Welcome to the Annual General Meeting of Calix Limited. My name is Darren Charles, and I'm the Company Secretary. Today's meeting is being held as a hybrid meeting with a combination of shareholders present in the meeting room here in Sydney and others participating online in an audio and video format via the Lumi platform. We hope that this hybrid format allows as many of our shareholders, proxy holders and guests to attend the meeting as possible. Shareholders and proxy holders who are attending online have the same ability to ask questions of the board and submit votes on the resolutions of the meeting as those who are in person with us today.
To help facilitate the structured process for the business of the meeting, for each individual item of business, we will ask those in the room to ask any questions first before turning to those joining virtually and inviting them to ask questions via the platform. For online attendees, written questions can be submitted at any time during the meeting. You can also ask questions directly during the business of the meeting when each resolution is being considered. We ask that if you do wish to ask a question using the audio system, that you introduce yourself so the chair can directly address you in response. To ask a written question via Lumi, press on the speech bubble icon towards the top of the window. This will open a new screen. At the top of that screen, there is a section for you to type your question.
Once you have finished typing, please hit the arrow symbol to send. Please note that while you can submit questions from now, they will not be addressed until the relevant time in the meeting. Please also note that your questions may be amalgamated if we receive multiple questions on one topic. Finally, due to time constraints, we may run out of time to answer all of the questions. If this happens, we will answer them as quickly as possible via email or by posting responses on our website.
To ask an audio question using the online system, click on the Request To Speak button at the bottom of the broadcast window. The broadcast window will be replaced with the audio question interface. Please confirm your name and the topic of your question and click Submit Request. Follow the instructions to grant access to your microphone and to join the queue. This second slide illustrates what happens to the interface when clicking on the Request To Speak button.
Voting today will be conducted by way of a poll on all items of business. To provide you with enough time to vote, for those joining virtually, polling on the resolutions is now open. Equally, for those in the room, the polling cards handed to you on arrival can be filled out at any time. If you are eligible to vote at this meeting with the Lumi platform, a polling icon will appear at the top of the window adjacent to the speech bubble icon. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options.
There is no need to submit or enter button as the vote is automatically recorded. You are, however, able to change your vote up until the time the chair declares voting closed at the end of the meeting. For those of you in the room, once your voting cards are complete, they will be collected by staff from Boardroom and tabulated with the online votes. The results of the polls will be published on the ASX platform later today. I will now hand over to Peter Turnbull, Chair of the Board of Directors for the commencement of the Calix AGM.
Thank you very much, Darren, and good morning, everyone. Thank you all for joining us, some physically here in the meeting room today and, I think, quite a bigger group online. We're very pleased to have you with us. As Darren noted, I'm Peter Turnbull, the Chair of the Calix board. I would like to welcome everyone to Calix's 2022 annual general meeting, which is in fact our 5th, only our 5th as a listed company, our 3rd using a virtual meeting platform, and our 1st using this hybrid format. I expect that most people now are fairly familiar with the operation and structure of hybrid meetings, but if you need any assistance during the meeting, just let us know.
As always, as Darren touched on, our goal for this year's AGM is to make the meeting as interactive as possible for shareholders using the Lumi platform. It will enable you to make comments, ask questions, and vote whether you are here in person or with us virtually, as Darren has just touched on. First up, I'd like to introduce the Board and Management team who are attending here with me today. We have Helen Fisher, Non-Executive Director and Chair of the Audit and Risk Committee. We have Jack Hamilton, Non-Executive Director and Chair of the Technology Committee. Phil Hodgson on my left, the Managing Director and CEO. Mark Sceats, an Executive Director and the Chief Scientist, and Darren Charles on my right, the Company Secretary and Chief Financial Officer.
I would also like to welcome and note the presence or thank them for the presence of our company's auditor, Ian Hooper of BDO, and from our legal advisors, James Delesclefs and Michael Jeffries of Hamilton Locke. Thank you for being with us here today. I'd just like to make a few introductory remarks and then I'll turn to the formal business of the meeting, and then Phil will provide a more forward-looking presentation after that. Governments, organizations, and investors are increasingly focused on environmental, social, and governance principles, commonly known as ESG principles. This theme or this movement is very much propelling what Calix is doing, really helping us to move forward.
Some of you may have seen the speeches made today at COP 27 in Egypt underscore the need for change, particularly in relation to decarbonization, inequality, and proper standards of governance. Just feeding back into those ESG principles. One demonstration of the growing ESG momentum is in the 2022 Global Investor Statement to Governments on the Climate Crisis, which was submitted to governments before COP 27. This statement was signed by 602 institutional investors representing almost $42 trillion in assets under management.
