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Top shareholders stand behind Silvercorp: CEO

Silvercorp denies the allegations that have been levelled in two different reports, both of which claim the company overstated production and misrepresented the quality of its Chinese mines.

Alfredlittle.com/Alfredlittle.com

Silvercorp Metals Inc. chief executive officer Rui Feng says the miner's top shareholders are standing behind the company, amid allegations by short-sellers of wrongdoing at the Vancouver miner.

"They said, 'Rui, just focus on the job.' They all believe me," Mr. Feng said in an interview Thursday as part of his campaign to fight his accusers.

Silvercorp denies the allegations that have been levelled in two different reports, both of which claim the company overstated production and misrepresented the quality of its Chinese mines.

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The first set of allegations came in a anonymous letter dated Aug. 29 and the second in a report from a research firm called Alfred Little, also commissioned by anonymous investors. Both groups have identified themselves as short sellers of the stock, which is listed in both Toronto and New York.

Silvercorp shares rose 7 per cent Thursday to $6.90, as executives continue to battle the allegations. But the shares are still down 16 per cent since the company told investors of the allegations on Sept. 2, and Mr. Feng is worried the company could find itself the subject of a hostile takeover attempt.

"It's a concern because the stock is down so much," he said. He wouldn't comment on whether the company has been approached.

The company's top investors are Royce & Associates, followed by Van Eck Associates Corp., Renaissance Technologies Corp. and then Mr. Feng himself, according to Thomson Reuters data as of June 30.

Royce & Associates wouldn't comment on its individual holdings when contacted on Thursday.

"We tend to be long-term shareholders and prefer to buy when stocks are out of favour and sell them when they are popular or acquired. We still think there are some great opportunities in the mining space," Whitney George, the fund's managing director, said in an e-mail to The Globe and Mail.

Silvercorp's CEO continued to fire back at his accusers Thursday through various media interviews, saying investors behind the initial anonymous letter softened allegations in a follow-up report that was posted online Wednesday.

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The post, which could not be verified, doesn't mention a "potential $1.3-billion accounting fraud" that was in the first letter, Mr. Feng noted.

"Why are they toning down? They are not saying fraud anymore," he said.

Silvercorp is working with police and regulators in both Canada and the United States, where its stock is listed, to determine the source of the reports. The British Columbia Securities Commission said it is investigating who is behind the reports and the allegations in them.

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Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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