Why are Lake Resources shares among the most shorted on the ASX?


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Lake NL Resources (ASX: LKE) Stocks have been in sensational form over the past two months.

Since that time in July, shares of the lithium developer have soared another 80%.

However, despite this impressive gain, shares of Lake Resources remain one of the best-selling shares in the Australian equity market.

As reported here, earlier this week around 10% of its shares were in the hands of short sellers.

Why are short sellers targeting Lake Resources shares?

Short sellers often keep their thoughts to themselves, which can make it difficult to know exactly why a stock is targeted.

The good news for us is that research firm J Capital has made it very clear why it is targeting Lake Resources, so there is no mystery here.

According to the memo, one of the main reasons J Capital is shorting Lake Resources is its direct lithium mining (DLE) technology. Its analysts believe that this unproven technology will fail to produce lithium in a clean way and will instead produce toxic waste. Which is definitely not something you want to do in today’s ESG-driven environment.

J Capital commented:

Lake claims to produce “cleaner lithium”. However, we believe that DLE will still use large amounts of water and produce toxic waste. Lake failed to set up an operational pilot plant on site three years after promising it would.

Most explorers work with multiple DLE technology vendors to find out which ones may be best for working at scale. Based on our research on cooperation partners, we are skeptical about the functioning of the DLE technology developed by Lilac Solutions “Lilac”. We have discovered that Warren Buffet’s Berkshire Hathaway Energy Renewables (BHE) has “split off” from Lilac.

Investors still have no proof that Lilac DLE technology works at scale and if so at what price. If DLE technology works, the number of “cycles” the extraction medium can be used for will be a key cost factor. If the media can only be used for a few hundred cycles, the costs can be prohibitive.

It should be noted that Lake refuted much of J Capital’s claims. However, until the technology is proven and the company produces lithium as expected, short sellers seem in no rush to close their positions.


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