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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
begin_of_the_skype_highlighting
(604) 669-9387
end_of_the_skype_highlighting,
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 |
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