Globally, there is a rapid and urgent shift towards electrification and sustainability, with investment funds backing these themes at a very rapid pace. It represents the unified investor call for governments to implement the policies needed to address decarbonization and accelerate the transition to a net zero emissions economy.
McKinsey notes that in the first half of 2022 alone, investors have channeled almost $90 billion into companies that are developing new climate-related technologies. The Inflation Reduction Act recently passed in the United States is also noteworthy at this stage. It includes approximately $270 billion to accelerate the energy transition and to support U.S. domestic manufacturing, which will include the re-engineering of the whole energy value chain.
McKinsey also estimates the need for some $275 trillion to be spent between 2021 and 2050 to fund the global energy transition. This equates to some $9.5 trillion per annum on a global basis. The figures are staggering. McKinsey also, the McKinsey estimate represents about 7.5% of GDP annually on average, with the biggest increase in spend on physical assets expected to occur between 2026 and 2030. Calix's technology solutions, particularly those aimed at solving global challenges in industrial decarbonization, are therefore extremely well-placed to capitalize on these strong and growing market tailwinds. Our core technology platform is being leveraged by each of our five lines of business to progress innovative technology solutions targeting various specifically identified global challenges.
In the 2022 financial year, Calix's commercialization strategies gathered significant momentum, despite the considerable economic uncertainty as the world emerged from the COVID-19 pandemic and also grappled with the impact of the war in the Ukraine and the associated energy and inflationary pressures caused by that war.
As shared at our last AGM, financial year 2022 marked the first material transaction in Calix's global commercialization strategy, with leading decarbonization investor Carbon Direct Capital Management investing EUR 15 million in Calix's cement and lime decarbonization technology business, which most of you would know is referred to as Leilac, or Low Emissions Intensity Lime and Cement. The strategic sale of a 6.98% stake in Leilac demonstrated the underlying value of the technology platform and provided an example of the flexible funding options available to Calix to accelerate and scale its multiple lines of business. In parallel with this equity transaction, Calix put a license agreement in place directly with the Leilac group, which will deliver 30% of Leilac's future royalty income to Calix, regardless of Calix's subsequent shareholding in the Leilac business.
The scope and scale of Calix's ambitions in industrial decarbonization continue to grow as we seek to fulfill the very significant potential our unique technology solutions offer to pressing societal and economic needs. I'd like to now just turn to take a brief look at Calix's financials. This is focusing on the financial year 2022. In the 2022 year, we achieved a gross profit of AUD 5.2 million, up from AUD 5 million in the 2021 financial year. Higher margin sales offset a 4% decline in sales revenue to AUD 18.5 million. The slight reduction in revenue followed the anticipated cessation of a coal emissions reduction tax credit in the USA, thereby affecting Calix's water business owned and operated in the USA.
We concluded the financial year with AUD 25 million cash on hand and minimal debt, providing financial and balance sheet strength and flexibility. Grant income recognized in the 2022 financial year was lower than in the previous 2021 year, due to the timing of key project dates within that financial year. Almost AUD 3 million in grant funding was received in financial year 2022 and deferred to be recognized in later periods. A further 10 grant-funded projects were announced in the last twelve months, excluding the recently canceled and soon to be replaced Australian government's Carbon Capture, Use and Storage Hubs and Technologies Program. I will leave it to Phil, the MD and CEO, to update you further on these projects following my address and the formal business of the meeting.
As we said we would do in financial year 2022, Calix invested significantly in its people, including the addition of 10 new engineers, the purchase of significant capital items, and sourcing professional services to advance our commercialization goals on various fronts. Our focus on people, combined with our traditional ongoing fiscal prudence, has given Calix a unique opportunity to continue to grow multiple successful lines of business simultaneously into large addressable markets. If I turn to the various. Just a bit of a brief overview of the various five lines of business. Just as a reminder of what those are, there's the CO₂ Mitigation, Sustainable Processing, Advanced Batteries, Biotech, and the Water business. We had an internal reorganization of our structure in this 2022 financial year.
The benefits of this internal reorganization, combined with a successful capital raising of AUD 19 million in the same year, helped to accelerate multiple environmental business opportunities in financial year 2022. These are now being commercialized through a combination of joint ventures, licensing agreements and spin-out strategies.
Turning to a bit more details to look at each of the lines of business, in particular, as well as the various trends and key achievements in financial year 2022. Again, Phil will cover the key priorities looking forward to financial year 2023, as well as the key milestones we've set ourselves looking forward. If we start with the CO₂ Mitigation business, Leilac has undertaken a significant transformation in the past year as its focus turned to commercializing and, in particular, scaling up the Leilac technologies to cement and lime decarbonization.
