Good morning and welcome to Calix Limited's first half of financial year 2024 results presentation. From the company today, we have the CEO, Managing Director Phil Hodgson on the left and the company CFO Darren Charles on the right of your screen. Before I hand it over to the guys to go through the presentation released on the ASX this morning, I just remind you that we will take Q&A at the end of the presentation, which can be submitted through the Q&A button at the bottom of your screen. But Phil and Darren, I'll hand it over to you. Thanks very much.
Excellent. Thanks very much Simon. If we could move through to the next slide. Welcome all to Calix's half year results 2024. For those of you who don't know Calix, we were founded in 2005. We've listed on the ASX 2018. We're a technology company. I'll talk about the technology in just a sec. But it's a technology that can really address multiple different industries and help them on their decarbonization journey. And so it's been a fairly rapid growth for the company especially in the last three years in terms of opportunities and the investment we're making in developing those technologies. If we move through to the next slide Simon. What is the core technology? Basically it's a new type of kiln or furnace. It's a new way to heat stuff up.
In a normal kiln or furnace you put what you heat and how you heat in the same vessel. So you put fuel in there and rocks in there and you light a match. It's been done much the same way for sort of 5,000 or more years. What we do is we separate how you heat from what you heat. And we do that with a rather large steel tube. The biggest tubes we've made are over 1.8 meters in diameter and over 30 meters high. And we heat that tube to over 1,000 degrees centigrade. How we heat it? We can heat it with traditional fossil fuels. We can heat it with waste. We can heat it with burning biomass. We can heat it with renewable electrons. So the first advantage of the technology is it's actually energy agnostic.
We can heat this tube with any sort of energy source we like. And what we heat goes down the middle of the tube. It needs to be a fairly small particle size. So imagine dirt or flour. Just very small particle size. And imagine holding a lump and dropping that lump of flour to the floor and watching it just float down. Basically all that's happening inside our tube. We're dropping what we heat down. It's floating down through the tube over 20-30 seconds and the red hot walls of the tube radiate heat into that powder. And that's how we heat stuff up with radiating heat into those small particles. Why do it that way? Well first of all let's have a look at one of the applications of the technology which is in CO2 capture.
What a lot of people don't know is that limestone by weight and here's a lump of limestone. For those who can see it it's a white whitish rock. Half the weight of this rock is CO2 trapped in the rock. When the cement and lime industries heat this up they release that CO2. It goes up into the atmosphere and the cement and lime industries are responsible for about 8% of global CO2 emissions. Over half those emissions are coming from the rock. So in their kilns they're heating up the limestone turning it to lime to make cement and all of that CO2 is just going up into the atmosphere. With our technology though we're heating it inside a tube.
So the small particles of limestone are floating down in the tube and as the CO2 comes out of those particles they're not mixed with any furnace gases. They're contained in the tube and come out the top as a pretty pure stream. And so the first application of the tech that we're looking at here is what we call our Leilac application. Low emissions intensity lime and cement. And so the kilns are a way to directly separate the CO2 that's coming from this. And of course if we're electrically heating the kiln with renewable energy then it's a way to get to zero emissions lime and cement. Another application of the tech and several different applications actually for what we call our sustainable processing business. And this is where electrification and the ability to power a kiln with renewable energy is really critical.
Some of the stuff that we're developing here is quite exciting. Iron and steel. The ability to make zero emissions iron and steel is in this section or I'll cover that off in the half year update a bit further down. Spodumene and its conversion to lithium. The joint venture with Pilbara Minerals that we're developing to build one of these on their mine site to produce the lithium salt is one of the projects we're developing there. The last application of the technology that I'll cover here is what we call our magnesium business. It's the ability to actually take another raw material called Magnesite and make quite highly active material out of that Magnesite. Again we're heating it up inside our tube. So same core technology.
We're creating because there's no flames and hot spots touching the stuff as we heat it up because it's inside this tube we can produce quite highly active materials. And so we've got a business that's actually generating revenue where we're making material to go into water treatment as a replacement for caustic. And also some really interesting applications of more active magnesium in biotech and agricultural applications. And so you can see here I guess multiple different applications for the one core technology. If we move to the next slide Simon we'll talk a little bit about the I guess the key competitive or advantage or the technology motors at work. You would have heard me cover off cement and lime, iron and steel. We're also developing the one core kiln to go into the aluminum industry. So to take aluminum hydrate and turn it into alumina.
We've talked about lithium and lithium salt production. So the one core technology can touch on multiple different industries. We estimate the industries that we can help decarbonize at over 20% of global carbon CO2 emissions. And the ability of the technology to be lowest cost in that is the key advantage. We're not trying to separate carbon at the end of a pipe. It's actually just the kiln itself that's separating the carbon in cement and lime. And when I talk about the spodumene and the iron and steel applications, the ability of the kiln to be just a great kiln let alone the ability to be renewably powered is really what's setting us apart from different technologies. If we move to the next slide, Simon.
