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Hi all,
Here is a snippet fron Casey Research on the matter:
"We have no reason to suspect Silvercorp has done anything wrong. It appears this is a deliberate attack on the company to profit on existing short positions. Keep in mind that this is not the first time a company operating in China has been targeted by similar tactics; a number of companies have been hit with similar allegations, the most prominent of which was Sino Forest by short seller Muddy Waters last June. These people have clear reasons for circulating false rumors.
What to do? First, do not panic, and do not sell your shares. Given what we know at this point in time, we have no reason to change our opinion of the company. Keep in mind that CEO and Explorers’ League honoree Rui Feng has an incredible track record. Would we buy here? Perhaps, with the caveat that we don’t know how bad the fallout could be and thus how low the shares could go. Given the enormous short position in the stock, they could fall lower – but at some point many of those positions will unwind and force the stock higher. If you have a full position, we recommend simply holding to your shares until this settles; if you have room in your portfolio to add or initiate a position, we think this could be a fantastic opportunity. In the interests of full disclosure, members of Casey Research and/or the Casey Fund may be buying shares in the next few trading days, and maybe even selling some puts as a short-term speculation."
Deno G.
I own a good chunk of SVM again. This is what SVM released earlier today. I have not seen anything else.
Deno G.
http://at.marketwire.com/accesstracking/AccessTrackingLogServlet?docid=0725204001sourceType=1http://www.ccnmatthews.com/logos/20090310-silvercorplo.JPG
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 09/02/11 -- Silvercorp Metals Inc. ("Silvercorp" or the "Company") (TSX:SVM)(NYSE:SVM) announces that there has been a dramatic increase in the short position of its shares over the past two months which is now approximately 23 million shares (Source: (http://www.dataexplorers.com/products/data), or 13% of the total outstanding shares.
Late yesterday afternoon, the Company was forwarded a copy of an anonymous letter dated August 29, 2011 addressed to the Ontario Securities Commission, the Company's Auditors, and various media outlets maliciously alleging a "Potential $1.3 Billion Accounting Fraud at Silvercorp". The anonymous author also stated that his firm held a short position in the Company's shares and intended to make his concerns known through internet postings. The Company has not confirmed whether the letter has been disseminated to all the addressees or if any postings have been made.
Recognizing that the anonymous letter may be disseminated the company wishes to proactively respond to the most serious allegations and has posted supporting information on its website to provide investors with comfort regarding the following allegations made in the anonymous letter:
1. The central allegation is that while Silvercorp reported net profit of US$66 million to the SEC in calendar 2010, financials purportedly available from the Chinese State Administration of Industry and Commerce (SAIC) shows "SVM" reporting a loss of US$0.5 million for calendar 2010. This allegation is false.
The SAIC website (http://wznj.saic.gov.cn, Attachment A) discloses the following for Silvercorp's four Chinese operating subsidiaries: (i) Henan Found filed net after income tax profit for Calendar year 2010 of RMB514,786,392; (ii) Henan Huawei filed a net loss of RMB6,091,388; (iii) Guangdong Found filed a net loss of RMB4,758,879; and (iv) Anhui Yangtze filed a net loss of RMB1,214,663. On a consolidated basis, the net profit of these four Companies is RMB502,721,462 (US$ 73 million). In addition on the cover of each filed SAIC document there is an anti-fraud code displayed which readers can use to independently verify those reports on the Chinese Certified Professional Accountant website (www.henicpa.org.cn). Further information to reconcile this China GAAP consolidated total net profit with the US$66 million figure will be posted on the Company's website. The anonymous author's numbers are clearly false.
As further evidence of Silvercorp's net profit, copies of the 2010 Annual Income Tax Filing Forms for Henan Found and Henan Huawei, which include a receipt chop issued by the State Tax Bureau of the Luoning County of Henan Province, is also attached (2010 Income Tax Filing Form, Attachment B). In the 2010 Annual Income Tax Filing Form, Henan Found reported net revenue of RMB964,812,316 (US$140.1 million), and a pre-income tax net profit of RMB590,727,919 and paid income tax payable of RMB74,441,229.
