Southridge Enterprises Inc (SRGE)

[stervc]

Key Valuation/Highlights from SRGE 2012 Annual Financials…

One might have read the PR below and wondered what is it that SRGE has that would make two NYSE companies be interested in buying our or doing a Joint Venture (JV) with SRGE. The SRGE recently filed Annual Financials confirmed the reason why such would logically considered. Below are some things of which are significant to note from the SRGE Annual Financials to understand the ”potential” valuation that is being considered through the eyes of the NYSE companies in my opinion that makes them want to do a deal with SRGE. Please consider below as I will try to elaborate in greater detail to reflect this:

On Page 10:
http://www.otcmarkets.com/otciq/ajax/showFinancialReportById.pdf?id=96742


Proven (Measured) and Probable (Indicated) Ore Reserves and Inferred Ore Reserves for the SRGE Cinco Minas property from the resource estimate done by Behre Dolbear de Mexico:

Measured/Indicated Gold = 89,100 oz
Measured/Indicated Silver = 12,500,000 oz

Gold = approximately $1,700.00+ per ounce as of 12/17/2012
http://www.kitco.com/charts/livegold.html
Measured/Indicated Gold = $1,700.00 oz x 89,100 oz of gold
Measured/Indicated Gold = $151,470,000

Silver = approximately $32.00+ per ounce as of 12/17/2012
http://www.kitco.com/charts/livesilver.html
Measured/Indicated Silver = $32.00 oz x 12,500,000 oz of silver
Measured/Indicated Silver = $400,000,000


Total Measured/Indicated Gold & Silver = $551,470,000



Inferred Gold = 13,800 oz
Inferred Silver = 1,800,000 oz

Gold = approximately $1,700.00+ per ounce as of 12/17/2012
http://www.kitco.com/charts/livegold.html
Inferred Gold = $1,700.00 oz x 13,800 oz of gold
Inferred Gold = $23,460,000

Silver = approximately $32.00+ per ounce as of 12/17/2012
http://www.kitco.com/charts/livesilver.html
Inferred Silver = $32.00 oz x 1,800,000 oz of silver
Inferred Silver = $57,600,000


Total Inferred Gold & Silver = $81,060,000



Total Measured/Indicated Gold & Silver = $551,470,000
Total Inferred Gold & Silver = $81,060,000

Overall Total Gold & Silver = $632,530,000



The above amount of $632,530,000 for the Overall Total Value is derived from the "Behre Dolbear Report" data that was derived from a 2004 resource estimate that was prepared on the ”Cinco Minas” summation of proven (measured) and probable (indicated) ore reserves and from the inferred ore reserves owned by SRGE. Again, Behre Dolbear is one of the most respected mining advisory firms in its industry. This estimate done by ”Behre Dolbear” de Mexico was based on the drilling, trenching and field exploration since 2003. Below are some thoughts to understand the positive credibility that exists from a report being done by Behre Dolbear:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=82014706
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79729247
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79729593
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79547036



The Total Revenues from the Cinco Minas property for the gold and silver confirmed by ”Behre Dolbear” is expected to be $632,530,000 as previously explained.

Although we don’t know the Net Expenses, we can use the information below for the Gold Industry standard until more is released from the company to confirm something different. The Yahoo link below reflects a [b[Net Profit margin for the Gold Industry of 24.00%:
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 = $632,530,000 x .24
Net Income = $151,807,200

Now we must divide the Net Income amount by the SRGE Outstanding Shares (OS) to derive an Earnings Per Share (EPS). The last update within the company’s Annual Financials filed on 15 Dec 2012 states that the SRGE OS is 545,874,868 shares. Now let’s move forward to consider below for deriving an EPS…

EPS = Net Income ÷ OS
EPS = $151,807,200 ÷ 545,874,868 OS
EPS = .278 per share

Now to determine a fundamental valuation of where SRGE could 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 = .278 x 21.20
Expected Price Per Share = $5.89 per share

For inquiring minds, this is the logic of which justifies why a NYSE company would be considering buying out SRGE or even doing a JV with them. With SRGE having a ”Fundamental Valuation” from their Cinco Minas property of $5.89 per share, gives the SRGE Market Capital in the amount as indicated below:

$5.89 x 545,874,868 OS = $3,215,202,972

The current SRGE Market Capital with SRGE trading at a rounded off price of .01 per share is as indicated below:

.01 x 545.874,868 = $5,458,748

That’s a difference in Market Caps as indicated below:

$3,215,202,972 ÷ $5,458,748 = 586.1 times undervalued

This means that SRGE trading at .01 per share could be considered ”Fundamentally Undervalued” 586.1 times less than the ”potential” valuation that was derived from the proven (measured) and probable (indicated) ore reserves and from the inferred ore reserves owned by SRGE.

Below are also more key highlights from the SRGE Annual filings that should not be ignored:

http://www.otcmarkets.com/otciq/ajax/showFinancialReportById.pdf?id=96742
** The Outstanding Shares (OS) is 545,874,868 shares as of December 13, 2012.
** The Authorized Shares (AS) is 1,500,000,000 shares as of December 13, 2012.
** SRGE is one of the very few penny stocks that are profitable.
** The Revenues for its fiscal year end 2012 = $3,148,692
** Net Income = $919,438
** Earnings Per Share (EPS) = .0011
** Total Assets = $30,705,471
** Total Stockholders’ Equity = $16,327,938

Also, for inquiring minds, if one were to research the definitions of proven (measured) and probable (indicated) ore reserves and Inferred ore reserves, you can do so from the Canadian Institute of Mining (CIM) link below:
http://www.crirsco.com/nat_canada.pdf

Upon doing so, one should now easily see how the valuation of what SRGE owns is very huge which would definitely attract NYSE companies to be a part of or acquire.

v/r
Sterling