Thank you for standing by, and welcome to the Calix Limited Financial Year 2024 Full Year Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you would like to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to turn the conference over to Natalie Barrington, General Manager of Investor Relations. Please go ahead.
Thank you, Cole. Good morning, everybody, and welcome to Calix's full-year results presentation for the financial year 2024 . My name is Natalie Barrington, and I've recently taken on the role of General Manager of Investor Relations at Calix. I'm thrilled to join the team, and I look forward to growing our investor relations function. Joining me today are Phil Hodgson, Calix's Chief Executive Officer and Managing Director, and Darren Charles, our Chief Financial Officer. They will take us through the details of our FY 24 results, which were released to the ASX this morning. Before we begin, I'd like to remind you that we will have a Q&A session at the end of the presentation. If you'd like to ask a question, please dial star one if you're using the conference call facility.
I'd now like to hand over to Phil and Darren to take us through the results.
Thank you very much, Nat, and thanks all for joining this morning. If we could just move to slide three of the investor presentation that was released to the ASX this morning. About Calix. When I had a look at this slide as we were putting it all together, I did a bit of reflecting about why I joined Calix back in 2013 . And if you have a look at the symbol down in the right-hand side of the slide there, one platform, technology, multiple opportunities. It's really those opportunities that lie along that diagonal, if you like, that really attracted me to Calix when I joined. You can see there, cement and lime, iron and steel, lithium, alumina, direct air capture, and of course, water and agriculture, which we've been in for a while.
These are huge opportunities facing huge global challenges, and with one core technology that can address those challenges, it was a very exciting company to join, and I'll reflect back again to 2013. I think there was just under 20 people. We managed to IPO the company in 2018. We still had less than 30 people at that time, and we've now, as you can see, on those numbers across the top, over 155 employees in seven countries, 25 different languages spoken, nine operational sites. When we IPO'd the company, we had two. So we've gone through a dramatic growth, and that growth is all about building capability, and it's about building capability to prepare the technology to decarbonize and make more sustainable those industries that I covered off before.
A really exciting company, a really unique company, in my view, and it's been an incredible journey, but there's still plenty to go. Still plenty to go. If we go to the next slide, which I think is four in the deck. The core technology. For those who aren't familiar, it's a new type of kiln or furnace, a new way to heat stuff up, if you will. It's a rather large steel tube. The biggest ones we've built are over 1.8 meters in diameter, and over 30 meters high. And we heat these tubes to over 1,000 degrees centigrade. We can heat with fossil fuels, we can heat with alternative fuels, waste materials, biomass, and we can heat with renewable electrons. So the new way to heat stuff up, the first advantage of it is we're sort of energy agnostic.
We don't really mind the energy we use, and of course, as industry decarbonizes and electrifies, it places the technology really at the forefront of those efforts across multiple industries, and in fact, in the picture, you can see there, some solar panels that we've installed on the roof of our warehouse at our facility in Bacchus Marsh, in Victoria. And behind, you can see this blue, sort of column. That's our fully electric calciner running off solar power, so it's a kiln that's able to run off renewable electrons. That's very unique, amongst kilns. The ability to start up and shut down and run off renewable electrons is highly important, as industry decarbonizes. This particular steel tube, we've heated it to over a thousand degrees externally. Whatever we heat goes down the center of the tube.
It needs to be a small particle size, anything smaller than about a third of a millimeter. So imagine dust or flour, sort of that sort of particle size. And then imagine dropping a lump of dust or flour on the floor and watching it float down. That's basically what we do inside our tube. We drop whatever we're heating up, down the tube. It just floats down over, say, 20-30 seconds, and the red hot walls of the tube radiate heat into those particles. So there's no flames touching rocks or anything like that. It's a radiative heat from the hot walls of the tube heating up those particles. So why do it that way? When you're heating different things, just say you're heating what's called a carbonate. Limestone is a very well-known carbonate, calcium carbonate.
What a lot of people don't realize is half the weight of a lump of limestone roughly is CO2. And when the cement and lime industries heat up limestone, it releases that CO2 out of the rock. And currently, that CO2 is released inside a standard cement kiln, is mixed with all the furnace gases and air, and is ejected into the atmosphere. And that's the cement and lime industry responsible for over 8% of global CO2 emissions, and over half of those emissions is coming from the rock. So with our particular technology, it just slots into the process in a cement kiln.
The limestone that the cement industry are using to make cement clinker, when dropped down our tube, releases that CO2, and because it's inside a tube, that CO2 is not lost to the atmosphere. It basically comes out the top of the tube as a pretty pure stream, and out the bottom comes the lime, which is then used to make cement clinker, or indeed, lime is used in many industries, such as steel, pulp and paper, aluminum, et cetera. So the first applications of the technology that we were developing- that we'll be developing, is in carbon capture from processing things like limestone that have a lot of CO2 in it. And that particular part of our business, we're calling Leilac: Low Emissions Intensity Lime and Cement.
And I'll cover that off, as I go through the businesses. Second, applications that we're developing in the technology are really to do with the fact that we can power it with different energy sources and more specifically, renewable electrons. And we call that sustainable processing part of our business. So the compatibility of the kiln with electricity and alternative fuels is gonna allow industry who need to use kilns to start to lower their carbon emissions. And that part of our business is quite exciting. We're looking at iron, green iron, we're looking at lithium, we're looking at green alumina. And so that part of our business touches quite a few major emitting industries. The last part of our business is the magnesia part of our business. This is our earliest business.
