Posted by mamaduck on 13th of Sep 2011 at 12:32 pm
We now have a name for another short seller accusing SVM of
fraud. And here is
their report. this was the cause for the
dramatic drop in SVM price today.
so is this real info or just made up stuff to further their
short position? Can you really trust them?
so they counted trucks, really?
Was fortunate enough to know their former president fairly well
several years ago. She may have had her differences with Rui, but
she never once impugned his integrity or made any negative
statements about his business ethics.
Of course things could have changed but why would they? All the
insiders made multiple millions years ago with their .10-.40/sh
options.
I think these shorts are going to be found to be lying. Guess we
will wait and see.
Posted by mamaduck on 13th of Sep 2011 at 01:29 pm
Perthx, I am counting on that too. They sent a couple of rocks
that fell off the truck to be tested and they found 30 gm of AG/
ton instead of the 400+
To me, the fact that there was any silver in the couple of rocks
is significant, since these could have been from any part of the
mine.
But then again, the skeptic in me remembers the Bre-X scandal,
where even Brian Mulroney (the former Canadian Prime Minister) was
on the Board of Directors.
There is a H&S pattern in the charts that takes SVM down to
zero. And there is a wedge that take it to $16. I guess it is
double or nothing from here.
As you said, we have to wait and see how this plays out.
Comments: Silvercorp was hit by another
accusation of wrongdoing today (which you can view in the link
above), and the stock plummeted 19.6%. Our first impression of this
report is much the same as the other one – biased, long on
innuendo, short on proof, and in some cases, flat out wrong. Let’s
go through the accusations one-by-one so you can see why we are not
panicking about our position…
The report states that their “investigator” picked up a couple
rocks that fell off an ore truck and the assays showed much lower
grade material than SVM reports. The report notes this sample is
not scientific, and promises better data in the future, but that
doesn’t stop them from publishing nonsense numbers now. They also
counted the trucks entering the mill and say there are not enough
to add up to the tonnage of ore SVM says it’s processing – but how
many days did they count? How many days did they count when there
was a power issue at the mine, or one of the mill circuits was down
for maintenance? What does it really prove to have a guy skulking
about the bushes taking pictures and picking up rocks?
One very important fact that seems to have escaped the authors
of the report is that SVM direct-ships high-grade ore to a smelter.
This is a very significant part of production that does not go to
the mill, and that would affect the number of trucks entering the
mill, as well as the grade of the ore going to the mill (or falling
off a truck along the way).
The report also falsely claims that Silvercorp’s narrow veins
cannot be mined without dilution, reducing the average grade. This
is simply not true. There’s a technique called “resuing” by which
you tunnel next to the ore, and then take only the ore to the mill.
The ore needs to be just right, but SVM’s massive sulfide veins are
just right for this. Plus, there are areas where the veins are
meters wide, and still grading kilos per tonne, so they can be
mined directly. Louis James has been there and seen this, and saw
it in multiple places in multiple levels of the mine.
The report also makes a big fuss about how large SVM’s MCap is
compared to its resources and reserves. They say SVM “should” have
more resources. This is more nonsense. It’s very common for vein
deposits to have only a year or two in reserves drilled off in
advance. Yes, that’s a risk factor, but its normal – drilling off
the whole deposit in advance is just too expensive. Nobody does it.
Furthermore, SVM trades at lower multiples and metrics than many
other silver producers, probably because of the “China discount.”
It is simply not overvalued, compared to its peers. This accusation
smacks of dishonesty.
Another fuss relates to SVM buying a project from a relative of
Rui Feng’s – but that, too, was disclosed at the time. Whether or
not the relative made a profit is not relevant; what matters is how
much the property is worth to SVM. The report states, “SVM’s
independent directors need to explain how this could possibly be a
fair price.” But the appropriate place for such a challenge is
directly to management, or at a shareholder’s meeting. Since these
avenues were apparently not tried, one must question the motives of
the company’s attackers.
The report makes another big fuss about SVM selling concentrate
to a smelter in which it owns at 15% stake. This ignores the fact
that this was fully disclosed when SVM made the investment, and
that SVM made the investment to ensure better terms for its sales
and security for its contracts. This is not a bad thing, but a very
good thing. The authors say they were “shocked” to see this well
known and fully disclosed fact, but that's a crock.