In China, on each sale of goods the seller must charge Value Added Tax, and the receipt issued for the paid value added tax must be approved and is stamped by the government. The Company is posting details on its website showing a reconciliation of the Value Added Tax paid by Henan Found on its revenues along with copies of the government receipts. (Attachment C)
2. The letter further alleges that the Company's cash position is grossly overstated. In fact:
(a) Silvercorp, as at June 30, 2011, had a cash position of $230.5 million - more than all the cash ever raised in the Company's history. Copies of Silvercorp's current bank statements (July 31, 2011) are available on the Company's website. (Attachment D);
(b) Since 2004 Silvercorp has raised in total $202.5 million through equity financings. Over the same period of time it has paid out $40 million in dividends, and has spent $31 million repurchasing its own shares, including $16.5 million in the currently ongoing Normal Course Issuer Bid announced June 17, 2011; and,
(c) The Company has $544.6 million in total assets and no long term debt as at June 30, 2011. 3. The letter also states that the grade of the Company's deposits is simply "too good to be true" compared to comparable companies. The Company acknowledges that its SGX Mine within its Ying mining district does have some of the highest grades in the industry. As disclosed in its most recent NI 43-101 report measured grades at the SGX Ying mine are 845g/t for silver. The mineral resource estimate for SGX was prepared by Mel Klohn L.P. Geol. of Spokane Valley, Washington, who is a Qualified Person with the firm of B.K Exploration Associates. Details of QA/QC procedures and assay lab information are described in the Technical Report filed on SEDAR under the Company's profile and available on the Company's website.
The Company has long established plans for an investor tour to the Ying mine site in the third week of September. All interested investors, analysts and media wishing to visit our mine site and view the ore and operations with their own eyes are asked to contact the Company to join the tour.
4. The anonymous author also alleges that Henan Found's 22.5% JV partner, the Henan Non- Ferrous Geological and Mineral Resources Co. Ltd., which is a state owned enterprise, sold a 5% interest in Henan Found for US$7 million, implying the Henan Found assets are worth only US$140 million. The anonymous author fails to mention that the transfer was to an affiliate. Based on the joint venture contract and articles of association of Henan Found, the 22.5% joint venture partner can assign its interest to an affiliate.
In accordance with good governance practices, the Company has established a task force of independent directors consisting of Dr. Robert Gayton, Paul Simpson, LL.B. and Earl Drake, Canada's former ambassador to China, to work with regulatory authorities to immediately investigate and discover the identity of the party behind these allegations. Silvercorp will pursue all legal options, whether in Canada, the United States, or China, to recover damages incurred by the Company as a result of these allegations.
Dr. Rui Feng, the Company's Chief Executive Officer, noted "this type of manipulative scheme is baseless and which depresses our share price and harms our shareholders. While we are fighting these manipulation schemes, we will continue with our ongoing share buyback program, increase our investor relations efforts, and continue to focus on growth through exploration, acquisitions, and mine development. We are pleased with our current operations and look forward to reporting another profitable quarter."
About Silvercorp Metals Inc.
Silvercorp Metals Inc. is engaged in the acquisition, exploration, development and mining of high-grade silver-related mineral properties in China and Canada. Silvercorp is the largest primary silver producer in China through the operation of the four silver-lead-zinc mines at the Ying Mining Camp in the Henan Province of China. The Company 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, Silvercorp 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. The Company's shares are traded on the New York Stock Exchange and Toronto Stock Exchange and are included as a component of the SP/TSX Composite and the SP/TSX Global Mining Indexes.
Attachments mentioned in this press release can also be obtained by visiting the Company's website, www.silvercorp.ca and clicking on the electronic version of this press release, or alternatively by calling the Company.
Contacts:
Silvercorp Metals Inc.
Rui Feng
Chairman/CEO
(604) 669-9397 or Toll Free: 1-888-224-1881
Silvercorp Metals Inc.
Lorne Waldman
Corporate Secretary
(604) 669-9397 or Toll Free: 1-888-224-1881
(604) 669-9387 (FAX)
info@silvercorp.ca
www.silvercorp.ca
Hi all,
Ted butler at his best.
Deno G.
http://www.silverbearcafe.com/private/silveraccident.html
The Coming Silver Accident
Theodore Butler
Perhaps "accident" may not be the precise word to describe what I see coming in silver. After all, Webster’s defines accident as "an unforeseen and unplanned event or circumstance." While that definition certainly encompasses what I see ahead in the silver market, I need to add a qualifying adjective to complete my vision. That word is unavoidable. The silver market is headed towards an unavoidable accident.
