Posted September 14, 2011
Silvercorp Responds To Second Anonymous
Allegation And Provides Government Certification Of Taxes Paid
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Silvercorp Update
SILVERCORP RESPONDS
TO SECOND ANONYMOUS ALLEGATION AND PROVIDES GOVERNMENT CERTIFICATION OF
TAXES PAID
VANCOUVER, British Columbia – September 14, 2011 – Silvercorp Metals Inc.
(“Silvercorp” or the “Company”) advises that a second set of anonymous
allegations against the Company has been made, which was published on the
internet (the “2nd Anonymous Report”). The Company refutes the substance
of all allegations in the 2nd Anonymous Report, and believes it has been
published in furtherance of concerted efforts by a group of short sellers
to drive down the Company’s share price through false, selective or
ignorant statements and rumors. Investigations are ongoing by the RCMP,
the BC Securities Commission, the SEC and the FBI to determine the
identity of the anonymous authors. The Independent Committee, in keeping
with its duty, has retained independent legal counsel to examine the
anonymous allegations. In addition, KPMG Forensic Inc. was engaged on
September 6th by legal counsel to the Independent Committee to assist the
Independent Committee by completing a report on certain aspects of
revenue, cash balances and income tax and VAT payments in China, and to
perform certain reconciliations of the Company’s filings in China with
those filed with North American regulators. The Independent Committee
will report further on its findings and respond to the allegations in the
2nd Anonymous Report in due course.
Dr. Rui Feng, Chairman stated, “Over the course of the last five years,
Silvercorp has developed and commenced profitable mining from its Ying
Mining Camp. Revenues from operations have resulted in Silvercorp’s
operating subsidiaries having paid over US$116.6 million in taxes to the
Chinese government, as evidenced by the Tax Certificates issued by Chinese
government, and total dividends of US$152 million to its shareholders.
These reflect a total revenue stream that is in accordance with the mine
production and sales revenues reported by the Company during that period.
I ask shareholders to exercise common sense in assessing whether these
allegations of “fraud” against the Company have any merit whatsoever in
the face of very significant revenues, tax payments and dividends, and
particularly when the accusations are made anonymously by parties whose
only interest is in depressing the Company’s share price. I invite the
authors of the anonymous allegations to come out of the shadow and
participate with the regulators in their investigations, if their concerns
truly extend beyond the profitability of their short positions.”
While Silvercorp is working with the regulators we will not comment
further on any rumor or fabrication on the Company published by anonymous
letters or blogs, however we wish to broadly address two of the concerns
raised in the 2nd Anonymous Report respecting (1) the disparity between
grades and production numbers reported in China and North America, and (2)
the sales to the related party:
(1) The Henan L&R Bureau Report or “Dynamic Reconnaissance Report on
the SGX Mine” is solely based on a detailed exploration report on the SGX
property prepared a Chinese firm for the mining permit application in June
2005. The report is based on limited exploration results before May 2005,
just a few months after Silvercorp acquires the SGX property. Alfredlittle
should know that this type of report was not reviewed and checked by an
independent qualified person defined by NI 43-101 so it is not NI43-101
compliant and cannot be relied on. According to Chinese regulations, once
the detailed exploration report for mining permit application was
completed, its resource calculation does not have to be updated every
year, and is only updated when preparing to renew the mining permit. The
SGX mining permit expires September 2014 so an updated exploration and
resource estimates report is not required t by the L&R Bureau until a
couple months before September 2014.
(2) It is inferred that significant sales of concentrate to a major
customer, Luoyang Yongning Smelting Co. Ltd. are somehow improper, or not
properly reported. The Company’s 15% ownership interest in the smelter
have always been publicly disclosed, most recently in the June 30, 2011
quarterly financial filings available on SEDAR. Neither Canadian GAAP,
nor IFRS standards consider this interest to constitute a “related party”
transaction. In fact, sales to the smelter, in keeping with the
profitable concept of vertical integration, are preferred as the Company
obtains an interest in the smelting profit as well. Concentrate sales
contracts the Henan Found signed with all its customer require cash
payment first before concentrates are shipped. The Henan Found has
received all funds in relation to its concentrate sales to the Yongning.
