Lake Resources provides rebuttal to 'inaccurate' short seller report

Thu 14 Jul 22, 11:53am (AEST)
tigers fighting attack battle

Key Points

  • Lake Resources shares are bouncing off session lows
  • The rebuttal addressed allegations about Lake's pilot plant, extraction technologies and insider trading
  • Vulcan Energy's post short attack performance might be worth a look

Lake Resources (ASX: LKE) has scraped together a rebuttal for a scathing short attack from J Capital. Though, the response seems to have left more questions than answers, with the company's stock down -12.6% as the market opened.

On Monday, the activist short seller argued that there is still no proof that Lake Resources’ direct lithium extraction (DLE) technology works at scale. The 17-page report left no stone unturned, taking jabs at everything from the lack of cost transparency through to dodgy director transactions. 

Here’s the rundown.

Lake Resources vs. J Capital

Pilot plant behind schedule

J Capital: The pilot plant was first promised to be delivered to the Kachi site in Argentina in the first-half of 2019. It has yet to arrive and function.

Lake Resources: The warehouse for the demonstration plant is currently being built. Lilac’s operating team arrives at the Kachi project site on 14th July, with demo plant modules to be delivered on site by 20th July when commissioning will commence.

Direct lithium extraction

J Capital: No evidence that Lilac DLE works at scale, and if so, at what cost.

Lake Resources: Not all DLE processes are the same, and that’s why the company has taken the time to identify the process that’s most efficient, with the best ESG credentials. The chemical process for Kachi has been set out in the pre-feasibility study in 2020 and pilot module test work has been undertaken by Lilac in California since 2020.

"We have a high degree of confidence that our plant will be successful because we've supported the design with so much test work," CEO Dave Snydacker told Reuters.

Dodgy director trades

J Capital: Insider share sale followed a pattern of announcements, followed by positive paid research, stock price rise and then insider sales.

Lake Resources: On a single occasion there was an inadvertent non-compliance in trades made during a closer period. Former Managing Director Stephen Promnitz failed to notify both the Chairman and Secretary and obtain written clearance for trades made on 20, 21 and 22 April. Lake said it is in the process of updating various agreements, letters and procedures about trading company securities.

Non-binding deals

J Capital: Announcements are full of fluff, including non-binding MoUs with Ford and Hanwa, an ‘expression of interest’ from UK Export Finance and a 'letter of interest' from Export Development Canada.

Lake Resources: They are largely non-binding, but with globally recognised companies for the long-term supply of a material critical to their supply chains. The nature of the MoU and ongoing discussions gives Lake reasonable confidence that the outcomes will assist in the progressing of the Kachi Project.

Allegations aside

What a sharp U-turn for a once promising lithium story.

Allegations aside, the report has generated substantial short interest and negative publicity for the company.

Notwithstanding other factors that might impact Vulcan Energy (ASX: VUL), the stock wasn't quite the same after a similar short attack last October.

Interestingly, other large cap lithium stocks like Pilbara Minerals (ASX: PLS) would mark a fresh all-time high in January 2022 and another brief rally in April, while Vulcan shares continued to trend lower.

2022-07-14 11 20 33-Window
Vulcan Energy price chart

Its also worth noting that Lake Resources was already down -75% from all-time highs before the short report. In retrospect, it's hardly an attack on a stock that's already been driven into the ground.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

Get the latest news and insights direct to your inbox

Subscribe free