Lithium

Short seller J Cap rips into lithium darling Lake Resources

Tue 12 Jul 22, 11:21am (AEST)
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Key Points

  • J Capital released a scathing short report after market close on Monday
  • The report takes a stab at everything from lithium extraction technologies to paid research reports
  • Lake Resources shares are halted until Thursday, where management will likely respond to the short report allegations

Notorious short seller J Capital is ripping into lithium hopeful Lake Resources (ASX: LKE), taking jabs at its direct lithium extraction (DLE) technology, insider selling and paying options for favourable research reports. 

To save face (and the risk of a massive dip at open), Lake Resources shares will be halted until Thursday, 14 July as management prepares for a rebuttal and possibly legal action.

Why J Capital is shorting Lake Resources

A questionable technology partner

The short report claims that "investors still have no evidence that the Lilac DLE technology works at scale and if so, at what cost."

J Capital reviewed the 9 companies that have disclosed a partnership with Lilac's DLE technology - only two are 'clearly' continuing to work with Lilac.

Pilot plant behind schedule

The report views a working pilot plant as a critical piece of infrastructure to progress the project and a pre-requisite for a Definitive Feasibility Study.

J Capital claims that the pilot plant was first promised to be delivered to the Kachi site in Argentina in the first-half of 2019. The pilot plant has yet to arrive and yet to demonstrate that it works on-site.

Cost and ESG problems

The short report estimates costs to be upwards of US$30,000 to US$100,000 per ton of lithium carbonate, which is not economic to produce.

Engineers familiar with DLE processes told J Capital that there is "still a lot of toxic waste and high water usage".

Lake has not provided any details regarding costs, waste or water usage in feasibility studies to date.

Non-binding

J Capital believes Lake announcements are full of fluff, with non-binding offtake agreements with Ford and Hanwa, an 'expression of interest' from UK Export Finance and a 'letter of interest' from Export Development Canada.

Paying for coverage

J Capital identified four financial service companies that provided positive research reports for Lake Resources, in exchange for shares and options.

Favourable research by parties that held an interest in Lake followed by insiders who sold stock
Source: J Capital

What happens next?

Management is likely busy preparing a rebuttal to all the points mentioned above.

It might be a good time to revisit how Vulcan Energy (ASX: VUL) responded to J Capital's short report last October.

Though, that debacle ended up with an apology and settlement from J Capital.

Lake Resources N.L. (ASX LKE) Share Price
Lake Resources price chart

 

Written By

Kerry Sun

Finance Writer & Social Media

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.

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