Silvercorp Takes on Short-Sellers in NY Lawsuit

Mining company Silvercorp Metals SVMSVM said Friday it has filed a lawsuit in New York County Supreme Court against a number of short-sellers who published reports accusing Silvercorp of fraud. The company filed the papers Thursday, saying that "false, defamatory and fraudulent" information about the company on the internet, and in letters, was being spread by Chinastockwatch.com, Jerry Katz, Alfredlittle.com, Alfred Little, Simon Moore and several "John Doe" defendants. Silvercorp alleges that the defendants published their claims to drive down the price of its stock in order to make their short positions more profitable. Silvercorp's chairman, Dr. Rui Feng, said: "This is the first step on our journey to hold participants of this scheme, or those who otherwise defamed the company, harmed its shareholders and manipulated the capital markets accountable." In late August, the company noted that 14% of its publically traded stock was held in short positions. At the same time, it alerted market authorities that it had received an anonymous letter alleging fraud at the company's Chinese operations. Shortly afterwards, research firm and short seller alfredlitle.com alleged that valuations at its Chinese operations were overstated and that one of its biggest clients was in fact a Silvercorp subsidiary. Silvercorp was then again confronted with a second anonymous report, to which it opted to fight back and issue a statement. Based in Vancouver, B.C., Silvercorp, which included government financial documents and mineral reports with its statements, said it is cooperating with the RCMP, the B.C. Securities Commission, the SEC and the FBI to determine the identity of the anonymous authors. It is a difficult time for other North American-listed firms with Chinese operations. Shares in Sino-Forest TRE continue their suspension on the Toronto Stock Exchange following the publication of a note from Hong Kong-based independent research firm Muddy Waters that alleged fraud at the China-focused tree plantation company, which resulted in the departure of CEO Allen Chan, as well as investigations by the company itself and Ontario's securities watchdog. The shares of oil recovery firm SinoTech Energy CTE have also been suspended on the NASDAQ since late August and may even be delisted, after alfredlittle.com alleged the company's reports and SEC filings were riddled with inaccuracies. The firm scheduled an appeal Thursday against the NASDAQ de-listing decision. Silvercorp is developing its GC silver-lead-zinc mine in the Guangdong Province and recently acquired the BYP gold-lead-zinc mine in Hunan province. In Canada, the company is preparing to apply for a Small Mine Permit for the Silvertip high grade silver-lead-zinc mine project in northern British Columbia to provide a further platform for growth and geographic diversification. As at 9.59am EDT, shares were up 1.3% at $6.91. Silvercorp stock is down 46% for the year to date.