When I first joined, we'd just started processing magnesite from our mine in South Australia into a product called magnesium hydroxide, and that particular product is used in wastewater treatment, and when we go through the financial numbers, Darren will update us on how that business has grown over the course of the last few years, and the sort of prospects that we see for it as well. That particular business is earning its revenue.
It is earning increasing gross margins, and that's a very important part of our business, not only for those aspects, but in terms of the ability to have a look at some really interesting materials that we're making for what we call high surface area or reactive magnesium oxide in things like marine coatings, agriculture, and possibly even pharmaceutical and veterinary applications. And so we've made a lot of progress during the year in that area as well, and we'll update you all on that as we move through the presentation, so that's the core platform technology. If we move to the next slide, which I think is slide five, here's those businesses across the top: carbon capture, sustainable processing, and magnesia.
And I've just broken those down a little bit into the different sort of applications that I'd hinted at before. First of all, our subsidiary focusing on carbon capture, we're calling Leilac: Low Emissions Intensity Lime And Cement. That's actually a subsidiary of the company, which has also been invested in by a group called Carbon Direct. A U.S. impact fund came in for 7% of Leilac for EUR 15 million, valuing that business at over EUR 215 million, post-money back in 2021. At that stage, that business had no licenses. It had applications only in cement and lime. And since 2021, we've doubled the number of applications and almost doubled the addressable market, with a move into direct air capture.
So that's using the ability of Leilac to process limestone into lime and capture the CO2. And that particular process is useful in direct air capture. And there, we're partnering with a company called Heirloom, Bill Gates-backed, forward CO2 credits already sold to Microsoft, recipient of $300 million in Inflation Reduction Act financing to put a plant together in Louisiana, in the States. And so again, since 2021, some significant progress is being made down that particular line, direct air capture. We've got a perpetual global license with Heirloom that's gonna generate $3 per every ton they capture. They're targeting a billion tons by 2035, so that's quite a target. If they can get a hundredth of the way there, that's still a great business for us.
And of course, the original cement and lime business, significant market size, as you can see there, over 1.4 billion tonnes per annum of CO2. Already, and again, since 2021, put a perpetual global license agreement with Heidelberg Materials in place. There are multiple other partners in our pipeline. And the business model is really, as evidenced from the Heirloom and the Heidelberg Materials licenses, it's a license fee per ton of CO2 captured. As I say, the Heirloom one is pretty indicative of the type of license fee we're gonna be extracting in these businesses, $3 a ton, and with sort of addressable markets in excess of 2.4 billion tonnes. That's a huge potential opportunity for the business. Moving along to sustainable processing.
You can see there are three different aspects that we're progressing. Pilbara Minerals, we're progressing a lithium unincorporated joint venture, that's a UJV. And lithium, obviously, one of those materials essential for the future battery industry, essential for electric vehicles. And despite the recent market lows, obviously there's some significant demand forecasted as electric vehicle fleet starts to grow or continues to grow, as I should say. That particular project there, I'll cover off a bit further down the presentation. All going very well there. The next one across, we're calling ZEAL, Zero Emissions Alumina. Big market. Alumina's only behind iron and steel in terms of size of market as a metal. We're working with multiple parties through the Heavy Industry Low Emissions Transition CRC or HILT CRC.
And the last one that we're also working with HILT on, with many members in cement and lime, iron and steel, and alumina, is ZESTY. So that's focusing on zero emission steel technology. Again, it's an application of our core technology, but that industry is huge, as everyone can probably imagine. $640 billion per annum worth of iron made every year. And so, the business model across all of these is to look at license fees, which are typically a percentage of revenue. And even a tiny percentage there, you can see represents a significant addressable market. The last line of business, magnesia. We've got a business in the States, a subsidiary called Inland Environmental Resources. They're really starting to fire on all cylinders in the water business there.
Taking a magnesium hydroxide product and selling it into water treatment as a replacement for caustic soda. We think the addressable market in the States is in excess of $100 million. But in terms of caustic replacement, it could be over 10 times that, depending upon how well we can penetrate into new areas, both geographically and also in terms of application. There's a lot of caustic used in freshwater treatment, for example, and so that's an area that we're looking at for magnesium hydroxide as well. Sort of, magnesia doesn't just end there. There's applications that we've been developing for quite some time in agriculture, marine coatings and biotech. All of those, of course, involving the food chain or the environment.
Approvals and those sorts of things take a bit of time, but those all hitting some pretty interesting milestones during the year, which I'll cover off in the line of business updates. So hopefully slide five gives a good overview of the different lines of business we're progressing, the size of the markets we're looking at, who we're working with, and the revenue model. Okay. On that note, I might hand over to Darren if we move to slide six to cover off the financial highlights.
Thanks. Thanks very much, Phil, and good morning, everyone. It's really my pleasure now to talk across the next few slides about our financial highlights for FY 2025. With a couple of key messages from my perspective: record revenue growth, record revenue result, diversified revenue streams, diligent investment to support the capability and commercial opportunity that we've been developing, and a focused capital strategy to pursue the opportunities we have in various different specific applications that Phil's talked about. So just talking a little bit further about each one of those elements, then starting with revenue. We're really pleased this morning to announce a record revenue result for FY 2024, with revenues from products and services up 30% to AUD 24.2 million, and overall revenue up over AUD 30 million for the first time.
