SILVERCORP
RESPONDS TO SECOND ANONYMOUS ALLEGATION AND PROVIDES GOVERNMENT CERTIFICATION
OF TAXES PAID
VANCOUVER,
British Columbia � September 14, 2011 � Silvercorp
Metals Inc. (�Silvercorp� or the �Company�) advises
that a second set of anonymous allegations against the Company has been made,
which was published on the internet (the �2nd Anonymous Report�). The
Company refutes the substance of all allegations in the 2nd Anonymous Report,
and believes it has been published in furtherance of concerted efforts by a
group of short sellers to drive down the Company�s share price through false,
selective or ignorant statements and rumors. Investigations are ongoing
by the RCMP, the BC Securities Commission, the SEC and the FBI to determine
the identity of the anonymous authors.
The
Independent Committee, in keeping with its duty, has retained independent
legal counsel to examine the anonymous allegations. In addition, KPMG
Forensic Inc. was engaged on September 6th by legal counsel to the
Independent Committee to assist the Independent Committee by completing a
report on certain aspects of revenue, cash balances and income tax and VAT
payments in China, and to perform certain reconciliations of the Company�s
filings in China with those filed with North American regulators. The
Independent Committee will report further on its findings and respond to the
allegations in the 2nd Anonymous Report in due course.
Dr.
Rui Feng, Chairman
stated, �Over the course of the last five years, Silvercorp
has developed and commenced profitable mining from its Ying Mining
Camp. Revenues from operations have resulted in Silvercorp�s
operating subsidiaries having paid over US$116.6 million in taxes to the
Chinese government, as evidenced by the Tax Certificates issued by Chinese
government, and total dividends of US$152 million to its shareholders.
These reflect a total revenue stream that is in accordance with the mine
production and sales revenues reported by the Company during that
period. I ask shareholders to exercise common sense in assessing
whether these allegations of �fraud� against the Company have any merit
whatsoever in the face of very significant revenues, tax payments and
dividends, and particularly when the accusations are made anonymously by
parties whose only interest is in depressing the Company�s share
price. I invite the authors of the anonymous allegations to come
out of the shadow and participate with the regulators in their
investigations, if their concerns truly extend beyond the profitability of
their short positions.�
While
Silvercorp is working with the regulators we will
not comment further on any rumor or fabrication on the Company published by
anonymous letters or blogs, however we wish to broadly address two of the
concerns raised in the 2nd Anonymous Report respecting (1) the disparity
between grades and production numbers reported in China and North America,
and (2) the sales to the related party:
(1)
The Henan L&R Bureau Report or �Dynamic Reconnaissance Report on the SGX
Mine� is solely based on a detailed exploration report on the SGX property
prepared a Chinese firm for the mining permit application in June 2005. The
report is based on limited exploration results before May 2005, just a few
months after Silvercorp acquires the SGX property. Alfredlittle should know that this type of report was not
reviewed and checked by an independent qualified person defined by NI 43-101
so it is not NI43-101 compliant and cannot be relied on. According to
Chinese regulations, once the detailed exploration report for mining permit
application was completed, its resource calculation does not have to be updated
every year, and is only updated when preparing to renew the mining permit.
The SGX mining permit expires September 2014 so an updated exploration and
resource estimates report is not required t by the L&R Bureau until a
couple months before September 2014.
(2)
It is inferred that significant sales of concentrate to a major customer,
Luoyang Yongning Smelting Co. Ltd. are somehow
improper, or not properly reported. The Company�s 15% ownership interest in the smelter have always been publicly
disclosed, most recently in the June 30, 2011 quarterly financial filings
available on SEDAR. Neither Canadian GAAP, nor IFRS standards
consider this interest to constitute a �related party� transaction. In
fact, sales to the smelter, in keeping with the profitable concept of
vertical integration, are preferred as the Company obtains an interest in the
smelting profit as well. Concentrate sales contracts the Henan Found
signed with all its customer require cash payment
first before concentrates are shipped. The Henan Found has received all
funds in relation to its concentrate sales to the Yongning.
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