Why is this ASX lithium explorer being targeted by activist investors?

The Vulcan Energy share price is paused today. Here’s why.

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A woman stands among activists in the street with her fist in the air.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price is halted this morning after the lithium explorer’s stock is featured in a scathing report by activist investors.

J Capital Research is an activist market research organisation. It notes it’s “usually on the short side”. J Capital’s website also reads: “We do our best to find and present facts, based on extensive primary research, but we will profit if these stocks decline.”

Overnight, it launched a damning report on Vulcan, claiming the company is misleading the market on the viability of its Zero Carbon Lithium business.

At the time of writing, the Vulcan share price is on pause at $14.99.

Let’s take a closer look at today’s claims.

Scrutiny facing ASX lithium explorer

ASX lithium explorer Vulcan Energy has requested to halt its share price amid claims its cornerstone project’s pre-feasibility study was based on misleading information.

Vulcan responded to the report, saying its claims are inaccurate. The ASX lithium explorer also stated:

It is clear the report is merely an attempt to profit from “shorting” Vulcan.

J Capital Research alleges that Vulcan’s Zero Carbon Lithium project’s assumed flow and recovery rates are “unrealistically high”.

The project’s pre-feasibility study assumes it will see a flow rate of between 100 litres and 120 litres per second. However, J Capital says other projects in the area have flow rates of 8 litres to 80 litres per second.

Additionally, Vulcan believes the project will have a recovery rate of 90%.

J Capital thinks the project’s flow rate will likely be around 70 litres per second with a 70% recovery rate.

The publication believes that would see the amount of lithium expected to be extracted from the project nearly halved.

It also claims the independent consultants who provided the pre-feasibility study data were either owned by Vulcan’s senior management or were acquired soon after the study.

Finally, the publication alleges the company has downplayed community opposition to the Zero Carbon Lithium project. It states the community’s disapproval is a large and unaddressed risk facing the project.

J Capital has also published reports on Nearmap Ltd (ASX: NEA) and WiseTech Global Ltd (ASX: WTC) in the past.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Nearmap Ltd. and WiseTech Global. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. and WiseTech Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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