To read the complete news release with tables, please see our web site
at
http://silvercorpmetals.com/_resources/news/PR_and_schedule_1_to_4.pdf
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Posted September 2, 2011: 'Silvercorp' (SVM)
SILVERCORP
NOTES LARGE SHORT POSITION IN STOCK AND RECEIPT OF AN ANONYMOUS LETTER
ATTEMPTING TO DISCREDIT THE COMPANY AND MANIPULATE THE SHARE PRICE
VANCOUVER, British Columbia � September 2, 2011 � Silvercorp
Metals Inc. (Silvercorp or the Company) announces that there has been a
dramatic increase in the short position of its shares over the past two months
which is now approximately 23 million shares (Source: (http://www.dataexplorers.com/products/data),
or 13% of the total outstanding shares.
Late yesterday afternoon, the Company was forwarded a copy
of an anonymous letter dated August 29, 2011 addressed to the Ontario
Securities Commission, the Company's Auditors, and various media outlets
maliciously alleging a Potential $1.3 Billion Accounting Fraud at
Silvercorp. The anonymous author also stated that his firm held a short
position in the Company's shares and intended to make his concerns known
through internet postings. The Company has not confirmed whether the letter
has been disseminated to all the addressees or if any postings have been made.
Recognizing that the anonymous letter may be disseminated
the company wishes to proactively respond to the most serious allegations and
has posted supporting information on its website to provide investors with
comfort regarding the following allegations made in the anonymous letter:
- The central allegation is that while Silvercorp reported
net profit of US$66 million to the SEC in calendar 2010, financials
purportedly available from the Chinese State Administration of Industry and
Commerce (SAIC) shows SVM reporting a loss of US$0.5 million for calendar
2010. This allegation is false.
The SAIC website (http://wznj.saic.gov.cn,
Attachment A) discloses the following for Silvercorp's four Chinese
operating subsidiaries: (i) Henan Found filed net after income tax profit
for Calendar year 2010 of RMB514,786,392; (ii) Henan Huawei filed a net
loss of RMB6,091,388; (iii) Guangdong Found filed a net loss of
RMB4,758,879; and (iv) Anhui Yangtze filed a net loss of RMB1,214,663. On a
consolidated basis, the net profit of these four Companies is RMB502,721,462
(US$ 73 million). In addition on the cover of each filed SAIC document
there is an anti-fraud code displayed which readers can use to independently
verify those reports on the Chinese Certified Professional Accountant
website (www.henicpa.org.cn).
Further information to reconcile this China GAAP consolidated total net
profit with the US$66 million figure will be posted on the Company's
website. The anonymous author's numbers are clearly false.
As further evidence of Silvercorp's net profit, copies of the 2010 Annual
Income Tax Filing Forms for Henan Found and Henan Huawei, which include a
receipt chop issued by the State Tax Bureau of the Luoning County of Henan
Province, is also attached (2010 Income Tax Filing Form,
Attachment B). In the 2010 Annual Income Tax Filing Form, Henan Found
reported net revenue of RMB964,812,316 (US$140.1 million), and a pre-income
tax net profit of RMB590,727,919 and paid income tax payable of
RMB74,441,229.
In China, on each sale of goods the seller must charge Value Added Tax, and
the receipt issued for the paid value added tax must be approved and is
stamped by the government. The Company is posting details on its website
showing a reconciliation of the Value Added Tax paid by Henan Found on its
revenues along with copies of the government receipts. (Attachment
C)
- The letter further alleges that the Company's cash
position is grossly overstated. In fact:
- Silvercorp, as at June 30, 2011, had a cash position of
$230.5 million more than all the cash ever raised in the Company's
history. Copies of Silvercorp's current bank statements (July 31, 2011)
are available on the Company's website. (Attachment
D);
- Since 2004 Silvercorp has raised in total $202.5
million through equity financings. Over the same period of time it has
paid out $40 million in dividends, and has spent $31 million repurchasing
its own shares, including $16.5 million in the currently ongoing Normal
Course Issuer Bid announced June 17, 2011; and,
- The Company has $544.6 million in total assets and no
long term debt as at June 30, 2011.
