03/13/2013 05:37 EDT | Updated 05/13/2013 05:12 EDT

Silvercorp Metals drops defamation lawsuit, withdraws appeal of decision

VANCOUVER - Silvercorp Metals Inc. (TSX:SVM) said Wednesday it was dropping its appeal against the dismissal of a defamation lawsuit that accused the mining company of participating in a short-selling stock manipulation scheme.

The company said although it believes the lawsuit against several companies and individuals should not have been dismissed, it's in its best interest and those of its shareholders, to end the lengthy and expensive litigation and focus its efforts on its operations.

In 2011, an anonymous letter addressed to the Ontario Securities Commission, the company's auditors and various media outlets accused Silvercorp of a $1.3-billion accounting fraud.

Shares in the company dropped by as much as 20 per cent in a day after the anonymous letters and comments were posted on websites alleging Silvercorp had overstated its financial statements and resource deposits.

The company repeatedly denied any wrongdoing and alleged that it was the victim of a smear campaign designed to drive down the value of its shares.

A forensic auditor's report later backed the TSX-traded Chinese miner's financial statements.

Silvercorp has four silver-lead-zinc mines at the Ying mining district in China's Henan province as well as the Silvertip project in northern British Columbia.