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XMFSinchiruna (27.60)

Setting the Record Straight on Silvercorp Metals

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September 07, 2011 – Comments (15)

Particularly in this post-Lehman, post-Madoff financial world, where rightfully cautious investors are eager to minimize risk, the shorts have it made.

http://www.fool.com/investing/general/2011/09/07/setting-the-record-straight-on-silvercorp-metals.aspx

I consider it a sad sign of the times that a company is forced to take seriously even those allegations brought forth by an anonymous party. But particularly where companies with operations in China are concerned, that is certainly the current reality. Successful silver miner Silvercorp Metals (NYSE: SVM ) found itself in just such a predicament last week, and I applaud the company for moving swiftly to rebut the contents of the allegations Friday with a press release backed by 268 pages of supporting documentation. Reacting to a major surge in short interest to reach 13% of shares outstanding, the company responded to an anonymous letter alleging accounting fraud and other alleged irregularities.

While I will leave the final verdict to the forensic accountants and translators that I suspect will continue to pore over those myriad documents and filings, I did manage over the course of my own review of the company's comprehensive rebuttal to emerge from the process with my long-standing confidence in the stock well intact. I will be maintaining my own personal holding of Silvercorp shares, and I encourage my readers to seek their own comfort level in the documentary evidence provided.

15 Comments – Post Your Own

#1) On September 07, 2011 at 12:08 PM, jesusfreakinco (29.04) wrote:

As I said in response to Speedy's comments...

As a former auditor, I can tell you one thing that happens during an audit - cash balances are confirmed independently with the banks.  If these bank statements with western banks are indeed valid, then SVM's auditors have been verifying their cash balances independently each year since the inception of the company.  This includes a 147,224,000 balance reported on their 10K less than six months ago - March 31.  Same would be true of their S/T investments 59,037,000 as of March 31.  This isn't Enron with the potential for a bunch of off-balance sheet entities to hide liabilities.  

I personally think the SVM raid was orcestrated by the hedge funds to liquidate part or all of their short positions, especially once management announced the share buyback.  I also think it is clear that GMX is part of a hedge fund or is tipped off by certain hedge funds about their activity.  His accuracy and score are impressive, but his methodologies are suspect IMO.

Hats off to SVM management.  It is clear they are protecting the shareholders interest by putting their money to work.  I've iniated a sizable position in real life and intend on holding it.  I think we'll see new highs withing a few months, especially with what I am hearing from some key commentators like Ben Davis (http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/6_Ben_Davies_-_Silver_Headed_to_$65_%26_Gold_to_Soar.html) Andrew Maguire, James Turk, and of course, our very own Chris Barker!

BTW - silver fighting back nicely so far from today's raid.  It will be interesting to see who 'wins' today.

JFC

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#2) On September 07, 2011 at 3:33 PM, BillyTG (29.65) wrote:

Wow, so goldminingAhole might be a hedge fund shill?

Well, since we now have this guy on record saying these things, maybe TMF can push his name and IP address to those Canadian police...

GMX, serious questions, because I find this stuff fascinating:
1. How much do you get paid to spout this nonsense on TMF?
2. How did you get recruited or find this kind of work?
3. Are you the fulltime TMF representative for hedgefund PM positions?
4. How does the hierarchy work? Like, does some anonymous person working on behalf of several hedgefunds contact you with tasks, or are you called directly from hedgefund managers? I'm just wondering to what extent they go to protect their illegal actions...are we talking CIA-level cover companies and layers of crooks in between the decision makers and the low level wonks like yourself?
5. You are a piece of SH!T. Whoops, I guess that's not a question.

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#3) On September 07, 2011 at 3:49 PM, BillyTG (29.65) wrote:

Pitch by: goldminingxpert 9/02/11 9:23 AMReply | Rec This (Recs: 4) | Report this postBiggest Chinese RTO fraud yet? Sure seems like it may be. Always do fundamental research rather than just buying something cause it has silver or gold in its name.Reply: goldminingxpert 9/02/11 9:45 AMReply | Rec This (Recs: 0) | Report this postand when buying a Chinese company, always always always check the SAIC filings.Reply: jesusfreakinco 9/02/11 1:54 PMReply | Rec This (Recs: 1) | Report this postGMX,

Yeah.. a lot of fraud companies generate significant earnings and cash flow, dupe their auditors into believing this cash flow is fraudulent, then have a share re-purchase plan to 'dupe' the retail investor. Sounds like you are pumping and dumping...Reply: goldminingxpert 9/02/11 2:03 PMReply | Rec This (Recs: 0) | Report this postThis has been the Chinese RTO business model for years now. The auditors are idiots *Deloitte and CCME for example*, the cash is fake *China Biotics and its fake banking websites* and the assets do not exist *SinoForests wicked woods*. Look up CCME, or RINO, or SNOFF.PK, or CHBT, or fifty other similar Chinese companies. Just because SVM is involved in mining does not change their ability to use the Chinese RTO business model.