- The letter also states that the grade of the Companys
deposits is simply too good to be true compared to comparable companies.
The Company acknowledges that its SGX Mine within its Ying mining district
does have some of the highest grades in the industry. As disclosed in its
most recent NI 43-101 report measured grades at the SGX Ying mine are 845g/t
for silver. The mineral resource estimate for SGX was prepared by Mel Klohn
L.P. Geol. of Spokane Valley, Washington, who is a Qualified Person with the
firm of B.K Exploration Associates. Details of QA/QC procedures and assay
lab information are described in the
Technical Report filed on SEDAR under the Company�s profile and
available on the Company�s website.
The Company has long established plans for an investor tour to the Ying mine
site in the third week of September. All interested investors, analysts and
media wishing to visit our mine site and view the ore and operations with
their own eyes are asked to contact the Company to join the tour.
- The anonymous author also alleges that Henan Found's
22.5% JV partner, the Henan Non-Ferrous Geological and Mineral Resources Co.
Ltd., which is a state owned enterprise, sold a 5% interest in Henan Found
for US$7 million, implying the Henan Found assets are worth only US$140
million. The anonymous author fails to mention that the transfer was to an
affiliate. Based on the joint venture contract and articles of association
of Henan Found, the 22.5% joint venture partner can assign its interest to
an affiliate.
In accordance with good governance practices, the Company
has established a task force of independent directors consisting of Dr. Robert
Gayton, Paul Simpson, LL.B. and Earl Drake, Canada's former ambassador to
China, to work with regulatory authorities to immediately investigate and
discover the identity of the party behind these allegations. Silvercorp will
pursue all legal options, whether in Canada, the United States, or China, to
recover damages incurred by the Company as a result of these allegations.
Dr. Rui Feng, the Company's Chief Executive Officer,
noted this type of manipulative scheme is baseless and which depresses our
share price and harms our shareholders. While we are fighting these
manipulation schemes, we will continue with our ongoing share buyback program,
increase our investor relations efforts, and continue to focus on growth
through exploration, acquisitions, and mine development. We are pleased with
our current operations and look forward to reporting another profitable
quarter.
About Silvercorp Metals Inc.
Silvercorp Metals Inc. is engaged in the
acquisition, exploration, development and mining of high-grade silver-related
mineral properties in China and Canada. Silvercorp is the largest primary
silver producer in China through the operation of the four silver-lead-zinc
mines at the Ying Mining Camp in the Henan Province of China. The Company is
developing its GC silver-lead-zinc mine in the Guangdong Province and recently
acquired the BYP gold-lead-zinc mine in Hunan province. In Canada, Silvercorp
is preparing to apply for a Small Mine Permit for the Silvertip high grade
silver-lead-zinc mine project in northern British Columbia to provide a
further platform for growth and geographic diversification. The Company�s
shares are traded on the New York Stock Exchange and Toronto Stock Exchange
and are included as a component of the S&P/TSX Composite and the S&P/TSX
Global Mining Indexes.
For further information:
SILVERCORP METALS INC. Rui Feng, Chairman/CEO & Lorne Waldman, Corporate
Secretary Phone: (604)
669-9397 ,
Toll Free Phone: 1-888-224-1881
Fax: (604) 669-9387, Email:
info@silvercorp.ca, website:
www.silvercorp.ca.
Investor Relations
Telephone: 604-669-9397
Fax: 604-669-9387
Toll Free Tel: 1-888-224-1881
Email:
ir@silvercorp.ca |
Office Address
Silvercorp Metals Inc.
Suite 1378 - 200 Granville Street
Vancouver, BC
Canada V6C 1S4 |
©
Goldonomic, Florida, USA -
+1 (772)-905-2491 |