A strange case which has become even stranger… « Mining Blog

A strange case which has become even stranger…

2. August 2012,

On 17 July I posted details of the “strange case” that developed when a hedge fund, called Anthion, was sued for damages by Canadian mining company, Silvercorp, for “shorting” the company’s stock value.

To many observers it must have seemed like one suspected fraudster pitting itself against another of the same ilk: “dog fighting dog”, one might say.

Although Anthion lost its counter-claim against Silvercorp last month in New York, the affair is far from over.

According to Canada’s Street Wire (1 August 2012) late last month, Silvercorp filed a petition in the Supreme Court of British Columbia, seeking an interview with Vancouver geologist John-Mark Staude.

The company claims Staude wrote a geological report that “may” be connected to the alleged “short-and-distort conspiracy” of which Anthionn and others have been accused.

Silvercorp says that the identities of “some of those behind the conspiracy remain unknown and Mr. Staude, as the report’s author, may be able to ‘shed light on this issue’ “.

The B.C. petition is part of the defamation case that Silvercorp is still pursuing in the Supreme Court of the State of New York, relating to the 14-page letter to the B.C. Securities Commission which stated that there was an accounting fraud at Silvercorp, and which Anthion appears to have endorsed.

Although Silvercorp isn’t claiming that Mr. Staude had any direct role in the letter, it says he may have “relevant knowledge”.

Just what that knowledge may be, and how relevant, is open to speculation.

Silvercorp identifies Mr. Staude as “a geologist working for Riverside Resources Inc. (a TSX Venture Exchange listing for which he serves as president)”, saying he was “commissioned to prepare a geological report on Silvercorp for Gerson Lehrman Group, a New York research group that works for hedge funds”.

According to Market Wire: “Silvercorp does not state exactly how the short-sellers may have used Mr. Staude’s report, but claims his ‘work product [sic] appears to be referred to in the anonymous publications’.”

The mining company now wants to examine Staude, to obtain evidence “pertaining to the commissioning and dissemination of the report” by Anthion and other defendants in the New York case.

In addition to Staude himself, the respondents named in the petition include Riverside Resources – and yet another private company “associated with Mr. Staude”, called Arriva Management Inc.

As we pointed out in our blog comment last month, although this little drama may seem a petty one, it had the potential to reveal much more about Silvercorp’s activities than we currently know – specifically in China.

Just how has the company managed to become not only the largest primary silver producer in the Peoples’ Republic – but also the cheapest among its peers?

Just what – if anything – Mr Staude’s geological report revealed that called into question Silvercorp’s assertions about the value and viability of its huge mineral deposits – or any problems in accessing them – we don’t know.

Indeed, we may never know. And the more’s the pity if that’s the case.


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