The Australian Securities Exchange (ASX) announced Tuesday it has halted Lake Resources’ share trading following the company’s request. Activity is set to resume on 14 June or when an announcement is released to the market, Kallanish reports.

The halt comes after a 6.3% drop in share prices on Monday on the back of allegations by short seller J Capital Research that the company was relying on “unproven” direct lithium extraction (DLE) technology from Lilac Solutions.

Lake’s flagship project, Kachi, is planned to produce 50,000 tonnes/year of lithium carbonate from Argentine brines. To date, the company has signed two non-binding MOUs with proposed offtake deals with Hanwa and Ford; has received expression of interest from UK and Canadian export credit agencies; and recently commissioned Citi and JP Morgan to coordinate the $1 billion project’s debt financing.

The US company said in a 17-page report that Lake’s proposal to produce cleaner lithium in Argentina is flawed as Lilac’s technology “still uses large amounts of water and produce toxic waste,” and it’s too costly to run.

It claims the ceramic beads that Lilac uses in its technology has a “problematically short” life of up to 150 cycles, or about 1 week of use. It estimates these beads would cost between $30,000-100,000 per tonne of lithium carbonate, which “is not economic to produce.” J Capital notes, however, that it doesn’t know if this is the case for Lake as they haven’t released information on their achieved medium cycles.

The miner expects production in 2024, but J Capital contests that timeframe, saying it would take at least three years for Kachi to be up and running. Lake has failed to get an operational pilot plant on site three years after promising it would, the short sellers notes.

“Investors had been expecting the delivery of the pilot plant to site and a definitive feasibility study (DFS) by the end of June. Instead, they got the resignation of the ceo and managing director Steven Promnitz without a replacement,” the report says.

Lake said on 23 June, the board received Promnitz’s resignation on Friday, considered it over the weekend and informed the market on Monday. No reason was provided and a search for a replacement has started, with focus on US know-how as the company wants to establish a North American presence. The company has also said the modular demonstration plant will be assembled and tested in Argentina during July.

Other alleged issues highlighted by the report include insider trading: “Lake insiders have successfully sold $8.1 million in stock in the last year. Lake granted 41.5m options to financial institutions that published favourable research on the company. Insider share sales have followed a pattern of Lake announcement, followed by favourable research, stock price rise, and then insider sales.”

The company is yet to respond to these allegations.