Silvercorp (SVM) Audit by KPMG Dispels Several Allegations

Silvercorp Metals Inc. (NYSE: SVM) has received the report of KPMG Forensic Inc., commissioned by its Special Committee to review the allegations issued by two anonymous sources in September respecting the Company's financial position.

Highlights:

As Silvercorp fully anticipated, after an intensive forensic investigative process KPMG has, among other things, reported that:

• its procedures confirmed that the cash and short term investment balances reported by Silvercorp at December 31, 2010 and March 31, 2011, and shown in the financial records at August 31, 2011, were substantially correct;
  
  
• the findings of its procedures do not support the allegation that 2010 "reported revenues of US $153 million are approx. 10x its true revenues of US approx. $15 million (according to SAIC filings)";
  
  
• revenue reported in the financial statements on file at the Chinese State Administration of Industry and Commerce at the time of KPMG's visit to the SAIC offices agrees to the revenue reported in the financial statements provided by local management;
  
  
• SAIC Reported Revenue agrees to revenue reported to local tax authorities in China, which was independently confirmed by KPMG with the tax authorities; and
  
  
• KPMG reconciled the SAIC Reported Revenue to within one thousand dollars of the revenue reported in the financial statements filed with the United States Securities and Exchange Commission.

The Special Committee has advised the board that in its view the findings of the forensic review support the integrity of the Company's accounting system and financial reporting in China and North America. The review was intensive and it is also the view of the Special Committee that the Company's processes were shown to be in accordance with good accounting practices. In light of the findings of the KPMG Report, the Special Committee is considering its review of the remaining allegations.

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