Silvercorp says, anonymous accounting fraud allegation is false

Silvercorp Metals Inc. (NYSE:SVM), a metals miner in China, said an allegation of accounting fraud contained in an anonymous letter addressed to Canadian regulators is false.

The letter circulated by e-mail alleges Silvercorp reported a profit in Y 2010 to the US Securities and Exchange Commission while posting a loss to regulators in China, Vancouver-based Silvercorp said in a statement. The letter was addressed to the Ontario Securities Commission, the Company's auditors and various media outlets, Silvercorp said.

Silvercorp fell as much 9.4% in early trading on the Toronto Stock Exchange.

The allegations against Silvercorp are entirely bogus, Lorne Waldman, a Silvercorp spokesman, said today in a telephone interview. If we didn't have assets in China this would not be happening.

Mr. Waldman denied the mining company was created in a so-called reverse takeover. He said that Silvercorp's auditor is Ernst & Young LLP, the same firm that audited Sino-Forest's financial statements.

Silvercorp also said that the anonymous author said that his firm held a Short position in the Company's shares and intended to make his concerns known through Internet postings.

The company cited today a dramatic increase in the Short position of its shares. Silvercorp said it has not confirmed whether the letter actually was sent to the OSC or any other organization.

Silvercorp fell 0.34, or 4.1%, to C$7.89 at 12:04 p.m. in Toronto. The shares declined 35% this year through yesterday.

Silvercorp shares are off 0.95 (11.30%) at 3.10 pm EDT on the NYSE.

Paul A. Ebeling, Jnr.




Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.