More apparently damning are statistics quoted from Chinese
authorities that appear to show much lower production rates and
average grades than SVM is reporting. There’s a link in the report
to a Chinese document and an English translation referring to the
“yuelianggou” mine showing these much lower production numbers
(there’s no link to the source for the lower grades). The Chinese
report may even be real and the translation correct – but that
doesn’t necessarily mean what the authors of the report are
suggesting it does. The Ying Mine is not one hole in the ground,
but a mine complex made of many physical components, and legal ones
too. Yuelianggou may be one of these components, and not the whole
thing.
Keep in mind what these accusations are: an anonymous report
from a group who is short the stock. We do not place much credence
in parties who have an open interest in seeing the share price fall
and hide behind trees to take pictures instead of confronting
management directly. Again, Louis James has been to the company’s
mines twice and refutes these claims, and Jeff Clark has opted to
attend the company’s mine tour in two weeks in lieu of our own
Summit.
Could we be wrong? Well, it’s possible. But think about what
that would mean. It would imply CEO Rui Feng doesn’t care about all
the billions of dollars he could make going forward and has sold
his soul for a few hundred million now. We doubt that. It would
also have to mean the 43-101 Qualifying Persons who sign off on
SVM’s reports are incompetent. Further, the auditors would all have
to be crooked. Quite frankly, this would have to be Bre-X and Enron
all rolled into one for the accusations to be true. This seems so
improbable that we’re willing to bet on it being false.
What if we are wrong? If we are, our shares could go to zero.
The company would be toast, and so would our money. We can’t tell
you this isn’t possible, but we see the odds of this being
extremely low.
Management told us the report is “baseless.” They’re working to
refute it and will issue a press release “very soon.” The British
Columbia Securities Commission is now involved and is asking the
parties to come forward, a departure from their usual policy of
keeping investigations confidential. The company also has a task
force devoted to the issue, and has sought the assistance of
various regulatory and law enforcement authorities in both Canada
and the US, and are carrying out their own investigation.
What to do? We still view this as an opportunity, with the
caveat that the onslaught of short selling may not be over. And if
a third report came out, it would hit the stock even harder. Or,
the accusers could be caught or proven wrong and the stock could
soar. Either way, panicking is not the right course. We're not
changing our recommendation. If you have your full allotment of the
stock, hold. If you have room to add shares to your portfolio, we’d
still view this as an opportunity. In the interests of full
disclosure, some members of Casey Research were filled on bids
today.
possibly, there is a hammer forming on the daily, but it's
early, and some positive divergence on the 15 min. Otherwise
I'm happy I never bought that one, though if I had I would have
been stopped out long again anyway
Posted by frtaylor on 14th of Sep 2011 at 10:54 am
volume yesterday was 35K, whereas the average is around maybe
3k. So, perhaps exhaustion selloff? Currently in the
6.40's. The other reason I bought was there was long term
support around 5.85 - 5.90. Well, we'll see!
they hit several important points refuting the short sellers
spurious and unverified claims and accusations.
Certainly not a gamble everyone should take but having been in
and out of SVM for years, this is still a great company in my
mind...and don't forget SVM owns like 20% of sister company New
Pacific which has an excellent Canadian property under development
and exploration.
Posted by paige386 on 13th of Sep 2011 at 11:03 pm
you have to love the part where the writer says we had a guy
pickup up rocks that fell off of a dump truck and tested it, I know
this isn't scientific but trust me we'll have more coming.
I remember when I was in College at the University of Illinois
in the early to mid 90's and I saw Bre-X, I was just amazed at how
it went from less then a buck to $250, but then of course we all
know what happened. Anyway Bre-X brings back
some nostalgia.
Of course I never owned Bre-X, I did play around with a few of
the Canadian Juniors, one went from 0.50 cents to $5 in a week,
Fairmile Res I think? unfortunately I was pretty green
and rode it all the way back down too. Just like a lot of
those Canadian Vanc, it was pump and dump by a big promoter
and was total pump and dump.
Alas It would have been much better for me to buy some CSCO or
YHOO or AOL or JDSU and held till 1999 rather then playing with
that crap.
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SVM - The plot thickens
Posted by mamaduck on 13th of Sep 2011 at 12:32 pm
We now have a name for another short seller accusing SVM of fraud. And here is their report. this was the cause for the dramatic drop in SVM price today.
big problem is these guys are the shorts
Posted by perthx on 13th of Sep 2011 at 01:05 pm
so is this real info or just made up stuff to further their short position? Can you really trust them?
so they counted trucks, really?