As mentioned earlier in my address, in September 2021, one of the world's largest decarbonization investors, Carbon Direct, invested EUR 15 million in Leilac for a 6.98% stake to help accelerate deployment of the Leilac technology. In March of this year, Leilac- 2, a commercial scale retrofit of the Leilac technology destined for construction at the Heidelberg Materials plant in Hanover, Germany, passed its Financial Investment Decision point, which is an important milestone.
Over the course of financial year 2022, the Leilac project pipeline grew by 63%, with a number of projects progressing through initial design and scoping work. Leilac's rapidly growing pipeline of projects is a testament to the very significant demand for technically viable, low cost decarbonization solutions for cement and lime.
This demand continues to grow, driven by increasingly ambitious net zero commitments from industry and strong carbon pricing incentives in Europe, as well as carbon tax credits in the USA. Again, very significant tailwinds. Turning to Sustainable Processing, Calix's line of business developing decarbonization solutions for chemical and mineral processing. Industrial decarbonization tailwinds continue to drive demand for low carbon and low waste processing solutions for the materials of our future economy.
Australia currently produces nearly half the world's lithium, with the global market for lithium carbonate and equivalents projected to grow by a staggering 6x by 2030. Calix's lithium processing technology has the potential to greatly reduce the waste and CO₂ footprint of Australian lithium and create a significantly higher value export product. Calix's co-development of a midstream lithium chemical plant with Pilbara Minerals, which many of you will be aware of, is progressing well.
This plant will utilize Calix's technology to produce a concentrated lithium salt pre-product for lithium batteries. Following the award of the AUD 20 million grant from the Australian government, Calix and Pilbara Minerals have agreed to commercial terms for a joint venture for sustainable pre-processing of lithium salt and has completed an initial scoping study. In financial year 2022, Calix announced the application of its technology for the decarbonization of iron and steel. While iron and steel are essential to today's society's continued development, they are responsible for around 7% of global CO₂ emissions and are one of the most carbon intensive and hard- to- abate sectors.
Calix's Zero Emissions Steel Technology, which many of you will know is referred to as ZESTY, has the potential to enable electrification and hydrogen reduction in the processing of iron ore, thus providing new pathways to green iron and steel. The initial testing conducted in the financial year just ended, pleasingly shows promising results for a range of iron ore types, and the technology continues to develop at a rapid pace.
Turning to t he Advanced Batteries line of business. The advanced battery line of business also leverages Calix's unique flash calcination technology to produce novel battery materials that exhibit promising high performance characteristics, which will be coupled with more affordable and sustainable production.
Following early stage research and development and positive collaboration with industry and academia, Calix's pilot production is on track for the first electric vehicle test application due in early 2023, so not too far away. At scale, Calix's advanced lithium manganese oxide cathode materials are estimated to reduce the energy required for production by approximately 6x , compared with conventional lithium manganese oxide production, thereby helping to minimize the battery's CO₂ footprint and cost.
With significant growth in demand expected for more simple, safe and affordable battery chemistries, Calix's novel battery materials continue to show very exciting promise. Turning to our Biotech line of business, significant progress was also made there in financial year 2022. The benefits of a safe, effective, environmentally friendly bioactive magnesium oxide continue to be identified and validated.
I'm pleased to report that following more than five years of independent testing and trials in Australia, the registration of our core product, BOOSTER-Mag, was approved by the Australian Pesticides and Veterinary Medicines Authority for crop protection purposes. Significant progress was also made on various trials, licenses and other agreements, including a broad-spectrum antifungal and anti-pest crop protector.
Demand for non-chemical alternative crop protection products has continued to grow, and we expect that growth to continue. Dutch-based Profytodsd is seeking a replacement for the now banned antifungal Mancozeb product. Profytodsd has included BOOSTER-Mag in their crop protection protocols for the first time in the past European summer. Trials in marine coatings are also continuing, with promising results achieved to date there as well.
Turning to Water. The water business. This is predominantly based in the USA. As many of you will recall, we've acquired a business, Inland Environmental, there in what, three years ago? As mentioned earlier, revenues in the water business were slightly lower in financial year 2022 compared with the prior year, down by about $1.7 million in U.S. dollar terms. Gross margins, however, increased in financial year 2022 to 33%, achieving a higher gross profit despite the lower sales revenue. In Texas, Calix's market entry continues with strong sales and a growing pipeline of further opportunities. A plant location has been identified and lease agreed in Texas, with procurement work for a new manufacturing facility well underway.
Calix's growth plans for its water business also include market entry into two new states in the U.S., in addition to the establishment of two new hydration plants. As mentioned earlier, Phil will provide an update on the key milestones achieved so far in this financial year, 2023, as well as the priorities for each line of business for the remainder of this current financial year. Just turning to sustainability. As you've no doubt recognized, sustainability sits at the core of Calix's purpose, driving our innovations in industrial decarbonization and a range of environmental solutions. In our own operations, we are no different. Calix is equally committed to sustainability internally, and we have undertaken several important steps to drive continuous improvement in our own internal environmental, social and governance practices.