So just to give you a bit of a snapshot of the industries that we're looking at and I guess the size of the opportunity and who we're working with. I talked about the CO2 mitigation space. You can see there in the cement and lime space we're working with several different partners in developing that core technology. Heidelberg Materials, Cimpor, Cemex, Tarmac, a CRH company, Engie, an energy company, Lhoist lime company. And that's really focused on the cement and lime opportunity. 1.4 billion tonnes a year of CO2 to mitigate in that industry. And also recently and I'll talk a little bit about this as well the direct air capture opportunity with a company called Heirloom. Bill Gates' backed company targeting a billion tonnes of CO2 capture by direct air capture using our technology in combination with their technology. They want to capture that billion tonnes by 2035.
Pretty ambitious. Those particular businesses are on their way. We've already got licenses in place with Heidelberg Materials and Heirloom. The Heirloom license for example is a minimum of $3 per tonne. When you multiply $3 a tonne by the market size you can see here you start to get a glimpse I guess of the potential of this technology and the total addressable market of this technology and the value. In the sustainable processing space you can see here lithium, alumina and iron and steel. The sizes of those industries lithium about $7 billion at the moment but that's predicted to grow quite a lot. Alumina again you're an order of magnitude up. In iron and steel you're an order of magnitude up again.
Again, we're successful in sustainable processing in putting a similar model in place that we've put in CO2 mitigation. We're looking at licensing and percentage of revenue is the way we're going to be licensing our technology into those sustainable processing industries. Already got a joint venture in place with Pilbara Minerals and I'll talk a bit about that further down. Lastly, the magnesium business. You can see there again some pretty significant markets. The water business we're already in earning some revenues and Darren will cover off how that business is going for us. Nicely growing revenues. Nicely growing gross margins. As I mentioned before, some pretty interesting applications in ag, marine, and bio.
If we keep moving, Simon, one last thing before we move into the financials is a lot of, I guess, questions over the last few months have been around, well, is there still the interest in decarbonization? Is there still the, I guess, the momentum in decarbonization? And is that still a great tailwind for our business? Well, the answer's yes. You can see here a quick snapshot of just recent moves in the policy space across Europe, the U.S., and Asia Pacific. Moves in the Asia Pacific, for example. China extending its carbon pricing and emissions trading policy. Looking to extend it across heavy industries. So it's had it in there for power but it's looking to add cement, steel, alumina, etc. And also I've been asked a little bit about, well, what happens if Donald Trump wins the election in the U.S.?
Well, the 45Q and the Inflation Reduction Act, which is really pumping a lot of interest in CO2 mitigation in the U.S. A lot of the beneficiaries of that are in Republican states and for carbon capture and storage from power facilities and these sorts of things. And so there is big bipartisan support for those aspects of the bill that also benefit technologies such as ours. So we see extremely low risk that there's going to be loss of momentum in decarbonization policies globally from what we've seen. And lastly in the E.U. on the left-hand side you can see there E.U. are introducing a carbon border adjustment tax. A carbon tariff if you like. They're targeting 100% phase out of any free issued permits for CO2 by 2034. And so all of industry will have to pay for their emissions by 2034.
And so when they go on market and pay for those emissions I think last year the CO2 price was about EUR 100 a tonne. It's dropped recently but if you can look forward and see how much they've got to reduce their emissions by 2030 and then ultimately phasing out by 2034 there's going to be a lot of upward pressure on the price of CO2 in the European system as well. So we don't see any change in the tailwinds and the momentum behind decarbonization. I'll cease my sort of introduction bit there and I'll let Darren talk a little bit about the financial results.
Yeah. Thanks. Thanks very much Phil.
From my perspective, key highlights and key messages from the first half is the beginning of being able to demonstrate the value that we're able to create for the company beyond just purely the magnesium or the water business. As Phil outlined above, the technology has application across some very large addressable markets. Across a thematic that will dominate the opportunity for the company over the next five to 10 years which is decarbonization. Decarbonization of iron and steel, lime and cement and other applications. And we've started to see for the first time in this and this half just finished revenues and earnings associated with the application of the technology into those lines of business. So at a top line at a revenue growth obviously we reported $ 16.3 million in revenue for the half which was up 28% on the same period last year.
Just breaking that down a little bit further, revenues are a combination of products and services which was up 41% on the same time last year to $ 12.2 million. Grants and other income which helped support some of the research and development that we're doing. And that was in line with the prior period. Underpinning that is also a strong growth in gross profit associated with gains that we're making in our water business. Phil will talk a little bit more about that. But in terms of specific lines of business just teasing out magnesium or water business we've seen strong growth in revenues in the U.S. and Asia Pacific at much higher margins. That's been something that we've been talking about for the last year or two now. Ensuring that we're generating significant growth in revenues at improved margins.
And in fact as we can see in a couple of pages' time we've invested in new plants in the United States to expand our footprint because we see there's very good prospectivity for growth in both revenues and good margins in that marketplace. So we've made some investments in the first half to increase our footprint in the U.S. And I'll touch more a little bit about that as we go forward. The other element that I'm particularly pleased to see is revenue contribution from other areas of the business. If I look back just four years or so ago the business was purely in terms of the profit and loss and the financials was purely about the water business.