I want to see the letter before I am convinced there is fraud here, but the odds are quite low of SVM being a clean company.

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#4) On September 07, 2011 at 4:10 PM, XMFSinchiruna (27.60) wrote:

http://caps.fool.com/Blogs/a-must-read-setting-the/628845?&mrr=1.00 

#36) On August 14, 2011 at 10:35 PM, goldminingXpert (99.61) wrote: 

At comment thirtytwo: Do you speak Mandarin or have a background in forensic accounting?

I personally have neither, though the fact that I have teams of translators that help me with research, plus people I can get accounting expertise from overcome that shortcoming. Just about all the hedge fund folks I work with are not Mandarin speakers -- or forensic accountants -- and yet we have exposed plenty of fraud throughout the China space. It does not take a knowledge of Mandarin to realize that CCME, CAGC, RINO, LFT, Sinoforest, YONG, COGO, CHBT, etc. are up to something. Just look at the margins and whether their story makes any sense. No Mandarin (or forensic accounting) required.

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#5) On September 07, 2011 at 5:10 PM, jesusfreakinco (29.04) wrote:

Round 'em up!

Silvercorp Says Canadian Police Offered to Find Source of Anonymous Letter

 http://www.bloomberg.com/news/2011-09-07/silvercorp-says-canadian-police-offer-to-find-source-of-fraud-claim-letter.html

Let me help them out.  He used to live in Colorado, but apparently he is in NYC according to his last post.  He goes by GMX and has lots of friends at hedge funds.  If it ain't him, he knows who it is and he'll squeel like a little girl if you put him under a bright light.

Surely TMF will help you identify his IP address.  Can't wait to see how this unfolds...

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#6) On September 07, 2011 at 6:36 PM, BillyTG (29.65) wrote:

GMX is definitely not to be trusted. He has some real explaining to do.

From the bloomberg article:

"Silvercorp cited Sept. 2 a 'dramatic' increase in the short position of its shares. Silvercorp said yesterday it has contacted the Ontario Securities Commission and the U.S. Securities and Exchange Commission."

Funny, but isn't that the same day that goldminingIdiot commenced his full-on attack of SVM here at TMF, trying to make the fraudulent letter seem valid? Yet, he actually red-thumbed SVM on CAPS on August 31, BEFORE Silvercorp noted the dramatic short increase. Hmmm. So is it possible he was one of the originators of the letter or rumors of trouble, before it hit the larger hedgefund community and public on Sep 2?

Surely, just a coincidence, as GMX has shown himself to be an upstanding man of integrity.

*************************************************************

Here he is admitting knowledge of something just a couple days before the big shorts roll in:

#16) On September 02, 2011 at 9:27 AM, goldminingXpert (99.59) wrote:

I have been waiting for the fraud allegations to go mainstream. Been short for awhile and waiting for the dirty laundry to go public.

**************************************************

At least he makes an attempt at denial prior to any accusations being thrown his way:

#35) On September 02, 2011 at 1:56 PM, goldminingXpert (99.59) wrote:

No interest in writing about SVM. I do not in any way want to be associated with the shorters here until I see their evidence ... sending that letter could get he/them in quite a bit of trouble if it is inaccurate. All I know is that there was chatter that their SAIC filings did not match, which in and of itself is sufficient cause to get short, since this has been a flawless predictor of accounting irregularities ever since John Bird exposed the CSKI shenanigans.

If you buy SVM here, your odds are about as good as if you bought CCME, RINO, SinoForest, or other mismatching SAIC Chinese filers.

**********************************************************

 So let's get this straight.GMX red thumbs SVM on CAPS August 31. 

Silvercorp announces the anonymous letter on September 2 early morning. The company says shorts have dramatically increased over the past two months. Silvercorp says they received the letter on August 29, curiously just two days before GMX redthumbs SVM, which is just two days before the information becomes public.

GMX says he has "been short for a while," but his redthumb is only a couple days old. It's also funny that he is always around to bash companies and write lengthy posts when blogs are hot with certain PM companies, but is inexplicably absent suddenly now that his credibility is on the line. GMX, let's have some answers...

 

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#7) On September 07, 2011 at 6:48 PM, Option1307 (29.95) wrote:

I'm sure this thread doesn't care but for what it's worth I actually appreciate reading both sides of the story from Sinchy and GMX and I'm sure there are many others here on the Fool that feel the same way.

While I certainly agree GMX can have opinions that can be over the top and frankly incorrect, it's nice to hear his take on things bc he has been proved correct in the majority of Chinesse garbage stocks etc. I'm not saying SVM is a scam just pointing out his track record has been streaky, but overall pretty good. In the end, his opinions are valuable and good to listen too, just read through the hysteria. I'm not condoning slander if indeed it did happen but for the most part he states opionions, much like we all do. It's up to us indiviually to decide what is right and wrong interms of an investment.