In the 2022 financial year, we reaffirmed our commitment to the United Nations Global Compact, which is the world's largest corporate sustainability initiative, and we continue to integrate with the UNGC ten principles throughout our own business. Calix is also committed to measuring, monitoring and reducing its carbon footprint in line with the Paris Agreement and the 1.5 degrees Celsius pathway. To this end, we've engaged certain external consultants to assist in developing our own emissions reduction roadmap for financial year 2023. We also recently installed a very significant solar array of panels at Bacchus Marsh, at our operations there, with a maximum capacity of 334 kW. The installation will generate about 408 MWh a year, preventing an estimated 437 tons of annual CO₂ equivalent emissions entering the atmosphere.
The solar installation is designed to cover the total energy consumption of the BATMn reactor, which is there at Bacchus Marsh, which is our all-electric calciner. Calix is also committed to measuring and reducing the total amount of waste generated by Australian operations in this financial year 2023, with an ambition to reach 100% sustainable material inputs that are either renewable, recyclable or reusable by 2030.
Continuing to evolve our internal governance structure to support and control the business as we grow is also an ongoing focus. To further strengthen our own internal governance structure and practices over the next year, the board will do three. Well, more than three things, but three key things. Introduce a new Code of Conduct and Board Charter. Two, establish a new Sustainability Committee of the board. Three, update the charters for the Audit and Risk, Remuneration, and Nomination, and Technology Committees.
Board renewal and succession has also been a focus for some time. Calix has had a very stable board with some minor comings and goings for quite a long time. We're at a point now where we really need to cast our minds forward on what we need in terms of the board for the future. The board continues to maintain a proactive and prudent process of board succession and renewal, helping to ensure the size and composition of the board is appropriate to support the continued delivery of Calix's growth strategies, as well as meeting the highest standards of governance. We welcomed Helen Fisher as a non-executive director in September 2020, and we farewelled Lance O'Neill in November 2021.
I might just say Lance was one of the longest-serving members of the Calix board. We're very grateful for his considerable contribution to Calix as an investor and board member over the years. At this stage, I'm pleased to report the next stage of board renewal is well underway. It is anticipated that additional non-executive directors with the requisite skills and experience to bolster Calix's growth strategies will be appointed in the 2023 financial year. That one or more retirements will also occur to facilitate those appointments. This board succession process also presents a near-term opportunity to progress Calix's long-held ambition to meet or exceed ASX Corporate Governance Council guidelines with respect to diversity, including gender diversity representation on the board.
On behalf of the board of directors, I would like to conclude my address today by sincerely thanking Calix's partners and customers for their continued commitment to solving global challenges, especially during a period of significant economic and global uncertainty. Calix is an organization quite simply made up of great people. We thank every employee for their unwavering commitment to our purpose and to the goals we have set ourselves.
I would also like to thank my board and senior management colleagues, Helen Fisher, Jack Hamilton, Phil Hodgson, Mark Sceats, and Darren Charles, for their dedication to the goals Calix has set and for the considerable progress achieved during the 2022 financial year. We look forward to accelerating the key lines of business activity, aided by the recently closed AUD 81.6 million capital raise.
The AUD 60 million, this is Australian dollars, AUD 60 million institutional placement and the AUD 21.6 million share purchase plan were very well supported by both institutional and retail shareholders, as well as a number of new institutional investors who have joined the register as a result of this recent capital raising. These funds will provide the resources needed to accelerate our commercialization strategies and further realize the potential of Calix's core technology platform.
Finally, on behalf of the Calix board, the management team, and all the staff, I would like to thank each and every one of our Calix shareholders for your ongoing and very much valued support. At this point, I'd like to turn to the formal business of the meeting.
Just some background in terms of how the voting's gone leading up to the meeting, I can advise you that 202 valid proxy forms have been received by the cutoff date, totaling some 95.477 million shares, being equal to 54.4% of the shares on issue. That's a pretty healthy voting outcome. There were no invalid proxy forms received, nor were there any proxies lodged by security holders with a nil balance. I just note too that each resolution before the meeting on which a vote is required will be conducted by way of a poll. I'll turn to the first individual item of business before the meeting.
This is to consider the financial report and the reports of the directors and auditors for the year ended 30 June 2022. There's no formal vote on this item, and I note that Calix did not receive any questions prior to this meeting on the accounts for the auditors or however. For those shareholders present today, if you have any questions on the accounts that you wish to ask, please do so now. Again, we will take questions from the room here first before turning to any online questions received. Are there any questions from the room here to start with on the accounts? No. Do we have anything online, Darren?