I think in 2019 the revenue from the water business was only a little bit more than the amount of revenue we generated from Leilac in the last six months. So we've seen good contribution from customers paying for products and services in CO2. And again that's only just commencing in terms of the opportunity for that business going forward. A third pillar in terms of positive contribution to the profit and loss was the gain that we were able to record associated with the IP that we're contributing to the PLS JV. And so across all three key main areas of the business we're seeing positive contribution from gains and revenues.
At the same time we're continuing to invest primarily in research and development activities because as Phil said a couple of slides ago the opportunity that the technology has to really pursue significant value creation for our shareholders is immense. And so we continue to invest in research and development primarily around our CO2 capture business and sustainable processing. And we're really pleased to sort of see some of the technological advances that we're making. And Phil will touch on that a little bit more in terms of ZESTY and CO2. But also as I said the platform that's being created for the company. Simon I might just quickly switch to the next slide. So that's the kind of key highlights from the profit and loss. Again repeating some of the comments that I made earlier. Contribution from the water business.
Good revenue growth from Leilac which was up 1,500% on the previous year. Obviously there was a low base. But we've been saying now for a couple of halves that as we grow our cost base in lines of business such as the CO2 one customers are increasingly interested and supporting paying for the work that we're doing for them. And we're starting to see that play out. And as we move forward and again Phil will touch on Heirloom there's significant opportunity for us to continue to earn revenues growing revenues in that line of business. Again I mentioned previously it's great to see the project with Pilbara pass FID in the last half and that project remains on track on budget. Again Phil will talk about that.
In terms of our free carry of the intellectual property that we're contributing, again that's beginning to contribute to the earnings in the P&L. So Simon, just the next slide now and I'll touch on the balance sheet and the balance sheet flexibility. A key message I think from my perspective is over the course of the next two, four, six weeks there's a significant amount of cash that we've got embedded in working capital which will unwind into cash in the bank. We've got a number of grants and rebates that we're due to receive over the course of the next little period of time. And so that will again I guess reinforce from our perspective the flexibility and the strength that we have in the balance sheet to continue to pursue the investments that we're making across what are significant and large addressable markets.
We've retained with zero debt we've retained a lot of flexibility in how we fund the business moving forward. Phil will talk a little bit more about that as well. So, Simon, the final slide for me. As I said, in terms of the operating cash flow in the first half was probably negatively impacted in terms of the timing on some receipts of receivables that we'll receive in the next couple of weeks. And so again it's a reflection of the investment that we're making mistimed with some of the receipts that we're getting associated with that investment. But that'll unwind in the next few weeks and months as I said. We have been investing in long lead procurement items for L2. And again Phil will provide an update. And we have recently updated about progress on L2.
We've added manufacturing capability in the U.S. We have a new plant that's been commissioned in Texas. And again the opportunity in Texas and southeastern United States is significant for the water business. And we've got another plant that's about to come on stream I think in the next week or so in the Midwest as well. And obviously we continue to invest in the JV with Pilbara. So those are some of the key highlights I think. Well capitalized. Strong balance sheet. Significant growing revenues across all three of our core areas of our lines of business. And a very strong result with growing margins in that first half. So Phil I'll hand back to you.
Excellent. Thanks Darren. Move to the next slide Simon. Okay. Just one of the things before I jump into the sort of latest updates around the Leilac business.
Around November, December last year we wanted to have a quick snapshot if you like of where we see value in that Leilac business because one of the things that we did back in 2021 was we had an investment from an impact company called Carbon Direct into the Leilac business. They came in for 7% equity for EUR 15 million. And it was the first I guess proof point of our spin-out model. And the spin-out model if you recall is really about as we get the technology to sort of pretty good value inflection points we look at bringing capital into those subsidiaries and getting the subsidiaries sufficiently resourced to chase after the commercialisation. So 2021 is when that happened with Leilac. Our first tick the box if you like. And that basically valued the Leilac business in 2021 at EUR 300 million or about AUD 500 million.
At that stage we had 34 projects in the pipeline. We had no license agreements in place. Since then we've put two license agreements global perpetual license agreements in place. One with Heidelberg Materials in 2022 and one with Heirloom around direct air capture in 2023. We've built the projects in the pipeline up to 82. So 82 projects in the pipeline as it ends calendar year 2023. And so we've progressed the business and de-risked the business quite considerably since that Carbon Direct investment in 2021. We're trying to just get our heads around value just to help I guess other people get their heads around value. And one of the things that we looked at is say comparable companies like Svante. Svante are developing a CO2 capture end-of-pipe system with what's called MOFs, metal-organic frameworks.
Now Svante, the biggest carbon capture facility that builds on a cement plant, is 400 tons per year capacity. In 2019 we'd already built Leilac-1 25,000 tons a year CO2 separation capacity. So we're already a little bit bigger than Svante. Some of them have built a 10,000 tons per annum capacity facility on a power plant. Not a cement plant though. Now Svante completed a capital raise. One of the other things we've been asked recently is, well, obviously the financial markets in the public market space have been a little bit dampened by interest rates and uncertainty. What's it like in the private market space? I'll talk a bit about this and I'll talk a bit about the iron and steel opportunity as well. We haven't seen really any dampening of enthusiasm in the private market space around investing in decarbonization technologies.
