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.
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.
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.
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.
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