We saw revenue increases and gross margin increases in our magnesia business, which was up 14% on the previous year at accelerating improved gross margins. We've seen significant material contribution from our Leilac carbon capture business, again, for the first time, with material revenues recorded. And even within our sustainable processing business, we've been able to recognize in the second half, as we did in the first half, again, associated with our intellectual property contribution to the PLS joint venture, that again contributed AUD 12.2 million to our results in the full year. The second element that I just wanted to focus on as well for everyone is a diligent investment focused on building capability and capacity to pursue our commercialization opportunities.
As we flagged over a couple of years now, we would accelerate our investment in research and development to pursue the many opportunities that we have. That's been done in a diligent and deliberate way, and we're very pleased with the platform that we have created. That investment has been offset by several grants that we've been able to receive, and we will continue to receive over the coming years, to help offset that investment. Finally, again, just to touch on our capital strategy and our cash position. At the thirty-first of December, 2023 , we reported our first half results. Our cash position was just a little over AUD 47 million. With everything that we've done and accomplished throughout the year, we end the full financial year with AUD 43 million in the bank.
So it's down just 10% in the half, despite the significant increase in pursuit of the various applications that we've undertaken. And we're very happy with the strong financial position that we are in at the end of the financial year. This position enables us to continue to focus on our core equity strategy to identify opportunities to accelerate the industrial application of our technologies across specific industry segments. So just turning to the next slide now. I'll just quickly again touch on some of the P&L. Again, growing and diversified revenue streams at significant improvement in gross margins.
significant gain resulting from our investment with Pilbara Minerals in our midstream demo plant that we hope to have come online towards the end of this current financial year, and that is currently on time and on budget, as reported again by Pilbara yesterday and ourselves, obviously today. There are several non-cash items as well that I just wanted to draw everyone's attention to on the P&L. So things such as share-based payments, expense, depreciation, and amortization. Although those are important elements for us to report, they don't actually impact the cash position of the company. So we continue to pursue the investment plans that we've laid out, and we're very happy with the position that we find ourselves in right now, delivering strong and accelerating revenue growth across various different lines of business.
The next slide then, in terms of our balance sheet. A couple again of key highlights. It's a strong financial position with essentially debt-free balance sheet. And again, as we've talked about, we're looking at pursuing the right capital and commercialization strategy for each specific application of our platform technology across areas such as lime and cement decarbonization, ZESTY with iron and steel, and Pilbara Minerals for the application of a fully electrified version of the calcination technology to deliver a low-carbon lithium salt product. Finally, the last slide from me then, which is slide nine. Again, to reiterate, our cash movement for the second half was down just 10% on the cash position at 31st December.
We've been able to deliver significant results, again, which Phil will talk to. We've built a growing pipeline of projects that present significant opportunity to generate revenues for the business, again, which Phil will talk to. At the same time as investing in expanded capability in the United States with two new manufacturing plants that are both fully online now. That work is complete, with new plants in Ripon and Lufkin to support a move into the southwest of the United States. We've also obviously made a significant investment into the midstream demo plant, together with Pilbara Minerals, which we're excited to complete construction hopefully later this financial year.
So, those are the key takeaways from my perspective: strong, robust financial position, record revenues, accelerating revenues at great growth margin, and diligent investment in the commercialization opportunities that our platform technology presents. So I'll hand back to Phil now to go over the highlights from last year.
Thanks very much, Darren. If we move to slide 10 in the pack that we've popped up on the ASX this morning. So what we're trying to highlight here is the operational achievements for the last financial year against the KPI scorecard, if you like. The set of key performance indicators that we talked about at the start of the financial year, and when reviewing the performance of each of those lines of business, effectively what we do is we give a mark out of 10, if you like, for how those businesses have progressed. You can see the colored dots representing completed, part completed pivot, where we decided not to do something but pursue an alternative value stream or not delivered, which is a red dot.
So if you have a look across the different lines of business, we've popped a red dot against Leilac-2, outside of our control. Heidelberg Materials decided to close the Hannover facility, where we were building our Leilac-2 module. Four-tube module, if you like, 100,000 tonnes a year of CO2 separation capacity. And we had to lift that project up and move it. Within three months, we'd found a site. We'd done the basic engineering, and that new site is called Ennigerloh. And so, what we wanna do, of course, this financial year, is really get that project back on track. But suffice to say, despite largely outside of our control, or pretty much all outside of our control, we record that as a miss.
That was not delivered to get all permitting and civil works complete at Leilac-2. When I talk about the completed bits, when I talk about continue to move projects down the pipeline, there's a significant project pipeline there with Leilac. You're seeing some of that coming through, and that's manifest in the revenues that Darren talked about earlier. The engineering revenues where the Leilac business is starting to generate income from customers who are paying us to do studies to look at application of the technology at their sites. That's been a very successful. I think, you know, from just over half, you know, half fifty grand or forty grand to fifty grand of work the prior financial year to over three million. It's a significant move up.
So that's been very successful. And of course, the basis of design for the Green Methanol Consortia Project, which we completed, and also, post the balance date, post June 30th, just into July this year, we announced AUD 15 million from the Australian government to support that project. And I'll talk a little bit about that in the more detailed operational reports. Sustainable processing, we were judged about an eight out of 10. The area that we only part completed was really the iron and steel. We wanted to try and get to final investment decision or final investment decision during the course of the financial year, which we did not do.