No, there are no online questions for this item of business, Peter.
Okay. All right. Well, thank you everyone. I'll move on to the three resolutions before the meeting and open the voting process. As Darren mentioned earlier, you can vote anywhere during the meeting. The first resolution is the remuneration report. To consider, and if thought fit, to pass the following resolution as an ordinary resolution. That being that the remuneration report for the company for the financial year ended 30 June 2022, which forms part of the directors' report be adopted.
Please note that the vote on the remuneration report is advisory and does not bind the directors of the company. Noting that each director has a personal interest in their own remuneration, as described in the remuneration report, the board unanimously recommends the adoption of the remuneration report.
As Chair of the meeting, I intend to vote undirected proxies in favor of this item. This resolution is also subject to various voting exclusions, which we noted in the notice of meeting. The proxy votes received for resolution one are presented on the screen, which I think everybody should be able to see, including online. Yeah. At this point, can I ask if there's any questions on the remuneration report first, from within the room here? No. Online, Darren?
There are no questions online for this item of business, Peter.
Okay. All right. Well, if you've not yet done so, please vote using the online voting tool as indicated earlier or the proxy cards here with us in the room. We will now move to the next resolution. At this time, because this involves myself, I will hand over to Jack Hamilton to chair the meeting for this particular item.
Thank you, Peter. Resolution 2 is to consider, and if thought fit, pass the following resolution as displayed on the screens, which is to re-elect Peter Turnbull, who retires under the company's constitution, and being eligible, offers himself for re-election to be re-elected as a director. The board unanimously recommends the election of Peter as a director. Again, proxy votes that have been received are shown on your screens. Are there any questions with the resolution? Again, first in the room. Darren, any on the platform?
There are no questions online regarding this item of business, Jack.
All right. Again, if you haven't done so, online please, the online tool is available and again, your proxy cards here in the room. With that, thank you. I'll pass to Peter.
Thanks very much, Jack. Thanks, all. I'd like to now move to the third and final resolution before the meeting. This relates to the non-executive director fee pool. There was hopefully a fairly detailed background explanation in the notice of meeting and the explanatory memorandum, but the resolution itself is to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That for the purposes of ASX rule 10.1.7 and clause 13.19 of the company's constitution, the maximum aggregate amount of directors' fees that may be paid by the company to the non-executive directors per annum is increased by AUD 400,000 per annum, from AUD 500,000 to AUD 900,000 per annum.
The board unanimously recommends the increase in the non-executive fee pool, recognizing our interest in this item. The proxy votes received for resolution three are presented on the screen. Got those? Yeah. Again, if there's any questions on this non-executive director fee pool item, please feel free to ask from within the room here first. Nothing at this end. Darren, do we have anything online?
There are no questions, online for this item of business, Peter.
Okay. Well, again, please vote using the online tools or the proxy voting papers at this end. Thanks. that concludes our discussion of the formal items of business. I'll just give a minute or so for people to get any last-minute voting in and then we'll close the poll voting system shortly. Okay. Well, hopefully that's given everyone enough time to properly record their votes. at this point, I'd like to invite Phil Hodgson, the MD and CEO, to provide a presentation which is going to focus more on the current financial year, 2023, what we're hoping to achieve, and where we are at present. thank you, Phil.
Excellent. Thanks very much, Peter, and thanks to all for your attendance today, whether you're in the room for the first time at a meeting or online as well. We're sort of struggling with the face-to-face, but the online bit seems to be working really well for us. The face-to-face, I can't see what's going on here, but I can only see what's sort of going on up there. For those of you who are new to the company, Calix was founded in 2005. We're fortunate enough to have one of the founders here with us. Mark Sceats, our chief scientist. Mark and another chap called Connor Horley, we founded the company back in 2005. Unfortunately, Connor passed away, but Mark's still with us. The powerhouse behind it.
You can see there 28 patented inventions now, 28 patent families. It's all ours. It's all Calix IP. We are not licensing IP off CSIRO, as I've heard some rumors say. It's all ours. A lot of it's originated just over there. But of course, a growing Calix team is contributing now to the patents that we're putting in place. It's a very important part of our company. It's the core of our company. It is our IP. The other thing is, with the sort of macroeconomic environment, I reflect on what Calix is and what we're trying to achieve. Often, two years ago. It was just two years ago that no countries had committed net zero emissions.
No companies, or hardly any, had started to commit to net zero emissions. Everything that you see today that Peter presented, in his slides about the trends that are happening in the financial markets, that has only started to really gather momentum over two years. What is going to happen over the next 10, as Peter said, as the real wave of capital required to decarbonize the planet really starts to hit. We're only just at the start of a pretty amazing trend. I think as Peter mentioned, we IPO'd in 2018. There was no interest in anything we were doing on decarbonization in 2018. The price of a ton of CO₂ on the EU emissions trading scheme was EUR 5 per ton. It's now over 80.