Svante completed a capital raise in December 2022 of $380 million which gave them a post-money value of over $1 billion. Unstated in terms of number of projects in the pipeline. Unstated in terms of any end-user license agreements in place. So that's an interesting sort of benchmark I guess to compare the two technologies that chasing the same prize. Chasing decarbonization of cement and lime industries. But one certainly in the private space. Sorry the Svante piece has certainly taken a couple of capital raises in the private space that have really put an interesting valuation on their company. So we think there's considerable value just in the Leilac part of our business. If we move to the next slide Simon. Where are we with Leilac?
So obviously a little earlier this year there was an announcement by Heidelberg Materials that they were closing the Hanover facility due to some overcapacity they have in Germany. Unfortunately that impacted the project. Heidelberg Materials reiterated recently that they're committed to the Leilac-2 project and that we're looking at alternative sites. That work is underway. And so hopefully we're going to be able to announce something fairly soon on the siting of Leilac-2. Leilac-2's important for the cement and lime cement applications where we use looking at alternative fuels. It's a very European sort of way to make cement is look at alternative fuels. And Leilac-2 was set up to look at that specifically.
One thing we want to emphasize is that the applications in direct air capture and other applications in lime and cement that we're looking at that are fully electric versions of our kiln are unimpacted at all by any delay in Leilac-2. So all of the stuff that we're doing with Heirloom etc. is moving ahead as planned. If we just go to the next slide I'll talk a bit about Heirloom. Obviously Heirloom is a Bill Gates-backed company attempting to capture CO2 from the atmosphere. Our technology's a critical part of the way that whole system is going to come together. Microsoft have put a forward contract in with Heirloom for 315,000 tons of CO2 removal. And we think the estimated value based upon the price per ton is about $200 million for that contract.
So Heirloom are already signing forward contracts in for the system they're looking at. And so again as Darren mentioned we've signed an agreement with Heirloom that our technology will be exclusively used in the Heirloom capture system. We've completed Calcium Looping test work successfully. Quite extensive test work completed there. And paid engineering work has commenced. And so one of the things that obviously licensing is great and getting more of these global licenses in place is going to be important to continue to progress the Leilac opportunities. But getting paid to do work for these projects is also important.
And so in a combination with the rising revenue obviously in the water part of our business and rising gross margins because counterparties are seeing the value in the technology and want to assess it for specific projects, you can start to see the revenue coming in in the engineering part of our business for the Leilac in the Leilac part of the business. And so paid engineering work commenced with Heirloom and numerous others. If we move to the next slide. I mentioned 82 projects in the pipeline previously. So certainly I think there was 76 at August last year. So moved again up to 82 representing over 20 million tons of CO2 abatement projects.
And again just emphasizing on this slide that we're starting to get to reasonable coverage of our engineering costs by charging for all of those companies that want us to have a look at projects in their pipeline. So it's very refreshing and encouraging to see cost recovery coming into that business. And that's as we sort of hinted at before encourages to keep accelerating and investing in getting this technology commercialized as soon as possible. Okay. If we keep moving I'll just a quick slide on the size of the prize if you like. I talked about 1.4 billion tons of CO2 to be mitigated in the cement and lime industry. That is potentially a similarly scale opportunity or even bigger.
And so the size full-scale plants that we've got to put in place just for cement and lime are probably two a week from now to 2050 if we're to address that whole 1.4 billion tonnes. That is a similarly scale opportunity. So massive opportunity for the company. Okay. Let's move through to sustainable processing. So ZESTI, zero-emissions steel technology. Really exciting results coming out of a recent study we completed with the support of ARENA. What is ZESTI? Basically it's using our same core technology. And inside the tube we put hydrogen. And in the top of the tube we put iron ore fines. Typically they're low value or even waste these fines. They're very small particles. As those particles of iron ore drop through the hydrogen we heat the tube externally with renewable energy. And that basically the hydrogen converts the iron ore to iron.
The fact that we can use small particles is a key technical advantage. If we go into the results of the front-end engineering design study, which is the next slide, the key thing I want to point out is no pelletization is required. And what that means is that we avoid the capital and energy penalty associated with getting these fines and putting them into pellets, which is the standard way to then take an iron ore to a direct reduced iron ore. Hot Briquetted Iron. And the results of this study, which we completed in December, we tested had over 90 tests on six Australian ores, iron ores. All once we get above about a wall temperature of 900 degrees centigrade, which you can see in this graph, we're right into the what's called metallization target range.
We've converted the iron ore to iron at a level which is sufficient for direct feed into a blast furnace or basic oxygen furnace. And so we actually have a technology here and sorry. I'll just go back a bit. The fact that we don't have to do pelletization. If you look at the costs that you save there actually the demonstration plant that we're looking at here for ZESTI which is 30,000 tonnes per annum is starting to get close to the cost the current cost of producing hot briquetted iron using the normal route. The normal I guess I want to say normal route. The normal high-carbon route. So this is a pretty profound outcome of this particular study.