But we did complete the FEED study supported by ARENA, and a significant and expanded and successful ore testing program with nine different ores from six different iron ore majors in Australia. So overall, the sustainable processing business, and I'll talk a bit about the spodumene projects, a little bit further down as well. But overall, sustainable processing business did very well. Magnesia was an outstanding result, as Darren said, growth in revenue, growth in gross margin. We pivoted from mag metal, having a basis of design ready. Our Chief Scientist, Mark Sceats, as is his wont, has discovered a new way to make magnesium metal, and we decided to pivot away from getting a basis of design done to putting a patent in place.
So, watch this space on that one. So you see the number of our patent families has moved at the half year, 28, to now 29 patent families. So, overall, a pretty good year operationally. I might just go to the next slide and start to have a look at. And these slides are a little more project by project. They're not necessarily line of business by line of business, but I'll summarize it all at the end. First of all, on slide 11, you can see there the direct air capture projects that we're developing with Heirloom, under our Leilac business.
and recently, we're able to announce, after being sort of gagged for several months by Heirloom as they were getting their local permitting and engagement process sorted, but we were finally able to talk about the projects we're working on with Heirloom. They're targeting a billion tons by 2035, so they better get a wriggle on. And so what they're doing is they're building a single tube version of our calciner with their direct air capture facility, targeting seventy thousand tons per year of CO2 removal. And virtually in parallel, they're working on a three hundred thousand ton facility. And that particular facility, obviously, starts to get quite material in terms of its CO2 capture, its license revenues that it would generate for us.
And so this particular partnership that we have with Heirloom is very exciting and accelerating. The other thing about Heirloom, of course, is we're getting paid. We're getting paid to do the engineering for our technology. And as we said before, the engineering income that's starting to be earned by Leilac is material. And so there's no capital needed for anything we're doing on this page. We're being paid the engineering. The capital is being paid for by Heirloom, including for the calciners. So this is a straight run-through to targeted first revenues from licensing. And all the way along, we're gonna be earning revenues from engineering. So targeted next steps with respect to Heirloom, obviously, we continue to deliver those paid services.
We'd really love to get into construction of the 17,000-tonne per annum facility pretty soon. Closely followed, say, within about 12 months by the 300,000-tonne facility. So, semi-parallel development, but a very exciting project with Heirloom, backed hugely by the Inflation Reduction Act, backed hugely by Bill Gates, backed hugely by Microsoft, who have forward purchased CO2 from this particular project. Very exciting for us and a huge market opportunity. If we move to slide 12. Our Leilac-2 project, as I mentioned before, we got a little bit sideswiped by Heidelberg. Obviously, they needed to keep things confidential while they dealt with staff and stakeholders, but they've decided to close the Hannover facility as a result of overcapacity in Germany.
But we did lift up and move the project pretty quickly to a new site called Ennigerloh. And so Ennigerloh is actually a little better for us. It's a little closer to planned CO2 infrastructure, and it's a plant as big as Hannover. And obviously, one of those plants that Heidelberg are gonna be running into the future, so they've already done their studies on which plants they're keeping open. But this one here is an excellent opportunity for us. During the year, we formed a joint venture with Heidelberg, which covers the construction, operation, and future ownership of that facility. Heidelberg will be contributing to it. The amount they're contributing is commercial in confidence, but it is a significant contribution.
There will be, and we've got secured grant funding through to the start of the construction phase and a bit beyond. There will be some financing or working capital cover that will be required for that facility, but that will be recycled, should all go well, because Heidelberg, as part of the agreement, joint venture agreement with us, will pay us back that money, should everything hit the operational targets that we're trying to hit, and that facility will move into Heidelberg ownership. So if we have a look at targeted next steps there, we're obviously moving through to completing the detailed design, given the new site that's close. We're moving through and we'll aim to complete a permitting process, and then commence construction in 2025.
So hopefully this financial year, site works will commence. And then, obviously, operations and commissioning about a year after that point that we commence site works. So, Leilac-2 project are disappointingly a bit delayed. We're probably running about six months behind our original schedules. But suffice to say, there's huge support that is continuing from Heidelberg, and huge support that is continuing from the European Union and the consortium that we're with to build this project. That includes Cemex, that includes Lafarge, that includes CRH, so some of the largest cement and lime companies in the world. And also part of that consortium, Port of Rotterdam, one of the largest CO2 hubs being constructed in the world.
And also, companies such as Solvay interested in CO2 for chemicals, and companies such as ENGIE interested in the energy flexibility of our technology. Very important project for us, and great to have that one moving again. If we move to slide 13, we've got the Project ZETA. This is what we're calling our project in South Australia. This is where we're building a cement/lime facility, initially lime, but we'll ultimately move through to make a future cement product. Initially focused on lime, this project will be supplying CO2 from our technology to two companies: Vast, which is a solar energy company, Vast Energy, and a company called Mabanaft.
Mabanaft, probably about a second-tier oil trader, and very probably substantive company, I should say, several billion dollar revenues, and very interested in ethanol- sorry, methanol for green shipping. And so their interest is really to have a look at how you can combine CO2 with hydrogen produced by Vast in off-the-shelf technology to make an e-methanol for shipping. This is the particular project that was granted AUD 15 million in funding in July just very recently. And so that particular one is now on a pathway. You can see the indicative timeline there. We've secured the grant funding.
