October 25, 2011 / 2:47 AM / 6 years ago

Silvercorp says report confirms sales data

TORONTO (Reuters) - China-focused miner Silvercorp (SVM.TO) said on Monday that an independent investigation had confirmed sales figures questioned by anonymous short-sellers, and its shares rose as much as 20 percent.

Silvercorp Metals Inc, one of a number of China-focused North American-listed companies targeted by short-sellers, said a KPMG Forensic report commissioned by a special committee had confirmed Silvercorp revenue figures, one of several items challenged in an anonymous letter from short-sellers.

“I think everybody has been waiting for the KPMG report,” Chief Executive Rui Feng told Reuters in an interview. “I hope they have the same view as us, and this report will put this nonsense to an end.”

Silvercorp, which operates silver mines in China, had repeatedly dismissed the short-seller allegations as a “short and distort” scheme.

“We were certainly waiting for this review. The market perceives it as a positive, and I would say we perceive it as a positive as well,” said BMO Capital Markets analyst Andrew Kaip in an interview.

The KPMG report focused on claims the company had reported different revenue in China and Canada, rather than allegations about asset quality. But those claims have been easier to discount, Kaip said.

“Many of those geological or asset-based criticisms we could deal with, having been to site, having a geotechnical background,” he said. “It was apparent to us that (the short sellers) were pretty unsophisticated.”

Silvercorp said the special committee “is considering its review of the remaining allegations” in light of KPMG’s findings.

Silvercorp stock tumbled as low as C$5.81 in September after the short-seller report came out, but had bounced back from that low before Monday’s report came out. The stock peaked at C$9.87 on Monday, a rise of 20.6 percent, and was up C$1.44 at C$9.62 by early afternoon.

In a 20-page news release, Silvercorp said the KPMG report showed its financial records to be substantially correct, with reported revenues of $153 million in 2010. The short-seller had alleged that these revenues were inflated by 10 fold.

The report said KPMG had visited the State Administration for Industry and Commerce office for each of its Chinese subsidiaries, and obtained the subsidiaries’ corporate income tax and value-added tax returns.

The consultants visited the subsidiaries’ banks to verify deposits and obtained more than 50 confirmations of cash and short-term investments from eight financial institutions and banks outside China.

Silvercorp filed a lawsuit in September asking websites to remove “false, defamatory and fraudulent information” from short-sellers who have accused the company of fraud.

Additional reporting by Pav Jordan; editing by Janet Guttsman

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