China stainless steel mogul fights to avoid a second collapse
A debt crisis is threatening the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry.
Bloomberg reports Silvercorp Metals was contacted by a Canada police unit called the Integrated Market Enforcement Team on Wednesday offering to help find the person behind an anonymous letter alleging a “potential $1.3 billion accounting fraud” at the company.
Silvercorp Metals was forced on Friday to make public the letter, also sent to the Ontario Securities Commission, presumably from a shorter of the company’s stock as it was also disclosed at the time that someone had built up a short position of some 23 million shares over the preceding two months. The firm with projects in China and Canada plunged 10% after the news broke, but has since regained much of the lost ground.
The Financial Post quotes CEO Rui Feng as saying Silvercorp had expected allegations of wrongdoing after the company was contacted by a shareholder. 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.
MINING.com reported on the big pay day for the shortseller as investors jumped the Silvercorp ship on Friday. The Vancouver company has 175 million shares outstanding and is worth $1.4 billion on the Toronto bourse where it added 3.83% on Wednesday, a generally positive day for the markets. Silvercorp is the latest in a string of Canadian companies with Chinese backing and operations being accused of fraud.