There's t hat grant funding for the next couple of years will basically be revenue, because we're gonna be using our in-house engineering to progress pre-front-end engineering design and front-end engineering design. And then come sort of 2026, we're targeting construction. And so that's where the grant funding will need to be matched with some project equity or finance. We'll be selling the material from this particular project, including the CO2, into the e-methanol facility. So, financing is also an option for us there. But suffice to say, the government is tipping in probably about 50% of the cost during that period. And then we move into commissioning and operations. And as I mentioned before, product revenues, selling the CO2, selling the lime.
So, that particular project there, you can see the indicative timeline below, is targeted early to mid-2027 to move through its commissioning and startup phase. If we move to the next slide, which is slide 14. Leilac full scale, so what we're calling Leilac-3. Leilac-2 is 100,000 ton per annum module. Leilac-3 will be several of those modules, so scale up from Leilac-2 to Leilac-3 should be fairly straightforward. I'll emphasize, in these particular applications, no capital needed. We are undertaking paid front-end engineering design and FEED studies on behalf of clients. It sort of says a little bit about the potential for the technology, when you are being paid by potential users of the technology for your engineering studies, and so this particular line, there's multiple opportunities in our project pipeline.
We reported over 82 at the half year. And so several of those to continue to move down this pipeline, similar to the way Heirloom did, to result in paid engineering studies, is what we're targeting under this particular work stream. And so as we move towards full-scale deployment, all going well, with Leilac-2 up and running, Leilac-3s will start to tip past their final investment decision point. And, again, all going well, should come online sometime in 2028, so several projects here. We'll talk more about those as we can. Heidelberg Materials have committed to explore the development of a full-scale commercial installation with us. And under targeted next steps here, you can see they pursue funding support and target markets. That's not for us. That funding support is for our clients.
So it's combining our technology with grant programs, such as the Innovation Fund, on behalf of our clients to move those projects forward. So, no capital needed for this particular work stream. And, as I say, I'm looking forward to FY 2025, when hopefully I can talk about a few more of those in the public domain. Next slide is slide 15. This is our midstream demonstration project with Pilbara Minerals. As Darren mentioned before, this project remains on track, both on time and on budget. Construction has commenced, and so we're really looking forward to have this project commissioning sometime in late Quarter One, early Quarter Two, next calendar year. And so, if we have a look at the project timelines there, as Darren mentioned, we've got a good, strong balance sheet.
There's secured capital in that balance sheet to continue to move this project through to commencement. And also grant funding there, AUD 20 million, that was provided by the Australian government to help with that particular facility and getting that one on track. So with that one there moving through into targeted joint venture revenues following successful commissioning, all going well. Even though the lithium price is somewhat depressed, as you're probably all aware of, the last 18 months to two years, I think 70% down or more, 80% down. 3,000 tons per annum of the lithium phosphate salt will still generate this joint venture just close to $40 million, just under, of which we're a 45% joint venture partner.
So still a significant project, and in terms of revenue. So that particular one there is all going well. Move to slide 16. There we have zero emissions steel technology. This one here, we want to move real quick. We filed for a patent in 2021. Most of the technologies we're up against to be the technology of choice for green iron are probably 10 years older than that, if not more. We've moved quickly since 2021. We had the first tests conducted on a modified facility, completely solar-powered facility in 2022, and early 2023. And then, as we've moved into 2024, you can see a much more extensive test work program took place. We've taken the iron we've produced into briquetting form.
And so we've produced our first green briquettes, which are the way that the iron will be shipped around. We've completed the front-end engineering design study. The test work and the briquettes and the front-end engineering design study all had funding support from ARENA, the Australian Renewable Energy Agency, to which we're very grateful. And the output from that particular report was some very positive techno-economic findings for the technology, targeting minimum hydrogen use. Hydrogen is the most expensive part of producing a green iron. And the key thing that we wanna do here is progress this now as quickly as possible to a final investment decision. What would it take us to do that? We'd obviously look at some grant funding.
ARENA obviously funded the first bit, and it is a big option for us for the second bit. But green iron, as you're probably aware, is right in the crosshairs of the current government's programs to promote local manufacturing, critical minerals, and renewable energy. So so that one there is in a very good sweet spot for that funding. We'll also look at financing opportunities. We could be bringing equity into a subsidiary, much the same way we did with Leilac, to continue to move that forward. And then similar to the Leilac business model, anyone interested in looking at this with respect to studies for their particular facility, we'd look at paid engineering work. And so we'd take that through to a demonstration plant targeting 30,000 tons a year of iron and steel.
We really wanna have that plant in Australia somewhere, so discussions are in an advanced stage on site works and where we're gonna locate this, and so we really wanna move this into a position where we can reach FID this financial year. We'd be targeting first tolling revenues, so we'd run the demonstration facility to cover its costs via tolling, but obviously, longer term, it is a licensed play. Similar to Leilac, it'll be a percentage of the value of the product you produce, which in this case is iron. If you look at how much iron is produced globally, there's $640 billion dollars per annum worth, at about $400 per ton, assumed there.
Huge opportunity there, very much in the target range of what the government wants to do here in Australia with respect to green industry, and so that one there, watch this space as we move through FY 2025. If we go to slide 17, our magnesite lime business, this one's been our sort of lunch provider for many years now and continues to do so and continues to grow well. As Darren mentioned, successfully completed a 50% upgrade. Have we still got everyone? Sorry, just had some queue music come onto the phone there. I'll keep going. So, nearly 50% upgrade in capacity, AUD 21 million in revenue, which is up 40%, AUD 7 million gross profit from the US water business.
