Silvercorp Metals Inc., following yet another false and misleading internet posting today by the fictitious and anonymous Alfred Little, posted an open letter today to its shareholders that addresses recent allegations made about the Company.” All of the allegations made against Silvercorp have been anonymous. All of the allegations are baseless and designed to be manipulative”, said Rui Feng, Chairman of Silvercorp.” At the risk of repeating this misinformation, we are making sure that every allegation is addressed in detail and investors have all of the information they need to have confidence in our company. While new attacks will keep coming, as is the past practice within the short and distort industry, with this open letter we are turning the corner and putting these allegations behind us”, said Rui Feng.
- Who are Alfred Little and anonymous Shorters?
To date, Alfred Little and the anonymous shorter sellers have not been identified. As such, they avoid legal responsibility for the rumors and fabrications that have been circulated. Is there any credibility to the International Financial Research & Analysis Group (“IFRA”), hired by Alfred Little or hedge funds, to fabricate rumors on Silvercorp? We determined that IFRA is an organization with no registration and no address? The IFRA’s Dino Huang also has no clearly defined credentials.
- Basic Rule and Regulations Silvercorp Follows
As Silvercorp’s subsidiary, Henan Found is a private company operating in China, it complies with the regulations, requirements and standards of China, which are completely different from those in NI43-101 and those in Canada or USA. It is unprofessional to simply compare these two sets of data, like Anonymous Shorters and Alfred Little have done. In Canada, when this kind of comparison is done, it is usually done by a QP, not by unqualified anonymous authors.
Again, Henan Found follows China accounting rules and tax rules. It is not possible to simply match financial statement with US or Canada GAAP. A detailed reconciliation is usually done and verified by a firm like Ernst & Young.
- Source Of Information And Qualification For Alfred Little’s Report And Allegation
Anonymous Shorters and Alfred Little have made accusations that Silvercorp’s information is not reliable or not independent. Our disclosed technical reports are above the NI43-101 standard requirement, having been prepared by independent QPs, and our financial statements were audited by Ernst & Young.
What is the accuracy and reliability of Anonymous Shorters and Alfred Little’s data? They said in their letters or report, they “believe all the information is accurate and sources quoted are reliable”, but who are they? How can they demonstrate that? Why should we trust an anonymous person with a vested interest? The main source quoted, IFRA, only has a phone number and email, but is not a registered Company in Hong Kong as it claims on its website.
Who is Dino Huang, the author who prepared Alfred Little’s research report and has purportedly sampled our ores “dropped” from a truck? We doubt that Mr. Huang is a QP, a CPA, a CA, or an analyst belonging to any professional association in China or any Country. What are his credentials to analyze Silvercorp from financial to mining and to geological results? If Alfred Little does not provide IFRA or Huang’s credentials and certifications, then what degree of credibility can their reports have?
Our lawyers in China were informed that the calendar 2010 financial statements are not available for ANY company from SAIC other than those summary data as we have shown in the Attachment A of our September 2, 2011 news release, as the SAIC has not completed or archived such material yet. The only information available for sale is dated prior to the calendar 2010 year. This fact further evidences that the Anonymous Letter V1 and V2 were pure fabrications andall reference to 2010 financial statements were false.
One thing we may give Alfred Little credit for is that when the Globe and Mail interviewed one of the authors, Dino Huang, he said that “we never said in the report that the company was a scam, or cooked its books”. This directly contradicts the Anonymous Shorters accusation that there was accounting fraud.
- There Are Significant Differences Between the Anonymous Letters V1 and V2?
The main allegation of mismatched SAIC filings (report profit in North America, while a loss is reported in China) was removed from the front page of the Anonymous Letter V2. The allegation was softened as follows: “There is a significant difference between the SAIC financials cited by Silvercorp in its September 2nd press release and the SAIC financials we initially obtained for calendar 2010, particularly as it relates to the key subsidiary Henan Found Mining Co. Ltd.” The authors admit they are in possession of two versions of SAIC filings for calendar 2010, and one version corroborates the Silvercorp’s figures. As they would not profit from the confirmed numbers they chose to report on the false lower numbers. The Company notes that the authors of the Anonymous Letter V2 are still referring to allegations in the Anonymous Letter which Silvercorp has demonstrated to be pure fabrication.
The Anonymous Letter V1 suggested that Silvercorp only has US$7.0 million of cash on hand while in Anonymous Letter V2 the authors now acknowledge that Silvercorp has US$87 million but state that “we remain, at this time, unconvinced that the Chinese cash balances are present in full, or 2) if present, unencumbered by liens.” The Company notes that the authors do not provide any information to substantiate this false accusation which the Company contends is in keeping with the fraudulent actions of the authors. The Company has posted its bank statements online, and its bank balances have been audited by a top international accounting firm.
The Anonymous Letter states “The grade of the deposits is simply “too good to be true” compared to comparable companies. The 43-101 resource reports…rest on shaky foundations.” The Anonymous Letter V2 completely alters the tone of the Anonymous Letter V1 and states “we do not suggest that any independent person associated with that report has knowingly acted in aninappropriate manner“. The authors now further suggest that additional confidence in the SVM investment case could be built if SVM were to hire a “name brand” minerals consulting firm and have independent, on-site work conducted every time a technical report is prepared.
The authors are no longer falsely asserting that SVM was a reverse takeover.
The authors have removed reference to the statement “Suspicious Press Release (June 9, 2011) One Week after SinoForest Collapse” and to a “Suspicious Management TV Interview in Wake of Sino-Forest“‘. They have also removed their assertion that they used government-trained experts in lie detection whose identity they promised to protect.