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Silvercorp denies faceless fraud claims, shares slide
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2nd September 2011
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TORONTO (miningweekly.com) – Shares in TSX-quoted Silvercorp plunged over 12% on Friday after the company, which owns silver mines in China, said it had received an anonymous letter from someone making fraud allegations, and claiming to have shorted its stock.

The company denied the allegations in the letter, saying it would “immediately” investigate who was behind the missive, and would pursue legal options to recoup damages the Vancouver-based firm suffered from the claims.

“This type of manipulative scheme is baseless and which depresses our share price and harms our shareholders,” Silvercorp chairperson and CEO Rui Feng said in a statement.

The allegations came at a time of heightened scrutiny of North America-listed companies with Chinese links.

Last week, The Ontario Securities Commission (OSC) suspended trading in the shares of Sino-Forest, the Toronto-listed firm that farms wood in China, after investor Carson Block earlier this year made stunning allegations of fraud in that company.

Chairperson and CEO Allen Chan fell on his sword two days after the OSC’s suspension.

Montrusco Bolton Investments fund manager John Goldsmith said it should be simpler for Silvercorp to disprove the allegations, which include claims it overstated profits and questioned grades at one of its Chinese mines.

“With Sino-Forest, the first question investors asked was who the hell is Carson Block?,” he said.

“Who knows who this person is [making the allegations against Silvercorp]?”

BMO Capital said it viewed Silvercorp’s “proactive” disclosure of the letter as positive, even sticking its neck out to recommend the stock.

“BMO reiterates Silvercorp’s outperform rating and views weakness in the share price as a rare buying opportunity,” analyst Andrew Kaip said in a research note.

Shares in the company were trading nearly 12% down at C$7.27 apiece just before the TSX closed on Friday.
 

Edited by: Creamer Media Reporter

 

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