We've achieved some excellent results in other parts of the magnesium business, including Booster-Mag, where we've sprayed it on some Greek olives, and there's gonna be an expanded season this year. And also, working with the CRC, what's called SAAFE, which is about antimicrobial resistance. We confirmed the control of drug-resistant animal and human bacteria with our high-activity magnesium. So obviously what we're trying to do as far as next steps, we wanna accelerate the revenue growth and continue to accelerate that revenue growth in the water business through those expanded capacity that we've completed this year. We'll move and complete a pre-FEED study for magnesium metal. As I say, we've filed for a patent this year. We wanna move through and continue to try and progress magnesium metal as an opportunity.
We've got a mine in South Australia. That mine in South Australia is right in the middle of one of the largest surface outcropping magnesium deposits in the world, and also we want to continue to develop and commercialize the applications in agriculture, marine coatings, and biotech. So magnesia continues to be a line of business that is increasingly well-performing for us. Moving through the next slide, in terms of sustainability, obviously with new accounting standards coming in and conformance with treasury guidelines around sustainability and disclosure, we've done a lot of work in this space. All of our technology addresses sustainability challenges, of course, but even within our company, we've got to be very conscious and move the ball forward on our own sustainability challenges.
We've released a sustainability report at the same time as our annual report, and so that's available on the ASX website as well, and there are key areas that we're targeting with respect to sustainability, including decarbonizing our operations. We're addressing our resource consumption. We're starting with some stuff like IBCs or intermediate bulk containers, but we're gonna move through into meatier stuff as we can, and obviously diversity, highly important for us, and so representation at all levels of the organization to conform with the United Nations guidelines, and lastly, of course, safety, ensuring zero harm at our sites. We've enhanced our company-wide health and safety management system, and so we'll continue to have an absolute focus on safety of all of our employees as we move forward.
So just a quick summary and outlook, and then we might hand over to some questions. If we have a look at what we're targeting on slide 20, with our KPI dashboard, as we call it, our key performance indicators, you can see there across the three lines of business all those little dot points that we're targeting. The key things there is we continue to progress and get site work commenced at Ennigerloh, underneath our Leilac or carbon capture line of business. We wanna get at least three scoping and basis of design studies complete and lead into paid pre-FEED studies. So that's about increasing the revenue opportunity in the Leilac pipeline, with those projects moving down the pipeline.
We wanna get what's called Project DOS, which is that 17,000-tonne per annum CO2 capture project construction commenced with Heirloom, and we wanna to complete the front-end, pre-front-end engineering design for our HyGATE project, which we referred elsewhere in the pack as ZETA. HyGATE's the initiative that funded Project ZETA, so we wanna complete the pre-FEED for that. Under sustainable processing, obviously, get our unincorporated joint venture project with PLS commissioned for spodumene, and we wanna start doing some third-party contracted ore studies. So this is where I think we talked about a pipeline of about six potential players interested in our process for processing spodumene. We wanna move those through at least one inter-contracted ore study for their particular ore. Iron and steel, pretty simple.
We wanna get to FID to move ahead with this demo plant. We wanna do that this financial year. Alumina, we wanna get a FEED study commenced with a third party for a demo plant on a specific site. In water business, we want continued growth, simple as that. That particular area there, we've got a great base to do it from, but we want to see continued growth in top-line revenue. Gross margin, we've grown substantially. We want to see continued growth in top-line revenue. So, in terms of just an overall snapshot of indicative project timelines and revenue timelines, 21 summarizes all of those other slides I've been through before onto the one slide.
You can see there where our priorities are in terms of projects, where those projects are in terms of pathway to revenue. Some earning revenues already, obviously, and others in terms of the pathway to revenue, and so under Leilac, sustainable processing, and magnesia, obviously magnesia business, really focusing on growing direct sales there. But we're gonna continue to present this graph as an update, so that people can track our pathway to growing revenues and ultimately license revenues down each of these lines of businesses. If we move forward one more slide again, 22. So just a quick summary and sort of the outlook, I guess. We still see demand for our technology continuing to grow, not only from governments, but from industrials.
I know it's been a tough capital and interest rate environment, and the perception might be that the brakes have been on, and certainly the brakes have been on a little bit in the capital markets, but the tide will turn, and we are very well-positioned to take advantage of that tide as it turns. The industry recognition, I guess, has been translated, as it says on the slide, to paid revenue studies , so this is really helping with our cash position. We're gonna keep focusing on those priority projects that were in the previous slide, and if I move down a bit further, as Darren mentioned before, what's really important for us is growing this growing the revenues and growing our diversified revenue stream, including those engineering revenues that are starting to be quite material for us.
Look, if I reflect again back to 2018, when we IPO-ed this business, in July 2018, our product revenue was AUD 3.2 million, and our gross margin was AUD 1.3 million. If I have a look at our results from FY 2024, our product revenue was AUD 24.2 million, nearly six times, or sorry, nearly eight times, and the gross margin it was AUD 10.3 million. So again, then we're nearly six times the gross margin that we were generating back when we first IPO-ed the business.
So the growth in revenue and gross margin is very important for us to enable us to wait out this turn of the tide while we position the company for when decarbonization really does have to accelerate, and so with respect to that, I think we are very well positioned with those revenues and gross margins growing nicely. Very last final point, there's a snapshot there of our board of directors. We've had a bit of a renewal through the last couple of years with our board of directors. Some of our directors have been around for quite some time, so of course, a big tip of the hat to Jack Hamilton, who retired at last year's AGM.
