Southridge Enterprises Inc (SRGE)

[stervc]

SRGE “Gran Cabrera” Fundamental Valuation(s)…

SRGE has recently release news that it has commenced a 50,000 meter exploration drill program at Gran Cabrera Gold & Silver Mining properties in Mexico as indicated below:
http://ih.advfn.com/p.php?pid=nmona&article=54157932

I think it’s safe to know and understand that this will be a series of holes that totals 50,000 meters and not just one hole with such distance as explained below:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79519738
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79518569

In my opinion, and also important was the rest of that PR which is what will allow you to somewhat asses a fundamental valuation for the Gran Cabrera property. Within this PR are the amounts of gold and silver within the Gran Cabrera from assays from chip and channel samples. It reads… ”…previous underground workings stated grades from this area in the order of 200-500 gram Silver and 3.4 gram Gold based on average assays from chip and channel samples. Historical information stated that ore from the Gran Cabrera mines could obtain assays in the order of 9 kilograms (290 oz) silver and about 10.3 grams (0.3 oz) gold in bulk operations, all high-end bonanza grade values. …”

From the previous valuation post below of the Cinco Minas, one should be able to understand that it is very possible to have an operation with the mill capacity to process 500 tons per day (tpd):
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79640513



So in my opinion, there is much reason to believe that we can expect an at least mill capacity rate for the site created there to be 500 tpd too. This would then equate to the amounts of gold and silver below for the Gran Cabrera indicated below:

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For Gold at the Gran Cabrera:
Gold at Gran Cabrera = 500 tpd of ore x .3 oz per ton
Gold at Gran Cabrera = 150 oz per day

Annual Rate of Gold at 500 tpd at Gran Cabrera = 150 oz x 365 days per year
Annual Rate of Gold at 500 tpd at Gran Cabrera = 54,750 oz of gold per year

Gold = $1,700.00+ per ounce as of 9/18/2012 close
http://www.kitco.com/charts/livegold.html
Annual Gold Revenues from Gran Cabrera = 54,750 oz x $1,700
Annual Gold Revenues from Gran Cabrera = $93,075,000

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For Silver at the Gran Cabrera:
Silver at Gran Cabrera = 500 tpd of ore x 290 oz per ton
Silver at Gran Cabrera = 145,000 oz per day

Annual Rate of Silver at 500 tpd at Gran Cabrera = 145,000 oz x 365 years
Annual Rate of Silver at 500 tpd at Gran Cabrera = 52,925,000 oz of silver per year

Silver = $34.00+ per ounce as of 9/18/2012 close
http://www.kitco.com/charts/livesilver.html
Annual Silver Revenues from Gran Cabrera = 52,925,000 oz x $34.00
Annual Silver Revenues from Gran Cabrera = $1,799,450,000

You can play with the 365 days per year in the formula above to factor in some down time for equipment maintenance, but since that variable is unknown, I will choose to move forward under the premise of a 365 day per year concept.

*******************************************************************************************

Total Annual Gold & Silver Revenues from Gran Cabrera:

Annual Gold Revenues from Gran Cabrera = $93,075,000
Annual Silver Revenues from Gran Cabrera = $1,799,450,000

Total Annual Gold & Silver Revenues from Gran Cabrera = $1,892,525,000



The Revenues for the gold and silver for the Gran Cabrera is expected to be $1,892,525,000 as previously explained.

Although we don’t know the Net Expenses, we can use the information below for the Gold Industry standard for ”Net Profit Margin” since it is the difference until more is released from the company to confirm something different. The Yahoo link below reflects a ”Net Profit Margin” for the Gold Industry of 24.00% as of 18 Sep 2012:
http://biz.yahoo.com/p/134conameu.html

If the Net Profit Margin is 24% then the Net Expense Margin is 76%. Now we can derive Net Income as indicated below:

Net Income = $1,892,525,000 x .24
Net Income = $454,206,000

Now we must divide the Net Income amount by the SRGE OS to derive an EPS. The last unofficial update within the SRGE forum was that some shares have been recently retired back to the company’s Treasury resulting in an OS amount of 545,874,868 shares as explained below:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79425075

The Authorized Shares (AS) for SRGE is 1,000,000,000 shares. This is the max amount that the OS could be increased to be. So, I will also explain how to determine a valuation consideration for a worst case scenario OS being maxed out to be the max amount of 1,000,000,000 shares. I will also later account for and factor in a mine life expectancy of 10 and 20 years, but for now, we’ll keep moving forward to consider below a derived EPS…

EPS = Net Income ÷ OS
EPS = $454,206,000 ÷ 545,874,868 OS
EPS = .832 per share

Now to determine a fundamental valuation of where SRGE should be trading if this amount for Net Income is captured, we must multiply the EPS by the Price to Earnings (P/E) Ratio for the industry in which it would trade which in this case would be the Gold Industry. As indicated below, 21.20 is the P/E Ratio for the Gold Industry:
http://biz.yahoo.com/p/134conameu.html

To understand more about the logic centered on the P/E Ratio, please read the link below:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=57154170

Now let’s derive a share price of where SRGE could fundamentally trade now that we have our EPS:

Expected Price Per Share = EPS x P/E Ratio
Expected Price Per Share = .832 x 21.20
Expected Price Per Share = $17.63 per share



Important to note; the above $17.63 per share amount is the per share valuation if everything were to happen over a 1 year time frame of which a 1 year time frame is not realistic to consider. What is realistic is to consider is the amount to be derived over a 10 or 20 year life expectancy of the Gran Cabrera mine. Let’s capture both the 10 and 20 year life expectancy of the mine below to give us an even yet better understanding of some more valuations to consider:

To derive the price valuation for the life expectancy of 10 years, just take the valuation of $17.63 per share and divide by 10 years as indicated below…

$17.63 ÷ 10 years = $1.76 per share per year for 10 years

This means that $1.76 per share per year is the total 100% per share fundamental valuation for a 100% consideration of the Gran Cabrera considering a 10 year life expectancy of the mine.

Now, to consider a worst case scenario if the OS was to be 1 billion shares, just divide any of the above valuations by 2 to cut in half the amounts to have a close approximate value since the OS suspected is approximately half of the maxed out amount for the OS. This can be used as a quick method to derive such because the OS is the key fundamental denominator that was used to asses and derive all of the valuations.



For a 20 year life expectancy consideration of the mine, divided by 20 as indicated below…

$17.63 ÷ 20 years = .88 per share per year for 20 years

This means that .88 per share per year is the total 100% per share fundamental valuation for a 100% consideration of the Gran Cabrera considering a 20 year life expectancy of the mine.

Again, to consider a worst case scenario if the OS was to be 1 billion shares, just divide any of the above valuations by 2 to cut in half the amounts to have a close approximate value since the OS suspected is approximately half of the maxed out amount for the OS. This can be used as a quick method to derive such because the OS is the key fundamental denominator that was used to asses and derive all of the valuations.



I think people should read the SRGE Gran Cabrera news below again to see how this property could be as attractive as its Cinco Minas property:
http://ih.advfn.com/p.php?pid=nmona&article=54157932

This and previous valuation posts of SRGE should not be considered the gospel, but only something to use as a framework to consider as more is actually confirmed considering the company’s potential and actual production goals are achieved. See my valuation posts as nothing more than “food for thought” to help gage where SRGE ”could” fundamentally trade if further confirmation is brought out by the company confirming its production goals. So far, I like how SRGE is growing and its potential that it has manifested to us all.

v/r
Sterling