This will not be like any accident you have ever witnessed or experienced. This is an accident you can fully prepare for, and greatly profit from. This coming silver accident could favorable and permanently alter your family’s standard of living and financial security. The great news is that preparations for this accident are simple and merely depend upon you applying common sense.
At the core of what makes the coming silver accident unavoidable is the immutable law of supply and demand. Supply and demand ultimately governs how all markets function. While some markets, including silver, can be artificially controlled or manipulated in price for long periods of time, eventually such manipulations must end if they are at odds with supply and demand.
Nothing has been more at odds with the basic law of supply and demand than the silver market. For many decades, the world has consumed more silver than it has produced. That has necessitated a draw down of previously produced silver - the existing inventories. There has never been a situation in any commodity where such conditions have failed to cause a dramatic price increase. While supply and demand mandate a sharp price increase, it has not yet come. That’s the groundwork for the coming silver accident. When it comes, the price will explode upward and reach levels that are talked about for decades to come.
The primary factors mandating a silver accident are excessive naked short selling and leasing. Silver has the largest short position that’s ever existed in anything. This is the key component to the coming silver accident. The total naked short position in silver measures into the billions of ounces and towers over real world supplies. This combined short position includes the COMEX, all other exchanges, forward selling and leasing, the cumulative issuance of unbacked silver bank certificates, unallocated storage programs and pool accounts. No other commodity has such a huge naked short position.
It is, basically, this bloated short position that’s at the heart of the coming silver accident. It is this same excessive short position that guarantees a financial windfall for your family. A naked short sale is the sale of something you don’t own. While common in financial markets, more than 99% of the world’s population will never sell short anything in their lifetimes. That’s because it’s an unusual and unnatural financial transaction.
Unbridled short selling can artificially depress the price. That is why we have restrictions on short selling that date back to the great stock market crash of 1929. In commodities, there must be a short for every long on every futures contract. Regulations are supposed to preclude excessive long and short speculation via speculative position limits, but these regulations have been abandoned in COMEX silver, despite the efforts of many of us to correct that.
There is one other aspect about short selling that is important to grasp. Whereas the word "sale" means closure or finality in all the billions of daily world business and financial transactions, a short sale is always an open or incomplete transaction. A normal sale marks the end of a transaction. A short sale marks the beginning of a transaction. A short sale must be completed at some point, in some way. There is no exception to this rule. Either the short sale is repurchased and closed out, or that which has been sold short is actually delivered and the open short sale is closed.
Precisely because all short sales must be closed out guarantees a silver accident. When I say that silver has the largest short position in history, I am also saying that silver has the largest number of incomplete transactions in history. Forget, for the moment, the manipulative and depressing effect this monumental short position has had on the price.
All short sales must be closed out in someway. With silver, could it be by delivering silver? Against the billions of ounces of silver sold short, how much do we have to deliver to close out these incomplete transactions? In the COMEX warehouses there’s 100 million ounces. That represents most of the known silver bullion in the world, but it’s mostly owned by investors other than the short sellers. Maybe there are a billion ounces of silver in the world, in coins, small bars and silverware, but that’s not eligible for delivery against the silver short position of billions of ounces. Not only is all the world silver in existence woefully insufficient to cover the monstrous short position, but most of this insufficient quantity isn’t even owned by the short sellers.
That’s why I’ve made such a big deal about the uniqueness of a silver short position that’s larger than existing world inventories. It eliminates one of the only two legitimate ways in which a short sale can be closed out. That’s why we’ve never seen any other commodity with a short position greater than what actually exists. How can you have a short position in anything greater than what actually exists?
The only remaining legitimate way a silver short position can be closed out is if it were bought back by the short sellers. From whom are these short sellers going to buy hundreds of millions and billions of silver ounces from? Or more correctly, at what price? Since actual delivery is out of the question, the only way the short sellers can buy back their bloated silver short position is to get every owner of real silver and every owner of paper silver to sell out. The price that would be necessary to accomplish that feat would qualify in any reasonable definition as an accident.
While there is no way to determine when the silver shorts will spook and rush to cover, time is not on the shorts’ side. They must try, at some point, to buy back and cover the silver they can’t possibly deliver. It is not important to know in advance what the actual trigger for the silver accident will be. All you need know is that with the critical and long-term physical deficit in silver, the short selling charade must end. Since we can’t determine when, don’t focus on the timing, focus on the inevitability of a delivery crunch.