A tip of the hat today to Peter Turnbull. This is his last financial year as our chair. So huge thanks, Peter, for all the service. Many, you know, eleven plus years service in on the board. And the new members to the board, if we have a look across, Helen joined us around two years ago, and Sarah Ryan and Peter Dixon joined us in January this year. And Alison Deans, of course, a little earlier than that. But Alison has agreed and is will become the chair of Calix from the first of October. And you can see Alison's credentials there, two ASX fifty companies, including chair of Cochlear.
So we are in very experienced and, well, looking forward to working with Alison and the new directors, obviously, as we progress the company forward. So, on that note, I might finish. Hopefully, I've left some time for questions. I don't mind going a little bit over the hour if needed. So, I'll hand back to you, Nat.
Thank you. If you wish to ask a question, you can press star then one on your telephone and wait for your name to be announced. If you wish to cancel a request, please press star then two. If you're on a speakerphone, please pick up your handset before pressing the keys. One moment, please, for the first question. Our first question today will come from Joseph House with Bell Potter Securities. Please go ahead.
Hi, Darren. Thanks for your presentation, and thanks for taking my questions. And just a few from me. Firstly, just looking at the lithium joint venture with Pilbara Minerals, can you just give us an update of how the lithium phosphate marketing is progressing?
Yeah, sure, Joseph. Thanks for the question. So the lithium phosphate is the salt that we will be producing from that facility once constructed and commissioned. That lithium phosphate salt is really in the marketing hands of Pilbara Minerals, who have lots of connections, as you can tell from their public disclosures into several battery and lithium companies. And so that particular material there is certainly remains of interest by several parties that Pilbara are talking to. It is a midstream product, so it will need to be further processed to make a battery-grade product, but that processing is not substantial.
And second thing, obviously, is it delivers two useful molecules: lithium itself, which is useful in all lithium batteries, but phosphate, which is useful in the most fastest growing battery chemistry in China, which is lithium iron phosphate batteries. So, several parties moving ahead with Joseph, and obviously, we'd be looking forward to updating the market as and when any secured offtake contract is put in place.
Excellent. So yeah, that, that kind of led to my second question around potential offtake. So, I mean, you, you flagged that this joint venture or this demo plant can, you know, generate about AUD 40 million revenue, I think, at current lithium prices. Is there a kind of a target of how many offtake agreements you wanna get to underpin the commercial rigor of the project?
There's no target. We just target to have the whole lot offtaken by one or more. So it may be one, there may be more. The idea of producing three thousand tons a year of that material, the reason we designed the plant capacity at that level, was to be able to produce commercial quantities. They're small commercial quantities, but nonetheless, they're still commercial quantities. So that may fill one contract or it may fill two or three, to be determined.
Great. Thank you. And maybe moving on to your grant position, are you able to give us some color on, you know, how much money or grant money we should be expecting to come through in FY 2025? Is it probably gonna be similar to FY 2024?
Yeah, I might take that one, Joseph. It's Darren here. So I think, you know, we're very, I guess, fortunate to have significant support from various different governments and projects that have already secured existing funding. There was, I guess, compared to the prior year, we were eligible to receive the R&D tax incentive, which was an R&D tax cash rebate. But because of our success in accelerating our commercialization strategies, we've actually exceeded the AUD 20 million annual turnover cap for that. So rather than a cash rebate on that activity, we get an accelerated tax deduction.
But nonetheless, we've still got significant grants already secured across the PLS project, across Leilac, and even one that we announced just recently with the Australian government to support the ZETA project. So certainly, you know, we expect to see material grant income in the FY 24, FY 25 year. We again, because of our success, we won't get the R&D tax incentive, but we didn't receive that in FY 24, just to point out.
But, but in terms of, yeah, other incomes, I mean, obviously for us, you know, we, well, I can't give you an exact number of what our revenue, our grant income expect, we expect to report, but we've got significant, continued access to significant grants to cover a substantial portion of our operating costs associated with those projects. And as well, we will, we'll continue to see accelerated and increased revenue from customers paying for our engineering services over and above what we've reported in the FY 2024 with Leilac. So, various sources of additional funding and revenues that we'll report in the year ahead, beyond just purely the magnesia business.
That's great. Understood. And maybe just lastly, looking at the water business, you know, great work increasing your gross profit margin. Just keen to get a better understanding of, you know, what are the initiatives that really drove that margin improvement, or is it just really driven by the scaling up of the water business? And maybe just an extension to that, you know, you spoke about growing the water business in FY 2025. That's one of your KPIs. What's kind of within that growth? Like, how do you kind of achieve that growth for the next 12 months?
Yeah, so I might make a couple of comments, and if I miss anything, Phil will jump in. So, firstly, one of the sources of the growth will come from an expanded platform in the US. So, we did invest in two new plants in Texas, and in Ripon, in the Midwest of the United States. They just came online in the last, I guess now, four or five months. So significant additional manufacturing capacity, up 50% on kind of the prior year. So, that will be one source of accelerated and growing revenues in the US, just a wider platform to serve a much larger market directly. And, so that's one core element to the opportunity.
In terms of where the margin growth is, where the margin expansion has come from, it's a combination of a couple of things: Just improved and enhanced kind of technology, leveraging the technology that Calix has developed over the years and applying it through the IER business. So efficient manufacturing processes and capability, which is one of the core reasons why we acquired that business in the first place. We saw the opportunity to leverage our technology into that. And secondly, you know, what's clear about our technology and our materials is we produce a very high-quality product that is valued by our customers. And so our teams in the magnesia business deliver great product quality and great service, and that is valued by our customers.
