(Reuters) – Short seller J Capital Research on Monday alleged that Lake Resources NL’s plan to produce lithium in Argentina is based on a process from Lilac Solutions Inc that likely does not work, the latest attack against a wave of new technologies aiming to produce the electric vehicle battery metal.
J Capital Research’s report outlines several alleged missteps by Lake’s management and claims technology developed by Lilac is too costly to run and uses too much freshwater.
Privately-held Lilac is among the most-prominent developers of so-called direct lithium extraction (DLE) technologies aiming to extract the battery metal from brine using a range of equipment, though none have worked at commercial scale.
“Lake has hitched its cart to Lilac’s yet-to-be-proven technology,” J Capital Research said in the 17-page report. “Investors still have no evidence that the Lilac DLE technology works at scale, and if so, at what cost.”
Shares of Lake, which are traded in Australia, fell 6.3% on Monday. Representatives for Lake and Lilac could not immediately be reached for comment. J Capital declined to disclose the size of its short position.
Lilac signed a deal with Lake last September to develop an Argentina lithium project, part of a plan to evolve from a technology company to a lithium producer.
In April, Ford Motor Co signed a preliminary lithium supply deal with Lake.
Lilac’s technology uses ceramic beads to attract lithium in batch cycles, akin to a laundry machine, after which a water-and-acid mixture is used to wash off the metal.
J Capital alleges in the report that the high cost of the beads would make Lake’s project uneconomical and that the process would leave behind “toxic waste.”
The report also alleges that Lake has issued stock options to analysts who published favorable reports.
(Reporting by Ernest Scheyder; Editing by Marguerita Choy)