Because we can use small particles we're avoiding pelletization and the costs even though we're using renewable energy and hydrogen the costs of producing HBI are down getting down towards a standard high-carbon HBI. So this is as I've said before a profound result. And we want to progress ZESTI as quickly as we can. If we just move. What is ZESTI worth? Very good question. Don't know. What I've looked at here is some companies that have raised capital recently. You remember I talked before about cement and lime and the fact that a company called Svante could raise over $300 million even in the current sort of financial environment. Well here are some recent raises in the iron and steel space. You can see here Electra have done a Series A and a Series B raise. They're up at sort of what's called Technology Readiness Level 3.
They're not out of the lab yet, but they raised about $85 million. On your standard sort of dilution metrics, that may value their company around $250 million. Another company called Boston Metal; they're developing another technology to make zero-emission steel. They did a raise recently, just September 2023, of $250 million. Again, conservatively on those metrics, that sort of values that company at nearly $750 million. They're not out of the lab yet either. Another company called H2 Green Steel just completed the largest raise into a green steel project. $1.5 billion of equity raised. $4 billion of debt. They're building what they're claiming is a zero-emission steel plant in Sweden. But really, it's natural gas driven, and the hydrogen part of that is still quite low TRL.
Maybe six . And so six is like still pilot scale. What have we done? Well, ZESTI we've built at 2,000 tons per annum. 500 tons per annum feed rates is what we got to in the testing that we'd completed with those six different ores. And the tube we built capable up to 2,000 tons per annum. We're definitely out of the lab. And so we're roughly TRL 4+ is where we see the ZESTI technology. One thing I will say about cement and lime and one thing I'll say about iron and steel that there's probably only half a dozen technologies that are ever going to decarbonize those industries. And so why are these companies being valued so highly? It's because there's very few companies playing into a huge market and a huge industrial problem.
With the latest results we've got from the ZESTI feed study and all of that extensive ore testing that we've done at that pilot scale that has really encouraged us to look at how we can accelerate the ZESTI opportunity. So when we talk about the capital, I guess, options available to the company if we look in the private space and see the valuations for these companies and we think about what we did with the Leilac business in terms of getting private capital into a subsidiary, that's absolutely one of the options that could really accelerate ZESTI and quite an exciting option that we're considering. Okay. Just quickly touching on the Pilbara project. The project with Pilbara Minerals. 45% to 55% joint venture. That particular project there, as Darren mentioned, passed final investment decision in, I think it was, August last year.
So just made it into the half. And that project is proceeding well on time, on budget. We've been asked a bit about lithium pricing. Well lithium pricing's obviously dropped quite dramatically over the course of the last 12-18 months. But the other thing that's dropped quite dramatically is spodumene. And so the difference between lithium and spodumene is what you call the chemical margin. The chemical margins have actually improved slightly over the course of the last 12-18 months. So this particular project still remains of interest to both parties and commitment from both parties continues. On time and on budget as I've said before. Targeting completion during probably towards the end of March 2025. Commissioning beginning the next quarter.
And so that one there's still line of sight for probably $40+ million in revenue as the value of lithium in the lithium spodumene itself. So a very interesting project. Very material to us. Still on time and on budget. And moving ahead well. If we move to the next slide. Just on advanced factories. We've completed a program on the advanced factories. The material we made is in a motorcycle. The motorcycle's on its way to Australia now. We're going to be doing lots of testing on it. We've been able to show that that material is as good as commercially available materials in the battery space. But the key thing we've also been able to show is that the carbon intensity and the energy required to produce that material in our technology is lower.
And so what we're going to be pursuing is really cathode production opportunities with our technology. Being a little bit ambivalent about what particular cathode materials we're going to be pursuing there. We've proven it in Lithium Manganese Oxide. We're doing testing in several other materials. But this particular focus will be around electrification, renewable energy power of cathode production. And so this particular line of business, the advanced batteries piece, is going to slot now into sustainable processing as one of the sustainable processing opportunities moving forward. So great progress on the batteries piece. It's going to be part of the focus of sustainable processing to take that to market. If we move to the next slide. Quickly on Magnesia. As Darren mentioned, good growth in our water revenues. Mainly driven from the U.S. Still plenty of upside in the U.S. Plenty of greenfields opportunities there.
Not going head to head against other magnesia competitors. Just simply replacement of caustic is generating all of the growth and all of the gross margin growth. As Darren mentioned, two new hydration plants. One fully commissioned. One undergoing commissioning right now in Wisconsin. And so those particular plants there we're adding 50% to our capacity to produce this material in the U.S. And it's going to be exciting to see that progress from here. Lots of opportunity, lots of advances in the ag/marine. AMR, antimicrobial resistance space. You can see there the steps that are being taken moving forward. Those particular applications, let's call them the bio applications of the magnesia, will take some time. But everything that we're doing there continues to prove the effectiveness, the efficacy if you like, of the materials that we're making with our core technology.