All of that has happened in a very short space of time. We just happen to be the right technology in the right place, amazingly. The other thing that constantly amazes me is how many applications this technology can be applied to. Often people ask us, "Well, you look like you're sort of the people doing a 100-meter dash, but people with no sense of direction. There's so many things you're trying to do. How are you going to do all those things?" Well, when I go into what it is and how we're going to do this, hopefully, that starts to become clear for each of you. Because with a technology with this potential, we just cannot not do something if we see a great idea.
Only in 2021, I think, Mark came up with the idea of looking at this for iron and steel. The progress and the pace at which we've started to develop that particular application surely should be a great indication for how we do this quickly and how we can focus on developing these new applications while continuing to deliver on the other applications in our business. If I move through. Some of you may not be familiar with the core technology, or you may have not really sort of had it explained to you. I'm going to do that now. This is my rock and roll part of the talk. I'll explain it with a rock and a roll.
Normally, in a conventional kiln, our technology is just a new way to heat things up. That's all it is. In a conventional kiln, you put what you heat and how you heat in the one vessel, and normally that's a fuel and few rocks and you light a match. It's been done much the same way in the sort of 5-7,000 years. What we do is a bit different. We separate how you heat from what you heat, and we do that with a rather large steel tube. Here's where my role comes in. We have a rather large steel tube. The biggest ones we've made are nearly two meters in diameter, over 30 meters high. They're quite big, bigger than this.
We heat that up to about 1000 degrees Centigrade. We can heat that. We heat that externally. Flames, we can heat it with biomass waste. We can heat it with renewable electrons. We can have, like, electric elements around it, like in your toaster, but obviously much bigger scale. We just heat this up to over 1000 degrees Centigrade. Whatever we're trying to heat goes down the middle. It needs to be a fairly small particle size. Imagine holding a lump of flour in your hand. About that sort of particle size, and then imagine dropping that to the floor and just watching that float down. That's all we're doing inside our tube. We're dropping it, whatever we're trying to heat down on the inside.
It floats down through the tube, and it's the red-hot walls of the tube radiating heat into those particles that does the heating for us. There's no flames or hot gases touching those particles from burning. It's just the radiating heat from the walls of the tube heating up the particles. That's how we do it, just separating how you heat from what you heat. Why do it this way? What's the point? Here's where the rock comes in. This is a lump of limestone. This is 44% by weight CO₂, f or those who want to be chemically accurate, I usually go about half by weight CO₂. But that, you feel that weight, that is half, nearly half CO₂ by weight in the form of carbonate, calcium carbonate.
When the cement and lime industries heat this up, it releases that carbon dioxide out of the rock, and it makes lime and cement. But of course, all of the CO₂ that's released out of the rock, they just leave it to go up into the atmosphere. The cement and lime industries together are roughly 8% of global CO₂ emissions, and over half those emissions are coming from the rock. The problem those industries face is the fact that their raw material is over half their emissions. Not how they heat, even if they were able to heat with renewable electrons, which obviously our kiln can do as well. Half the emissions are coming from the rock.
What does our kiln do that's a little different? Well, when you grind this up into small particles, as the cement and lime industry currently do, and you drop it down our tube, and the CO₂ comes out of those particles, it comes out the top as a pretty pure stream of CO₂. It directly separates the CO₂ that currently is being mixed in with all of their flue gases and then just ejected out the stack.
It directly separates that CO₂, just from a different way to heat stuff up. That's one reason this technology is really quite interesting. There's a couple of other areas that it's getting a lot of traction in the marketplace for as well, and that's the ability for this thing to be renewably powered. I talked a bit before about electrons, elements around the outside of the tube.
The ability to heat those elements with renewable electrons is actually causing a lot of interest in the technology. The Pilbara Minerals opportunity that I'll talk about is actually centered around that. I'll tell you why when I talk a bit about Pilbara Minerals and what's happening there. The last interesting thing about the technology is because there's no flames and smoke and hot points touching the stuff you're trying to heat up, you can actually make uncontaminated high surface area materials. There's no contamination, as I mentioned before. There's no hot spots that burn these things. We can make it just right. Popcorn, as Mark likes to call it, or I like to call it, but Mark hates me calling it that. Mineral popcorn.
That particular aspect is where you're heating particles up and activating them. In a lot of mineral processing, a lot of chemical processing, they do heating to activate or to extract those minerals, and even the Pilbara Minerals example as well, I'll talk a bit about what actually that heat is doing to extract that and why an even temperature uncontaminated by flame, uncontaminated by smoke, actually gives this kiln a huge advantage over conventional ways of heating up. There are three different advantages to heating this way. It sounds like it's.