Was fortunate enough to know their former president fairly well several years ago. She may have had her differences with Rui, but she never once impugned his integrity or made any negative statements about his business ethics.
Of course things could have changed but why would they? All the insiders made multiple millions years ago with their .10-.40/sh options.
I think these shorts are going to be found to be lying. Guess we will wait and see.
SVM
Posted by mamaduck on 13th of Sep 2011 at 01:29 pm
Perthx, I am counting on that too. They sent a couple of rocks that fell off the truck to be tested and they found 30 gm of AG/ ton instead of the 400+
To me, the fact that there was any silver in the couple of rocks is significant, since these could have been from any part of the mine.
But then again, the skeptic in me remembers the Bre-X scandal, where even Brian Mulroney (the former Canadian Prime Minister) was on the Board of Directors.
There is a H&S pattern in the charts that takes SVM down to zero. And there is a wedge that take it to $16. I guess it is double or nothing from here.
As you said, we have to wait and see how this plays out.
More SVM
Posted by mamaduck on 13th of Sep 2011 at 05:37 pm
9-13-2011
Silvercorp
(US$6.30, 175.06M SO, $1.10B MCap, www.silvercorp.ca)
Re: http://alfredlittle.com/2011/09/13/silvercorp-metals-questionable-customers-geologists-production-quality-and-serious-related-party-failures/
Comments: Silvercorp was hit by another accusation of wrongdoing today (which you can view in the link above), and the stock plummeted 19.6%. Our first impression of this report is much the same as the other one – biased, long on innuendo, short on proof, and in some cases, flat out wrong. Let’s go through the accusations one-by-one so you can see why we are not panicking about our position…
The report states that their “investigator” picked up a couple rocks that fell off an ore truck and the assays showed much lower grade material than SVM reports. The report notes this sample is not scientific, and promises better data in the future, but that doesn’t stop them from publishing nonsense numbers now. They also counted the trucks entering the mill and say there are not enough to add up to the tonnage of ore SVM says it’s processing – but how many days did they count? How many days did they count when there was a power issue at the mine, or one of the mill circuits was down for maintenance? What does it really prove to have a guy skulking about the bushes taking pictures and picking up rocks?
One very important fact that seems to have escaped the authors of the report is that SVM direct-ships high-grade ore to a smelter. This is a very significant part of production that does not go to the mill, and that would affect the number of trucks entering the mill, as well as the grade of the ore going to the mill (or falling off a truck along the way).
The report also falsely claims that Silvercorp’s narrow veins cannot be mined without dilution, reducing the average grade. This is simply not true. There’s a technique called “resuing” by which you tunnel next to the ore, and then take only the ore to the mill. The ore needs to be just right, but SVM’s massive sulfide veins are just right for this. Plus, there are areas where the veins are meters wide, and still grading kilos per tonne, so they can be mined directly. Louis James has been there and seen this, and saw it in multiple places in multiple levels of the mine.
The report also makes a big fuss about how large SVM’s MCap is compared to its resources and reserves. They say SVM “should” have more resources. This is more nonsense. It’s very common for vein deposits to have only a year or two in reserves drilled off in advance. Yes, that’s a risk factor, but its normal – drilling off the whole deposit in advance is just too expensive. Nobody does it. Furthermore, SVM trades at lower multiples and metrics than many other silver producers, probably because of the “China discount.” It is simply not overvalued, compared to its peers. This accusation smacks of dishonesty.
Another fuss relates to SVM buying a project from a relative of Rui Feng’s – but that, too, was disclosed at the time. Whether or not the relative made a profit is not relevant; what matters is how much the property is worth to SVM. The report states, “SVM’s independent directors need to explain how this could possibly be a fair price.” But the appropriate place for such a challenge is directly to management, or at a shareholder’s meeting. Since these avenues were apparently not tried, one must question the motives of the company’s attackers.
The report makes another big fuss about SVM selling concentrate to a smelter in which it owns at 15% stake. This ignores the fact that this was fully disclosed when SVM made the investment, and that SVM made the investment to ensure better terms for its sales and security for its contracts. This is not a bad thing, but a very good thing. The authors say they were “shocked” to see this well known and fully disclosed fact, but that's a crock.
More apparently damning are statistics quoted from Chinese authorities that appear to show much lower production rates and average grades than SVM is reporting. There’s a link in the report to a Chinese document and an English translation referring to the “yuelianggou” mine showing these much lower production numbers (there’s no link to the source for the lower grades). The Chinese report may even be real and the translation correct – but that doesn’t necessarily mean what the authors of the report are suggesting it does. The Ying Mine is not one hole in the ground, but a mine complex made of many physical components, and legal ones too. Yuelianggou may be one of these components, and not the whole thing.
