The Lake Resources N.L. (ASX: LKE) share price has been a poor performer in recent weeks.
This has led to the lithium developer's shares losing over 20% of their value since this time last month.
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Why is the Lake Resources share price under pressure?
There are a couple of reasons for the weakness in the Lake Resources share price this month.
The first is the outlook for lithium prices. There are concerns that prices may have peaked and could be heading materially lower over the next 18 months as supply grows.
For example, Goldman Sachs is predicting the following for lithium carbonate pricing:
- Lithium carbonate
- 2022 US$59,331
- 2023 US$53,300
- 2024 US$11,000
- 2025 US$11,000
If this forecast proves accurate, then prices could have collapsed by the time Lake Resources is producing lithium from its Kachi project in Argentina.
Short seller attack
Also weighing on the Lake Resources share price could be doubts over the direct lithium extraction (DLE) technology that will be key to the Kachi project's success.
The team at J Capital believes that the DLE technology the company is looking to use could be "dramatically" underperforming expectations. It also suspects that there could be issues with quality given that no shipments have been announced.
The investment firm 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.
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.
All in all, given the pricing and production uncertainty, it isn't overly surprising to see the Lake Resources share price struggling right now.