Sinch usually provides a solid case for metals and I really appreciate all the gold/silver blogs which are interesting if nothing else. But it's nice to hear all opinions and then make the decision yourself.

Lastly, Fools need to let it go. If you truly are going to ignore his comments then stop posting directly linking his posts and responding to him indirectly. It's not helping the situation.

I don't mean to offend anyone with this comment but as I said above I know there are other Fools that would be sad to see him go. Quite frankly, this bickering between parties, Pre-SVM, has gotten a tad out of hand, on both sides of the aisle. Let's move on Fools and focus on investing more, ok good talk!

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#8) On September 07, 2011 at 6:58 PM, jesusfreakinco (29.04) wrote:

BillyTG

You're right.  Good memory.  In best Ricky Ricardo voice... GMX... you got some 'splaining to do...

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#9) On September 07, 2011 at 7:02 PM, jesusfreakinco (29.04) wrote:

Option1307

However, in this case, GMX may have broken the law...  The trail is interesting isn't it?  At the very least, it doesn't look good for him.  How can you explain his comment:

"I have been waiting for the fraud allegations to go mainstream. Been short for awhile and waiting for the dirty laundry to go public."

You have to admit it does sound suspicious.  Perhaps he can clarify things for us.  I am sure he is lurking around here somewhere...

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#10) On September 07, 2011 at 7:10 PM, BillyTG (29.65) wrote:

It's not me, I'm just piggybacking on the "GMX is a tool" bandwagon. TMF Sinch has well documented GMX's contradictory, false, and ridiculous record.

GMX has written of his access to hedgfund translators and analysts, he voraciously bashes particular PM stocks in sudden, passionate accusations not grounded in fact, then suddenly disappears. He very curiously shorts SVM just a couple days before Silvercorp goes public with the false, but crushing letter.  Then he comes on here and bashes it realtime, trying to make the letter seem credible. Then, true to his Modus Operandi, disappears again.  I mean he is a true pump and dumper, or basher and dasher (just made that up, hopefully I'm the first!).  There are others on this board, like EV98, or whatever his name is, that pumped compton petroleum.

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#11) On September 07, 2011 at 7:40 PM, jesusfreakinco (29.04) wrote:

Didn't see all the comments on the public link.  Here it is:

http://www.fool.com/investing/general/2011/09/07/setting-the-record-straight-on-silvercorp-metals.aspx

GXM smackdown... WWF style!

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#12) On September 07, 2011 at 7:47 PM, Option1307 (29.95) wrote:

 jesusfreakinco

Maybe you are right, time will tell.

How can you explain his comment:

"I have been waiting for the fraud allegations to go mainstream. Been short for awhile and waiting for the dirty laundry to go public."

I've done zero reseach into SVM, simply bc it is related to China I crossed it off my list long ago, but from the very article Billy linked above I see this:

Silvercorp had expected allegations of wrongdoing after the company was contacted by a shareholder, Feng said. Ralph P. Aldis, a San Antonio-based money manager at U.S. Global Investors Inc., called the company Aug. 16 to say that a U.S. stock brokerage was spreading information that short seller Carson Block’s Muddy Waters LLC was preparing to publish a report on Silvercorp, Feng said..

I have no idea what GMX was refering to with his above statement, nor do I really care. But the quote I pulled from the Bloomberg article seems to imply that others, even SVM itself, were well aware that there were rumors flaoting around about its credibility. This, Aug 16th, is well before GMX started writting about SVM here. I'm not here to judge one way or the other, but I just don't see this as the slam dunk case you do.

Anyways, good luck investing to all!

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#13) On September 07, 2011 at 9:58 PM, jesusfreakinco (29.04) wrote:

Option1307

I am all for investigative reporting and valid shorting of stocks, but firms and people that manipulate the truth or spread lies have no place in a 'free market.'  It is long overdue that the SEC and AG's enforce the laws.  That is all I hope for.  GMX clearly knew some information would be leaked that would allege wrongdoing - whether true or not.  This is the same as trading on inside information as far as I am concerned.  That in and of itself should have him investigated.  If he was a part of the lie, then that is allegation number 2.

We need to restore integrity in this country and, unfortunately, Wall St is among the worst of the dishonest among us.  We'll see where this goes... I am just hoping for justice to be done and the truth to be revealed.

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#14) On September 13, 2011 at 11:54 AM, XMFSinchiruna (27.60) wrote:

http://business.financialpost.com/2011/09/13/second-short-seller-makes-allegations-against-silvercorp/

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#15) On September 13, 2011 at 12:04 PM, XMFSinchiruna (27.60) wrote:

http://labemp.files.wordpress.com/2011/09/silvercorp-metals-final-report.pdf

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