased by $9,446. Since it is an increase in an asset, there is a decrease in cash flow in the operating activities section. Also in the liabilities section, you will see that there was an increase in accounts payable. In 2010 the accounts payable was $22,277 and in 2009 the accounts payable was $19,782. The overall increase is $2,495 in accounts payable. Since accounts payable is a current liability, there was an increase in cash flow because when current liabilities increase, cash flow also increases as well. As a result, the company did incredibly better in 2010 than 2009. The results are indicated in the cash amount of the balance sheet. Overall there was an increase in cash flow in the year 2010. The Cash amount in 2010 was $165,945 and the cash amount in 2009 was $115,931. The overall increase in cash during the 2009/2010 year is $50,014.
Reflection:
Overall in my opinion I think the Capstone Mining Corporation will see prosperity and success in the future. The results of the cash flow statement indicated that the company was more successful in 2010 than 2009. First of all in the cash flow statement, the net income in 2010 was relatively higher than 2009. In 2010 there was a total net income of $72.6 million. This indicates that revenue exceeded expenses. Much of the contribution came from the high gross revenues this year earned which reached $301.3 million. In 2009 there was a net loss of $18.3 million. The difference in the net income with the net loss is $54.3 million. This indicates that expenses exceeded revenue. The gross sales revenue in 2009 was $250.4 million. The difference in gross sales revenues between 2010 and 2009 are by $50.9 million. That is a really big increase in one year and you can see the different effects by the difference in revenue. Right now when there is a high sales volume, we can assume that there is a really high demand for copper and these other valuable minerals which are used to create raw materials to produce products. Prices of minerals are increasing from year to year due to the high demand for this mineral. As a result, the company is now earning money with a net income instead of losing money with a net loss. As a result, the boost in net income has made a significant increase in operating activities. These financial results will likely attract investors due to its recent success and I believe that after Capstone Mining Corporation’s recent downfall in 2009, the business has made a strong push to make its business more profitable and more attractive to investors. I personally believe that this business has made a lot of progress to become a successful mining and manufacturing company.