And there will come a time when things like antimicrobial resistance will keep forcing itself on, I guess, humanity to the point where we have to find alternatives to antibacterial treatments that don't engender antimicrobial resistance. And so the opportunities in these markets are huge. And so we're going to continue to progress all of these different applications of the magnesia business. And we still see them as highly prospective. If we move through. In terms of sustainability, we have three different ambitions. We've progressed well against all of those ambitions over the course of the half. Move forward again, Simon. Lastly or second lastly I should say before I sum up. Just in terms of the board, two new directors joining us in January. Dr. Sarah Ryan and Peter Dixon. Huge welcome to those directors. Enormous experience being brought to the board.
So we have a highly experienced board now. Peter Turnbull is looking to retire during this year. And Alison Deans has been nominated as the chair-elect of the company. So the board renewal process is nearly complete. And huge welcome to Dr. Sarah Ryan and to Peter Dixon to the board. And we look forward to working with you. Just in terms of where we're at on a KPI dashboard. There are only watchpoints here. Leilac-2. Obviously we're working hard with Heidelberg to identify the new site. The magnesium metal plant, the basis of design there is being delayed a little bit. But other than that, everything else is on track. Move through to the last slide. Just in terms of a quick summary. Obviously the core technology we continue to be highly excited by. We don't see any change in the macro environment in terms of decarbonization.
We don't see any change in the financial environment in terms of capital available and wanting to be placed to accelerate that decarbonization. So we're continuing our strategy of acceleration. We're investing in the technology and the development of the technology in these businesses as a result. As far as capital is concerned, obviously building head company revenues and gross margins helps us. We're not just a science and R&D company with no revenue. It's great to see the revenue building in the water business. It's great to see the revenue coming in for our engineering services for these new applications which is endorsement in and of itself. As Darren mentioned, we continue to have a strong balance sheet. We have very prudent and focused investment to build technology value. And the P&L impact of the Pilbara project, for example, is just one example.
But obviously as we look back on 2021 when we had Carbon Direct investment into the cement and lime part of the business, there's enormous opportunities to continue to look at other deals in a similar way. And that moves onto the next point nicely because equity farming at this subsidiary level is one of those areas where we see considerably more value than the head company's probably being given being attributed with currently. And so much more efficient for us as we want to accelerate those businesses to look at getting equity in at those subsidiary levels. So Leilac which is de-risked since 2021. ZESTY where we want to get on and build this 3,000 tons granite plant. We see in the market some very interesting benchmark values. And so those options remain extremely interesting to us.
I've probably talked about Leilac, Pilbara, and ZESTI pretty well during the talk. So I might conclude there, Simon, and happy to answer any questions.
Sorry about that. Thanks for that, Phil. Thanks, Darren. First question. It looks like there's meaningful working capital outflow in the first half. Would you expect that to reverse in the second half? And what's the outlook for CapEx in the second half?
Yeah. Hopefully I addressed that to a certain extent. And I'll just reiterate that, Simon. Yes, indeed, a significant reversing of that situation over the next few weeks and month or so. Just a timing issue more than anything. But we continue obviously to invest in the platform that we're building. In terms of CapEx in the second half, yeah, I think as we've mentioned, the two plants in the U.S. are pretty much there.
Other than the Pilbara project that will continue to be built and obviously funded significantly by our partner there as well and the government, that's probably the key CapEx items in the second half in terms of Leilac too. Obviously we're working through a process to finalize the site selection and work on engineering for that once that one site has been completed. So yeah, in terms of CapEx in the second half, it will not be as big as the CapEx outlay in the first half for sure.
Thanks, Darren. Just a following question on Leilac too. Has there been any developments with Heidelberg around allocating an alternative site and a six-month delay to expect a construction or reasonable assumption?
Yeah.
Look, I think what we've been able to say in the public domain is we absolutely are working very hard alongside our Heidelberg on selecting the site to move the Leilac-2 project to. I think a few weeks ago when Heidelberg reiterated their commitment to the project, we talked about the site selection not being weeks but not being a year or more. So it's somewhere in between. We obviously want that to be sooner rather later as to Heidelberg. And so we're working to that timeline. As soon as that site is selected, the six months required to engineer just the integration aspect. The plant itself is designed. It's ready to go. It's the integration with the existing plant that we've conservatively estimated at six months engineering.
Once we know which site, we can probably give a more accurate update on whether that is 6 months or whether it's four or shorter. So watch this space and hopefully we can have some news soon.
Thanks, Phil. Calix capture CO2. What are the CO2 storage considerations for Leilac and other uses? Has there been any thought or development of various storage choices that can be offered as a package or through partners to different clients?
Yeah. So if we have a look at the Leilac-2 project, the Port of Rotterdam is a member of that project. Port of Rotterdam is one of the largest CO2 storage hubs being developed in the world. And so absolutely the consortium that we have there developing Leilac-2 with us includes all of the thinking that needs to happen around CO2 storage and infrastructure.
