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the lunch

Illustration of Rui Feng, CEO of Silvercorp Metals Inc.Anthony Jenkins/The Globe and Mail

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. 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.

What's more, the company's shares hit an all-time high of $15.60 (Canadian) on the Toronto Stock Exchange in early April, around the time the price of silver peaked at about $49 an ounce (U.S.). But the celebration didn't last long. In August, Mr. Feng said he started to notice strange movements in trading of his stock. "I knew something was happening," he said, pouring more tea. The company was then told by one of its shareholders in mid-August that it had heard a report on Silvercorp was being prepared by short sellers.

The short position on the stock had started to build. Mr. Feng was in Beijing on Sept. 2, when he got a call saying that an anonymous letter alleging a "potential $1.3-billion accounting fraud" had been sent to the company, its auditors, regulators and some media. The company said it had to respond, insisting the allegations are bogus.

The stock tanked.

Then, just as the shares were starting to recover, a second anonymous group of short investors came forward with more accusations of wrongdoing in a report issued by a website called, which describes its work as research on companies operating in China. The allegations against Silvercorp continued to trickle in, and the company continued to fight back through documents and by vigorously proclaiming its innocence to both the news media and investors.

"I never cheated nobody. That is very important," Mr. Feng says.

Before his company became the target, Mr. Feng had been following other Chinese companies listed in North America that were being tagged by short sellers in their reports. He wasn't as quick to blame short sellers back then. However, now that his is in the spotlight, Mr. Feng is claiming discrimination against companies that do business in his native country.

"I understand these people are trying to make money," he says of the short sellers. "But now they say every Chinese company is a fraud? That's not fair."

Not only does Mr. Feng insist his company has done nothing wrong, he plans to fight the "short-and-distort industry" by demanding regulators start cracking down on the people behind it.

As part of its effort to show the company has nothing to hide, it commissioned a special committee to look into the allegations, with the help of KPMG Forensics, which is expected to put out an independent report any day now on the company's books.

And if KMPG's numbers turn out to be different than Silvercorp's?

"They will not," Mr. Feng shoots back.

"What if they do?" he is asked again.

"They won't."



Born in 1963 in Hubei province in central China.

Moved to Hunan province, where he was raised in a military camp while his father served in the Chinese army.

The eldest of three children.


Was among the first generation of students in China to enter university after the Cultural Revolution.

Earned a BSc, then a masters of geology in China.

Moved to Canada to pursue a PhD in geology from the University of Saskatchewan. Graduated in 1992.

Awarded a postdoctoral fellowship from the National Engineering and Science Council of Canada in April, 1992, to work as a research scientist at the University of Montreal.

From 1993 to 1994, worked as a research scientist for the Institute of Sedimentary and Petroleum Geology of the Geological Survey of Canada in Calgary.


After striking out on his own, made some mineral resources discoveries in China. These included those behind Jinshan Gold Mines Inc., which was later sold to Robert Friedland of Ivanhoe Mines in 2004. Ivanhoe sold its interest in Jinshan in 2008 for $216-million, for a gain of $201-million.


Director of the B.C. chapter of the Canada China Business Council and vice-president of the Canada-China Business Association.

Began playing golf in 2008.

Enjoys reading history books

Married with two teenage children.