Keep in mind what these accusations are: an anonymous report from a group who is short the stock. We do not place much credence in parties who have an open interest in seeing the share price fall and hide behind trees to take pictures instead of confronting management directly. Again, Louis James has been to the company’s mines twice and refutes these claims, and Jeff Clark has opted to attend the company’s mine tour in two weeks in lieu of our own Summit.
Could we be wrong? Well, it’s possible. But think about what that would mean. It would imply CEO Rui Feng doesn’t care about all the billions of dollars he could make going forward and has sold his soul for a few hundred million now. We doubt that. It would also have to mean the 43-101 Qualifying Persons who sign off on SVM’s reports are incompetent. Further, the auditors would all have to be crooked. Quite frankly, this would have to be Bre-X and Enron all rolled into one for the accusations to be true. This seems so improbable that we’re willing to bet on it being false.
What if we are wrong? If we are, our shares could go to zero. The company would be toast, and so would our money. We can’t tell you this isn’t possible, but we see the odds of this being extremely low.
Management told us the report is “baseless.” They’re working to refute it and will issue a press release “very soon.” The British Columbia Securities Commission is now involved and is asking the parties to come forward, a departure from their usual policy of keeping investigations confidential. The company also has a task force devoted to the issue, and has sought the assistance of various regulatory and law enforcement authorities in both Canada and the US, and are carrying out their own investigation.
What to do? We still view this as an opportunity, with the caveat that the onslaught of short selling may not be over. And if a third report came out, it would hit the stock even harder. Or, the accusers could be caught or proven wrong and the stock could soar. Either way, panicking is not the right course. We're not changing our recommendation. If you have your full allotment of the stock, hold. If you have room to add shares to your portfolio, we’d still view this as an opportunity. In the interests of full disclosure, some members of Casey Research were filled on bids today.
SVM may have put in
Posted by frtaylor on 14th of Sep 2011 at 10:44 am
SVM may have put in at least a short term bottom this morning. I bought a little at 6.00, stop below today's lows.
possibly, there is a hammer
Posted by matt on 14th of Sep 2011 at 10:50 am
possibly, there is a hammer forming on the daily, but it's early, and some positive divergence on the 15 min. Otherwise I'm happy I never bought that one, though if I had I would have been stopped out long again anyway
volume yesterday was 35K, whereas
Posted by frtaylor on 14th of Sep 2011 at 10:54 am
volume yesterday was 35K, whereas the average is around maybe 3k. So, perhaps exhaustion selloff? Currently in the 6.40's. The other reason I bought was there was long term support around 5.85 - 5.90. Well, we'll see!
casey research nails it
Posted by perthx on 14th of Sep 2011 at 08:19 am
they hit several important points refuting the short sellers spurious and unverified claims and accusations.
Certainly not a gamble everyone should take but having been in and out of SVM for years, this is still a great company in my mind...and don't forget SVM owns like 20% of sister company New Pacific which has an excellent Canadian property under development and exploration.
SVM
Posted by paige386 on 13th of Sep 2011 at 11:03 pm
you have to love the part where the writer says we had a guy pickup up rocks that fell off of a dump truck and tested it, I know this isn't scientific but trust me we'll have more coming.
How do these people get away with this stuff???
Brian Mulroney was (and still
Posted by yojimbo on 13th of Sep 2011 at 01:45 pm
Brian Mulroney was (and still is) on the Board of Directors for Barrick, which was one of the suitors for Bre-X.
I remember when I was
Posted by matt on 13th of Sep 2011 at 02:03 pm
I remember when I was in College at the University of Illinois in the early to mid 90's and I saw Bre-X, I was just amazed at how it went from less then a buck to $250, but then of course we all know what happened. Anyway Bre-X brings back some nostalgia.
Of course I never owned Bre-X, I did play around with a few of the Canadian Juniors, one went from 0.50 cents to $5 in a week, Fairmile Res I think? unfortunately I was pretty green and rode it all the way back down too. Just like a lot of those Canadian Vanc, it was pump and dump by a big promoter and was total pump and dump.
Alas It would have been much better for me to buy some CSCO or YHOO or AOL or JDSU and held till 1999 rather then playing with that crap.