That all of that enables us to drive and deliver substantial improvement in our gross margins. So that's really the key. Fantastic product quality and service, and an enhanced technology capability, and an expanded platform in North America that will help contribute to continued growth in the magnesia business.
And I might just add, Darren, when we talk about customers' willingness to pay, we have built the reputation of the product to the point that we can extract a premium from that. It was very much around matching a price, and they'd choose us because we had a good product, but we're actually now starting to leverage a bit of a premium. So that's where the continued growth has come from in gross margins, say, for the last 12 to eighteen months.
Great. Thank you for that. That's all my questions. I'll hand it over. Thank you.
Thanks, Joe.
Our next question will come from Connor O'Prey with Canaccord Genuity. Please go ahead.
Morning, gentlemen. Maybe just a question on the outlook for CapEx in FY 2025, and obviously, you've got the ability to do some flexing there, depending on grant receipts. So maybe talk about the sort of CapEx that's kind of non-negotiable, you're firmly committed to, versus the CapEx you might have some discretion over.
Yeah, I'll cover that one, Connor, and again, Phil, jump in. So essentially, the key project, CapEx wise for us this year, is completion of the PLS midstream demonstration facility. And that's pretty much it in terms of material activities. You know, we've obviously invested a significant amount in the water business in the last couple of years to develop the manufacturing capability that we've got there. That work is complete. There may be a little bit of sustaining capital to support accelerated revenues, but it will be at the margins. Really, the key one is the PLS project, and then obviously the next cab off the rank will be L2, as in when we complete the engineering on the new plant at Ennigerloh.
But the timing of that, you know, we'll update as and when, you know, that project is, you know, those processes have been complete. But at this stage, we don't see material incremental PP&E in FY 2025 as we complete the engineering. And again, we've obviously got significant grant funding to support that particular project. So in terms of CapEx spend, yeah, other than the midstream, that's pretty much the key one. We've invested a lot in the last couple of years, and I think we'll see beyond the two projects that I've mentioned, we don't need to, you know, repeat the level of PP&E the last couple of years, I've said, other than the midstream project.
Great. Okay, so I think AUD 15 million in FY 2024, so less in 2025?
Yeah, in terms of, you know, things like repeating the water business investment and, you know, some-
Yeah.
next gen, our next gen plant, the Thor's Hammer down at Bacchus Marsh. Yeah, that, those things won't need to be repeated.
Great. And then last question, just obviously, the cash flow a lot better in the second half, looked like a strong working capital situation in the second half. One thing I noticed, just going through the accounts, a bit of an uplift in payables exiting FY 2024. Do you have a payment or have you made a payment subsequent to year-end to sort of reduce that AUD 12 million? That seems a bit higher than historical levels.
No, no, we haven't. And that's actually so that'll be paid by the Australian government, Pilbara Minerals, and about 20% by us. So that's essentially consolidating some of the capital commitments to the Pilbara project that we essentially, like I said, we get a free carry on a fair chunk of that. So that's what that is related to.
Got it. And I will add, we'll sneak one more in. So you didn't, you sort of uplifted the value of the unincorporated JV, and I just want to check. I suspect that just reflects the free carry rather than any other kind of i t's just a kind of mechanical process-
100 %.
Rather than anything else. Yeah.
Yeah, 100%, 100%. It's just basically the work in progress of the project versus our ownership of the percentage of the work in progress versus the cash that we have to contribute. It's just a free carry.
That's great. Thanks.
Our next question will come from Jim Randall with Ord Minnett. Please go ahead.
Thank you. Phil, sorry, my question was covered earlier with just the economics in the revenue flows with Pilbara. So no questions from me. Thank you. Well done.
Thanks, Jim. No problem.
And our next question will come from Matt Perry. Please go ahead.
Hi there. I'm interested to understand the rationale of going ZESTY alone rather than with one or many partners.
Oh, so, yeah, I haven't ruled out ZESTY going with partners, just to be clear. One thing we will be doing, or should I say, will not be doing, is becoming an iron producer ourselves. So the partnership approach is similar to the way we'd approach the Leilac project in Europe. There could be industry players there, there could be some impact funding that comes in there as well. But yeah, we're not ruling out that a consortium and/or equity structure that we put together that would not have strategic players in there.
Thanks for that.
No problem.
There are no further questions at this time. I'd like to turn it back over to Phil Hodgson for any closing remarks.
Excellent. Thank you very much, well, thanks very much all for your attention this morning. As we sort of outlined during the presentation, we're very pleased with the growing revenues, the growing gross margins, and the ability for that, along with pretty prudent cost management, to support this business through. You can see, in much more detail than we've provided before, the revenue sort of indicative revenue timelines that we're seeing across the priority projects in our business, and so the ability of the business, as we've done before, to really position ourselves to take advantage as and when capital markets improve, interest rates come down a bit, and the ability to really accelerate these projects, we're in a very good position to make sure we get great value for our businesses by doing just that.
So, thanks again. Looking forward to FY 25 and, no doubt, speak to all of you, hopefully again soon. If there's any further questions that you think of post this meeting, I'm sure we'll send them through to Nat, our investor relations GM, and we'll be happy to answer them.
That does conclude our conference for today. Thank you for participating, and you may now disconnect at this time.