Silvercorp Says KPMG to Issue Fraud Allegation Report ‘Soon’
Silvercorp Metals Inc. (SVM), a Canadian miner of the metal in China, said a probe it ordered by KPMG Forensics Inc. to check the company’s cash flows and production volumes to counter allegations of fraud may be completed soon.
“We’re a real company and will fight against shorters and distorters,” Feng Rui, Silvercorp chief executive officer, said today at a meeting in Beijing.
Silvercorp, whose shares have lost 46 percent this year in Toronto trading, has denied allegations of accounting fraud contained in an anonymous letter to Canadian regulators last month and those posted on Alfredlittle.com, which publishes research about companies doing business in China.
Allegations of fraud against Chinese companies such as Silvercorp and Sino-Forest Corp. (TRE) have heightened investors’ concern about other North America-based companies with operations in China. Toronto-based Sino-Forest shares plunged 79 percent so far this year.
Silvercorp, a Vancouver-based company which describes itself as China’s largest silver miner, may have overstated its net income last year by at least fivefold, according to a report posted Sept. 19 at Alfredlittle.com.
The website posted another report Sept. 22 saying that the company may have sent some silver ore for processing with lower grades than earlier stated. Both reports are sent anonymously.
“Our auditing doesn’t have anything wrong, the allegations are fabrication,” Feng said today in an interview on the sidelines of the meeting.
Legal Action
Silvercorp is suing Alfredlittle.com website operator Alfred Little and an editor Simon Moore, alongside Chinastockwatch.com and operator Jerry Katz, for publishing ’’false, defamatory and fraudulent statements,’’ Silvercorp said in the complaint filed on Sept. 22 in New York State Supreme Court in Manhattan.
Chinastockwatch.com website couldn’t be accessed for contact information today. An email seeking comments from Little and Moore wasn’t immediately replied outside business hours. The complaint is “frivolous” and “every statement that was made in every single report that was published on Silvercorp from Alfredlittle.com is completely factual,” Moore said in a telephone interview on Sept. 24
Silvercorp fell 2 percent to C$6.91 on the Toronto stock exchange on Sept. 23, extending its loss this month to 19 percent. The shares have declined even as the company is seeking to counter the allegation by working with legal authorities.
Silvercorp has started recovering from the shadow of allegations, Feng said. “The allegations won’t prompt us to make any changes in the process of financial reporting and auditing,” he said.
The Federal Bureau of Investigation, the SEC, the British Columbia Securities Commission and the Royal Canadian Mounted Police are trying to identify the authors of the reports, Silvercorp said.
To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net
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