Often, we get asked, well, it just sounds so simple. Why hadn't someone thought of that before? My usual flippant answer is, well, I wish I'd invented the wheel and patented that too. With this one, it's actually when you get into the smarts of it, pretty, it's elegant. Let me put it that way, elegant. This tube will grow by a meter and a half when you heat it to 1000 degrees Centigrade. A big 30-meter tube will grow a meter and a half. How do you mechanically seal that so that you are having an atmosphere inside the tube that is what you want, pure? Our engineers have been working really hard on perfecting the application of the technology. There's all sorts of things, excuse me, that we do inside the tube as well. Are there internals in the tube?
Do we have gases and particles moving in different directions or the same directions in the tube? Do we have all sorts of different temperature profiles on the tube to get what it is that we want when we process these things? They're not in any of Mark's patents. They're not there because we don't want people to read them. So when it comes to patent protection, it's great to have the 28 patents, but the know-how of our engineers is really important as well. The trade secrets we have around this process is critical. Thank you for voting for the REM report. It's not just for me. That same system that I'm under, which is share rewards by options, is available to all of our employees.
It's critical in terms of retention of those employees and reward because they hold so much of the value of the company in their heads, that they remain committed to the company, so they only get their rewards like I do over several years. They earn out those rewards over several years. It's a really important way to keep the intellectual property within the company. The system that we have around REM is not necessarily a conventional system with short-term cash and long-term cash or whatever. It is very much around an incentive program designed for our employees because that's core to the value of this company. So anyway, I digress. Let me just keep moving on. I'm wax lyrical about the technology. What do I do to get this. Got a slide on.
Oh, there we go. Okay, cool. So, if I start to touch on what is really quite exciting about the technology, I mean, we've talked about a lot of the, every line of business under Peter's speech, but perhaps I'm going to focus on just a few key areas because, if I look ahead to this year and what really is going to continue to propel the company this year, is around decarbonization. Around those huge things that we talked about. Cement and lime, as I said, responsible for about 8% of global CO₂. Over 4 billion tons of cement and lime made every year and will likely be made every year all the way out to 2050. Not easily replaced. We can see, there are some sort of new cements and geopolymers and those sorts of things.
We were in the building products industry back in 2015 trying to make a magnesium cement. I tell you what, every time we tried to sell that cement in the building products industry, we got asked the question, well, where's the building that you built with that? That had been around for 20-40 years. That question always then comes circularly back to cement. Building skyscrapers, 70 megapascal compressive strengths. What is the only material that we can trust to do that? That's cement and lime. Massive amount of urbanization taking place over the course of the next 20-30 years in developing countries. Cement will be critical. There's not going to be a replacement for it, and so it has to be decarbonized. The other one up there is iron and steel, which I mentioned before.
As I say, Mark, wonderful idea in late 2021. Eventually persuaded me that it was a good idea. He comes up with about 100 a week and I try and cull that down about one a year that we actually pursue. Iron and steel did pique my interest. It's the same core technology. In this case, we have hydrogen in the center of the tube, and we have iron ore that's introduced in the top, and the iron ore fines. Iron ore fines are millions of tons a year are produced of iron ore fines. Too small, obviously, lump is probably the prize of the iron ore industry because they don't actually do much to it. They just crush it down a bit and sell it.
Smaller stuff, they have to pelletize. They pelletize and sell that overseas as pellets to iron ore to the steel makers. There is stuff that's too small for that. This kiln loves small stuff. The iron and steel piece was hydrogen in the middle, iron ore fines in the top. That hydrogen loves oxygen. Iron ore's basically rust or iron oxide. The hydrogen pulls that oxygen off the iron ore to make iron. Now, there are other hydrogen reduction techniques, but what the genius of Mark's idea was, well, if we use our kiln, we don't lose any hydrogen. We don't lose it to a furnace. It's all contained in there, and outside we heat with renewable energy.
The ability to reduce the amount of green hydrogen that is used to make a green iron or steel is critical to being the lowest cost. Iron and steel, pretty exciting. 7% of global CO₂ emissions associated with iron and steel. The other thing that's interesting about these technologies, you know, people ask me about competitive technologies. Yes, there are competitive technologies in these spaces. I can count on sort of one hand, maybe one and a bit, the number of technologies that are addressing the cement and lime issue. Very, very few are actually going to solve that issue. I can count on a similar number that the number of technologies that are going to address the iron and steel emissions issue. I can only count on one finger, a single technology that does both.
