The Lake Resources N.L. (ASX: LKE) share price is falling on Monday.
In morning trade, the lithium developer's shares are down 1% to $1.02.
Why is the Lake Resources share price under pressure?
Today's decline may have been driven by the release of another short seller report on the company this weekend.
According to a note out of J Capital, its analysts believe that the direct lithium extraction (DLE) technology the company is looking to use could be "dramatically" underperforming expectations.
This technology is the key to making the lithium developer's Kachi project in Argentina a success, so its failure would be a big blow to the company's aspirations.
J Capital alleges that Lake Resources' new CEO, David Dickson, has been contacting other DLE providers due to the underperformance of the current technology, which is being developed by its partner Lilac Solutions.
It commented:
One of the first actions of Lake Resources' (Lake) new CEO, David Dickson, was to contact Chinese-listed Sunresin (3000487 SZSE) to ask if Lake could explore the use of their direct lithium extraction (DLE) technology. We have confirmed this with multiple sources, including Sunresin. If Lake is reaching out to alternative technology suppliers and going back to the drawing board for its technological solution for DLE, then investors deserve to know about it. Lake should advise investors if Kachi brine will be evaluated by alternative DLE technology partners for the extraction of lithium.
What else?
J Capital also highlights that after 600 hours of operation, the DLE technology has produced 80% less lithium carbonate equivalent (LCE) than was expected.
Lake Resources was aiming to produce 2,500kg of LCE after 1,000 hours of operation but only indicated that 303kg LCE was produced after 600 hours in a recent update.
But it gets worse, according to J Capital. The investment firm believes that there could be issues with quality given that no shipments have been announced. It explained:
It appears there may also be a quality problem with the lithium concentrate produced at the pilot plant to date. We estimate the first 2,000 liters of lithium concentrate was produced by the end of October and still has not been shipped 30 days later. Lake has not provided an explanation for this delay.
Lake should be clear with investors about why they have delayed the first shipment of 2,000 liters and why it will take up to three months to process the lithium carbonate from the lithium concentrate that is currently being produced at the site. Is there a quality problem with the lithium concentrate being produced by Lilac that creates difficulty for processing it into lithium carbonate?
These certainly are interesting times for the Lake Resources share price and its shareholders.
