Rui Feng, the chairman and chief executive of embattled Silvercorp Metals Inc., has relinquished his role as CEO, the company said on Friday, about a month after reporting lower production at one of its mines in China and amid investigations in the U.S. and Canada.
The outspoken Mr. Feng will remain as chairman of the Vancouver-based company, which operates one of the largest silver mines in China and has been accused of helping Chinese police detain a Canadian in China for defaming Silvercorp.
The company said Silvercorp president Myles Gao will take over as chief executive to allow Mr. Feng to focus on his role as chairman, providing the miner with “strategic guidance.”
The company also announced that one of its directors, Robert Gayton, who was on the company’s audit committee, is retiring and that Malcolm Swallow, a mining engineer with experience with Chinese mines, will replace Mr. Gayton on the board.
The management shakeup comes after Silvercorp announced mid-September that a new method of accounting for ore at its SGX mine in China reduced how much silver it produced in August compared with the previous month.
Mr. Feng’s move also comes about seven months after the U.S. Securities and Exchange Commission asked Silvercorp to turn over documents related to a fight the company had with short sellers and a Canadian researcher, Huang Kun, who is in jail in China.
Separately, the British Columbia Securities Commission and the Royal Canadian Mounted Police launched investigations.
It is unclear whether the company decided to shuffle its management team because of the civil and criminal probes. But criticisms of the company have been building, the latest from a report by Barron’s at the end of September.
The public battle between the company and short sellers started when Mr. Huang’s boss, Jon Carnes of EOS Funds, published a damning report alleging that Silvercorp inflated its profits and misled investors about its production levels.
That report, issued in September 2011, was based on data that Mr. Huang helped collect for Mr. Carnes and sent the company’s stock down 20 per cent. The company accused Mr. Huang of defamation and said he worked in concert with short sellers like Mr. Carnes to drive down the price of Silvercorp’s shares.
Since July 2012, Mr. Huang has been in a jail in the city of Luoyang in Henan province, where Silvercorp’s flagship mine is located.
An investigation by The Globe and Mail uncovered evidence that appeared to show Silvercorp and its executives worked with Chinese authorities to help pay for the investigation against Mr. Huang. The trial for Mr. Huang is expected to start soon.
A spokesman for Silvercorp did not immediately respond to requests for comment on the regulatory probes or Mr. Huang’s pending trial. The SEC and B.C. regulators declined comment.
Mr. Carnes, who is paying for Mr. Huang’s defence and said he has spent more than $2-million (U.S.) defending himself against Silvercorp’s defamation suit, said he has been trying to make his case to the independent directors of the company but to no avail.
Mr. Carnes said he may re-initiate a short position in Silvercorp.
Silvercorp, which bought a major stake in its silver project from the Chinese government, produced 1.4 million ounces of silver for its first quarter ending June 30. Its stock closed at $3.30 on the Toronto Stock Exchange on Friday. It traded at nearly $9 prior to the publication of Mr. Carnes’ report in 2011.