We're also looking at onshore options as well with the Geological Societies of Belgium and Germany. So absolutely, Leilac being connected through to storage is part of how we think about it. U.S., for example, several projects there being looked at proximate to CO2 pipelines. Leilac does need to be connected to CO2 storage applications. And resolving that is part of what we do. And we're working with our partners and with experts on doing that. One other thing I'll add though is utilization. The project that we're developing in South Australia which is looking at utilization of CO2 from a lime plant for green methanol production is one of those areas that we're also progressing. So Vast, German fuels company and energy company called Mabanaft, in a joint venture, ARENA funded, we're supplying the CO2 to that site. And that will be used to make a green methanol.
Maersk, the second largest shipping company and the largest container shipping company in the world, has committed to green methanol as its shipping fuel of the future. So CO2 utilization options are also being developed with partners, if you like, to Leilac.
Thanks, Phil. Can you please provide your thoughts on whether you see heat batteries such as that proposed by Rondo Energy as an opportunity or a threat to your business? I.e., can this technology be retrofitted to existing kilns to decarbonize? Or is it potentially an opportunity more suited to Calix's kiln?
It's absolutely more an opportunity than a threat. What Rondo's technology and other heat battery-type technologies do is they take electricity when it's really cheap, they convert it to heat and store it as really hot bricks.
As and when electricity or other energy sources become very expensive, they then convert the heat in the bricks back to electricity. And so they'll sit there and be a battery, if you like. That's actually quite complementary to our technology more than anything else. Those batteries, as a heat battery, they can't necessarily decarbonize cement as we say. Half the CO2's coming from this for a start. Heat batteries will do nothing there. But heat batteries will certainly work with our technology well. We may decide, for example, to build double the capacity of our kiln and only suck down energy when it's really cheap and only run the kiln when it's very cheap. And so in combination with heat batteries and energy systems, we may have kilns that are very, very flexible in terms of taking cheap energy.
Even though you spend a bit more on capital, the ability to access cheap energy allows the kiln to be quite economic. So yeah, so heat batteries and the ability to load balance and all those sorts of opportunities are available to our technology. And I see that as complementary. Hence the reason, by the way, companies such as Engie are working with us in the Leilac project. So Engie, obviously one of the largest utilities companies in the world.
Thanks, Phil. Given you're using waste fines from iron ore, do you have a feeling for the value add to iron ore producers? Will it have a material increase on their recoveries?
Short answer is I would think so. Obviously we're in discussion with iron ore producers. They play their cards very close to their chest.
But suffice to say, there've been numerous attempts by the iron ore industry to process fines. So BHP, Rio have all attempted to do it. They've failed technically to be able to do it. And so those particular installations which were, well, well over a decade, perhaps even two decades ago, were there to do just that. Is to take a lower value material like an iron ore fine or ultra fine and produce a hot briquetted iron product. And so absolutely, I think they see value in it. We've processed a hell of a lot of iron ore through our facility in Bacchus Marsh from some of the largest iron ore producers in the world. So that sort of says to me they see value in it.
Right. And can you itemize where cash was spent in the first half?
How does that look over the next six months?
Maybe Darren's got to take that.
Yeah. I think the key area of investment, I think if you look at the P&L, it's R&D which has grown. And the key area where we're accelerating our investment there are in the two areas which represent the most prospective value for the company which is in cement and lime decarbonization and direct air capture. So the CO2 business, we've built a very strong, very capable team to really attack that opportunity. And as Phil said, that's two markets that are worth multi-billion dollar have a total addressable market of multi-billion dollars on an annual basis with our licensing model. So reducing the
Accelerating the technology up the TRL cycle and de-risking the tech as quickly as possible and getting the tech into the marketplace will allow us to tap into this opportunity that we're creating to generate license and royalties associated with that technology. So that's the one key area of increased R&D spend. The other area is in the sustainable processing part of the business which, again, as we've hopefully been able to try and illustrate this morning, very prospective opportunity across obviously the spodumene opportunity with Pilbara which is contributing some gain with our IP being recognized.
But in terms of ZESTI, again, relative to the market opportunity and I think the slide said something like $640 billion total addressable market on an annual basis, spending $2 million- $3 million in additional R&D in the first half which was co-funded by ARENA, I should add, represents a significant smart investment for the company when the results so clearly demonstrate we look like we're onto a really interesting winner in terms of lowest cost of a DRI product. That's particularly interesting and exciting and is something that we feel represents really strong good value for investment. The other area in terms of capital is obviously with the Pilbara JV, with our plants in the U.S. that I've mentioned, and also some long-lead procurement items for Leilac.
Thanks.
What color can you give on the competitive landscape in carbon capture and cement that Heidelberg Materials or others may be looking at?
So competitive landscape in cement. Yeah. So Heidelberg Materials have three, I guess, technologies that they're looking at ultimately to help them decarbonize. The first is what's called amines which is a chemical that sits there at the end of the cement plant, at the end of the pipe. And that chemical absorbs the CO2. And then you've got to take that chemical and boil it up again. And that releases the CO2 as a pure stream. That technology's been around for 60 years in the oil and gas industry, 60-plus years. And it's being applied to cement. Several Heidelberg Materials projects are looking at amines. And the only issue or the problem with amines or the several problems, we think, but it's going to be bloody expensive.