Long-time readers know that Investment Rarities has been underwriting my articles for the past four years. For most of that time, the silver price averaged between four and five dollars. For the past year, the silver price has been six, seven or eight dollars. Does this increase mean that the price has finally responded to the law of supply and demand, and therefore eliminated the chance of a silver accident?
Normally, a price increase of 50% or 100% in a commodity should be sufficient to balance any consumption deficit. That’s a big move in any commodity. But not for silver. That’s because the consumption deficit in silver is unlike any other commodity deficit. Silver has been in a structural deficit stretching back for more than a half-century. You don’t undo the damage of 60 years with a 50% or 100% gain.
There is zero evidence that production or consumption has been impacted by the price, or that the silver deficit has been cured. There has been no worldwide rush to find new silver mines in response to higher prices. Silver may have increased in price, but there has been zero effect on near-term production increases or substitutions in demand. No one has switched to gold or platinum jewelry because silver is up in price. The law of supply and demand hasn’t been affected one bit as a result of the recent price increases. The first prerequisite for the coming silver accident is very much intact. However, it takes more than a bullish supply and demand equation to cause a violent price event. Bullish fundamentals point to higher prices but not necessarily a price accident. In the silver short position, we have the needed reason, in spades, for an accident.
As a result of the 60-year structural deficit, we have exhausted just about all the world’s previously existing silver inventory. That includes just about all world governments’ silver inventory. When the unavoidable silver accident occurs, there will be no one to douse the price fire. This can’t be said about any other commodity.
This fact distinguishes between a gold and a silver accident. In gold, in a financial meltdown or currency crash (popular reasons given for a gold price accident), world governments own enough gold to extinguish a price explosion. In silver, they don’t own enough silver to put out a fire.
It’s rare to be presented with an unavoidable financial accident that you can personally benefit from. If you find my argument has merit, then position yourself in silver before the coming accident. If you wait until the accident happens, it will be too late.
Hi Pic,
Judging by the dismal performance of my PM stocks today in light of reletive strength in the PM's them selves I would have to say the long term trend would lend to the higher posibility of a PM take down tomorrow. Just my gut feel.
I don't post often so I will mention that I voted yes on the merger (too many 1000's of shares). Been in since about 2006 area.
Lots of talk on the board as to when the shares are going to catch up to the performance of the metals. Maybe that will happen when JPM and alike truly lose control of physical PM pricing through the paper market. Don't know when that will be but probably around the same time the bond market as we know it starts to unravel and disperse $$$ into the PM's.
Again, just some thoughts,
Deno G.
Hi Munisign,
That article is refering to the US listing ECUXF. Obveously not referenceing the TSX listing. You ar eright about it being mis-leading.
Deno G.
Hi all,
I must confess that since the dot com bubble days I have always looked for value.
The dot com days were fertile learning grounds for a late 20’s Joe Shmuck like me. I ate all the dung heaps and lies thrown my way by main street media etc.. I made a pile of dollars and lost a pile of dollars. Greed was a part of it but mainly, rather than using reason and logic as a part of my decision base I followed the heard. I thought how can the majority be wrong???? It was not till after the fact that I realized that the heard was being led by people that did not and never will have the herd’s best interest at heart. If the housing/credit bubble scenario was not enough to further install that fact in us then I truly feel sorry for those who don’t get it.
Now, after many years of holding stocks like ECU, EXN, CPN, XRC, SVM and preaching the value of physical metals which I do not own enough of, those who followed me (family mainly) are now calling me a bag holder, that I should have figured out that there is good reason for the shares not following the price of the metals. That in-ground ounces have very little value. Mind you, they can’t tell me what that reason is or what the value of in-ground ounces should be….
So again I sit here bewildered as to why would the value of the shares of such companies be so much lower and the fundamentals be so much better than say 4 years ago? Why has main street called a top in gold and silver for literally years. Now the calls are even louder and mor efrequent than ever when all fundamentals (aside from technical charts maybe) are stronger than ever? Well, logic tells me now that the value is still in this sector, the heard is again desperately being led away from and parted from real wealth.
I will not follow that path again. If I die a poor man it will only be financially and definitely not because I followed the herd. It will be because rhyme, reason and logic were not meant to prevail before I go.
A further confession, I am all in as of yesterday and I own way to many shares of ECU. But I am OK with that. I would rather be 6 years early than 6 days late!!!!
Deno G.