Fraud Letter ExcerptSilvercorp Metals the latest Canadian company accused of fraud (2-Sep)
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
.5 million for calendar 2010. This allegation is false.
2. The letter further alleges that the Company's cash position is grossly overstated. In fact:
(a) 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);
(b) 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,
(c) The Company has $544.6 million in total assets and no long term debt as at June 30, 2011.
3. The letter also states that the grade of the Company’s 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.
Time will tell if the anonymous tipster’s allegations are correct, but with so many people on edge after the Sino-Forest scandal, there’s no doubt the Canadian investment community will be watching this closely.