I don't think anyone has walked away from the fact it's going to be expensive. Calix to themselves who are supplying the technology for Heidelberg at what's called their Norcem project, I think they've much said their technology will at least the lowest cost will be around at least EUR 100 per tonne of CO2 captured. So amines, technically a little more advanced given the history in oil and gas. When I say technically more advanced, just they've at a higher TRL, if you like. But that's going to be much more expensive. The other thing that Heidelberg is looking at is what's called oxyfuel. It's where you separate air into oxygen and nitrogen. You just put oxygen through your burners on the cement plant. You still need a CO2 capture system at the back. You still need to separate air into oxygen and nitrogen. That takes energy.
So again, energy penalty associated with using oxyfuel. But it's one of the technologies that have been around and trying to be developed in Europe since the late 1990s. So there's a bit of momentum behind oxyfuel. We've been around since 2019. So we're the new kid on the block. And we're punching well above that weight, I think. But there's three sort of technologies that have been looked at. A couple of others being looked at. I mentioned Svante. That's like a metal-organic framework version of an amine. It has the same issues. It will require energy once the metal has absorbed the CO2 to put steam through and release that CO2 as a pure stream. There's these membrane technologies where you're trying to separate again a gas from a gas through membranes.
All of them, they have a limit in terms of how cheap they're ever going to be because of the energy penalty. So where we have technical advantage is we have no theoretical energy penalty. Now, our retrofits will, of course, have energy penalty because we're moving hot streams about. If we built a plant from scratch and used all of the heat streams in a greenfields application, our target would be to have and use no more energy than a best available technology cement plant today. So we see ourselves as well, I guess what we say is we've got physics on our side. We're just hitting stuff up in a different way. And so that's where we see significant competitive advantage versus the others. But yep, as I say, there's half a dozen that'll ever decarbonize cement and lime. And we're one of them.
We think we've got pretty good advantage.
Great. Thanks, Phil. Two more questions. Is there any updates on Cemex?
Yeah. Cemex continues to be in that pipeline. They've got three projects that we're developing with them. And as soon as we can, we will update on Cemex. They're an interesting company to deal with. They remain committed to the technology. And as I say, as soon as we can update on those projects and on and I know the behind-the-question would be, "When are you going to sign the license agreement with Cemex?" "When they agree to our terms" is the answer to that.
Great. Thanks, Phil. And just last question. There's a recent announcement of BHP, Rio, and BlueScope working together to build a ESF plant. Is ZESTI technology suitable as a feedstock for this facility?
Therefore, is a selection of the location of a ZESTI pilot plant linked to the BHP, Rio, and BlueScope determining a location for their facility?
Yeah. No. Excellent question. And very pleased to see that announcement by BHP, Rio, and BlueScope. What they're looking at there is what's called an electric smelter. An electric smelter is absolutely what can sit downstream of a ZESTI unit. So once we take the iron ore and convert that into an iron, what an electric smelter can do is melt that iron and take with it some of the impurities out of the iron to make it suitable for electric arc furnaces, for example. And so that type of smelting technology is absolutely compatible with ZESTI. Does it need to be colocated with a ZESTI plant? Not necessarily. We can produce a hot briquetted iron product from our ZESTI facility.
That can be moved to a smelter and smelted. Probably a little more efficient if it's colocated. But for these first demonstration units, that type of efficiency isn't a critical element. So in summary, Simon, yeah, great to see them doing it. It sort of says that these guys are moving down a pathway to decarbonize as quick as possible. It says they're still bloody interested in making sure that their hematite/goethite ores which are 96% of our exports and a huge part of their revenue, they're looking at ways and means to make sure those ores can be electric arc compliant which they aren't now. And so it sort of says that these guys are looking ahead nicely. And that's good for us because ZESTI integrates with that sort of technology beautifully.
Great. Thanks, Phil. That's the end of the Q&A. And I'll just hand it back to you for closing remarks.
Excellent. Thanks, Simon. Look, first of all, thanks very much for all of your attention, all of your support. Over the course of the last six months, we're into a pretty exciting phase. We've got a FEED study complete for a 30,000-tonne grantum demonstration facility that is getting close to the economics of making a hot briquetted iron. Those economics exclude any carbon advantage that our technology might have. We feel that technology, if I look at benchmarks in the market, is highly valuable. We want to look to progress that as quick as possible. We have similar views in the Leilac space. Accelerating nicely in direct air capture. In other projects coming down the pipeline. Really looking forward to updating the market on Leilac too.
With more projects coming into the pipeline, with engineering fees being generated by that line of business, I remain highly excited by it. Things progressing well on Pilbara and Magnesia. The water business continues to grow nicely for us in the States. Personally, I see huge opportunity for the company over the remaining parts of this financial year. I really look forward to updating the market as and when these opportunities reach some interesting milestones over the course of the next few months.
Great. Thanks, Phil. Thanks, Darren. Thanks, all, for attending.
Thanks. Goodbye.