Alfred Little Takes Down Silvercorp Again With Full Report Detailing Company's "Substantially Inflated" Earnings

Tyler Durden's picture

Just out from Alfred Little: "SilverCorp Metals (NYSE and TSE: SVM) is a $1.2B market cap silver mining company deriving all its sales and income from mining assets located in China. Following the publication of our initial findings we are today publishing our complete report with substantial new findings..." Judging by the immediate stock price reaction (down 8%), the latest alleged Chinese fraudcap may have just been exposed.

Summary from the report:

  • Audited Financials of SVM’s JV Partner Prove Henan Found’s Net Income is Overstated by 5.2X and thus SVM’s reported Net Income is Overstated by at Least 5X
  • SGX (Ying) Resource Estimates were Wrong from the Start: 2005 Henan Provincial Land & Resource Bureau Detailed Resource Report Directly Contradicts SVM’s Initial 2004 Technical Report
  • 20 Days of Video Surveillance of Trucks Passing Through Henan Found’s Weigh Station Indicate Production is 43% Less than Levels Reported in the Three Months Ending June 30th 2011
  • SVM Failed to Disclose its Largest Customer is a Related Party Under Chinese Accounting Standards applicable to Henan Found.  SVM’s Largest Customer Reported Zero Sales in 2010.  98% of Henan Found’s Sales Growth in 2010 Came from Two Questionable Customers.
  • Henan Provincial Land & Resource Bureau mining reports contradict the production, quality and resource estimates of SVM’s key SGX (Ying) mine as shown in its 40-F and independent NI 43-101 reports that rely heavily upon data provided by management.   No independent geologists have visited SVM’s SGX mine since 2008.
  • Additional Outside Tests of Ore Obtained from the SGX Mine Continue to Reveal Low Silver Content.  Independent Metallurgical Tests of SGX Ore Quality Last Occurred in 2005.
  • Recent Auction Sale of 5% of Henan Found Values it at nearly a 90% Discount to SVM’s Market Value
  • SVM Acquired Yangtze Gold from Chairman Rui Feng’s Relative for $60.27 Million Giving Him a 1500% Gain in Six Months

Full report below: