Rui Feng’s lawyers want him to keep quiet.
Even some of his still-loyal shareholders have urged the chief executive officer of Silvercorp Metals Inc. SVM-T to ignore anonymous short-seller allegations of wrongdoing and focus instead on the business of mining silver in China.
But he can’t help himself.
The allegations, which surfaced three weeks ago, have not only hurt Silvercorp’s reputation, but have hit Mr. Feng in the pocketbook. The stock has fallen by as much as 25 per cent, benefiting short sellers and stinging shareholders such as the CEO, who has a 2.4-per-cent stake in the Vancouver-based company.
What’s more, when Mr. Feng speaks, the stock bounces back. Take Friday, for example: Although Silvercorp shares closed down in Toronto as silver plunged for the second straight day, the stock jumped briefly after the company launched a multimillion-dollar lawsuit in the United States, demanding that various accusers remove what it alleges are “false, defamatory and fraudulent information” from their websites.
“Nobody will push me down,” says Mr. Feng, 48, over a lunch of halibut and tea this week at The Grill restaurant inside Vancouver’s Terminal City Club. Founded in 1892, the downtown members-only venue is dominated by silver-haired white men several years his senior and, as his voice grows louder, his intensity causes some members playing billiards nearby to stop and stare.
Mr. Feng also has a new weapon in his war against short sellers: a pair of bright red socks. They, too, are loud against his black suit, white buttoned-down dress shirt and black shoes. The socks are a gift from his secretary, who insisted this week he had to start wearing red for good luck, as is customary in Chinese culture. He says he plans to wear a pair of red socks, and a pair of red underwear, every day – at least until this battle is over.
Mr. Feng is no stranger to struggle or to the rough-and-tumble world of business. The PhD-educated geologist, who was raised in a military camp while his father served in the Chinese army, has had his share of setbacks. And, he says, he has been both cheated and blindsided a few times in his career.
In the beginning, there were private deals with people who didn’t pay. There was the embarrassment in early 2004, when Silvercorp was called SKN Resources Ltd. It publicly congratulated Southwestern Resources Corp. after it announced positive results from drill holes on its Boka Project in China, which it hoped to capitalize on at its Tuobuka property nearby. Boka would be exposed as a fraud a few years later, but not before Mr. Feng’s team drilled away at its own site and found nothing. Eventually, it pulled out and watched its share price plummet back to penny-stock status.
Silvercorp then quickly turned its attention to the Ying silver project, a “high-grade silver gold” endeavour in which it bought a majority stake from the Chinese government in April, 2004. After reaching full production two years later, Silvercorp quickly turned a quarterly loss of about $800,000 (U.S.) into a profit of $2.3-million a year later, according to its financial statements.
Mr. Feng has attributed his seemingly quick success at Ying in part to the mine’s tunnelling technique, which he says is a speedier process than drilling.
Today, Silvercorp and its flagship Ying mine is China’s largest primary silver producer, pumping out a record 5.3 million ounces of the metal in its last fiscal year ended March 31, and earning $68.8-million in profit on sales of $167.3-million – also records.
