Silvercorp Metals Inc. is denying allegations itinvolved in a "potential $1.3-billion accounting fraud," responding to an anonymous letter addressed to the Ontario Securities Commission.

The Vancouver-based silver producer, which is active in China, says the allegations centre around what the unidentified author claims are grossly overstated financial results as well as the company's cash position.

Silvercorp says its comments are also in response to a dramatic increase in the short position of its shares in the past two months, roughly 13 per cent, or about 23 million of its total outstanding shares.

The anonymous author said his firm held a short position in Silvercorp shares, and he intended to further spread his concerns via the Internet.  

The company says the letter was also addressed to its auditors and some media outlets, though it couldn't verify whether it was sent to those people.

Silvercorp says it wanted to respond to the most serious allegations, and has posted accounting information on its website that disproves the allegations.

Earlier this year, TSX-listed forestry firm Sino-Forest was accused by short seller Carson Block of overstating revenues and effectively being a massive Ponzi scheme. The company is fighting the allegations, but in the meantime, Sino-Forest shares have ceased trading on the TSX and CEO Allen Chan has resigned.

With files from CBC News