15% of global CO₂ with the one called technology. That's what's exciting us at the moment. A lot of the momentum behind the company and a lot of the progress that's been made in those areas is driving a lot of the interest. The third one I'll touch on up there, materials for a clean economy. In this case, I'll talk a bit more about the Pilbara Minerals joint venture, and I'll run down to that particular slide. It's an area where we're applying our core technology for spodumene and lithium extraction from spodumene. There are many other areas that we're developing this core technology into. We've talked about Alumina, we've talked about clays, rare earths.
All of these use a heating system to heat up a mineral to crack it open so that you can then extract. Okay? When I go into the example I'll use in the Pilbara Minerals joint venture that we're forming, the importance of having a much lower carbon footprint production economy here in Australia is basically only going to get more and more important. We're really well-placed across a number of critical minerals. Okay. Let's keep moving. I'll jump this one. I'm conscious of time. I've sort of rattled on a bit. I know that. This is sort of a structure of our business. As Peter had covered off, there's five different lines of business we're pursuing.
Why I put this one up is if you look to the right of this slide, you'll see there a Carbon Direct investment that Peter talked about during the last financial year, where an impact fund called Carbon Direct invested EUR 15 million for just under 7% of that business. Why is that sort of really important deal for us? Well, first of all, if you do the math, you can work out how they value that business. Suddenly, you can look below that at their different lines of business, and for this one over here called Lime, you can actually start to see a value for that line of business. As a reminder, we always get 30% of the revenue of that business, regardless of our equity stake, as a license fee.
That particular deal sets us up to show what equity value these businesses start to have and the fact that the Head Co will always receive an income from that as well on top, because the IP will remain with Calix. Okay? That entity, Leilac, has a global exclusive license from Calix to go and commercialize the technology. That style of deal is a deal that we are looking at for other parts of our business. Secondly, it's the way we do all the things we do. People say, how can you concentrate on so many things at once? This is how we do it. That money is going to Leilac to resource that business up to chase its commercialization.
We're hiring engineers, business development people, senior people from that industry, lime and cement, to resource up that line of business to chase commercialization. We're not experts in cement or lime or iron and steel. We're experts in this. How do we do it? That's how we do it. Okay. That's why this slide's important. That's why that deal is so important for us. Watch this space. Just quickly in terms of Leilac itself, where are we at on the journey with the Leilac? For those who are unfamiliar, Leilac, Low Emissions Intensity Lime and Cement. That one over there on the left of the slide, one that we built in Belgium at a HeidelbergCement facility.
25,000 tons per year capacity of CO₂ separation. That's only 5% of the throughput of a cement plant. One of these tubes in that little tower there, to the right, of the big, cement precalciner tower. As Peter said, passed final investment decision in March this year, to scale up. We're not making bigger tubes, we're just making more of them. We have four tubes in that particular version there, that we're now just into full detailed design and hopefully commencing site works and long lead procurement items really soon. We're targeting 2024 for that one to be up and running. It will take a 20% slipstream and have a 100,000 tons a year of CO₂ separation capacity. Then from there, we just multiply that one several times over to match the full scale of a cement plant. Okay?
From here to here, we have risk. Risk is around process and heat integration. What Leilac- 2 has to solve for us is minimizing the losses associated with this retrofit. Moving process and heat streams about, the heat distribution around the four tubes, making sure it's as efficient as possible. If we can hit our targets around 12% in efficiency, then we can start to see the costs of using our technology as being the lowest. Yes, question.
Just from what you said, Leilac as the separate entity where the investment came in.
Yes.
is now your sales, exclusive sales arm?
Yeah. For the cement to lime application, yes.
You're not going into sales from a Calix point of view. That's Leilac that'll be doing that. You're leading the technology.
Correct.
You're not.
Yeah. Just for cement to lime-
Yeah.
Leilac is lead. They are the ones that are going to do it. Yeah.
Can I just follow on with a question?
Yeah.
The turnover last year was AUD 25 million, with a profit of AUD 5 million. Shares on issue are?
AUD 175 million.
Following the share placement, there are AUD 175 million?
About AUD 180 million. After the SPP, it's AUD 180 million.
That's a P/E ratio of about 117, which means that over your 10-year forecast, hopefully you'll increase sales, say 10-fold. What strategies do you have through Leilac to actually get to those figures?
The business model for Leilac is a license and royalty business model. In other words, we will charge a customer per ton of CO₂ that the technology captures. In fact, the first license agreement has just been signed with HeidelbergCement. I think that's the-
Yeah.
Next slide. Thanks, Neil. Yep. The business model for the Leilac group is to obviously roll out the technology by signing these license agreements. It's not a capital-heavy business model, although at the start we will be using capital to help de-risk for our counterparties, for our customers. Okay? Ultimately, you move into, I call it the blueprint stage, where you have a license and royalty type of income based upon the ton of CO₂ at a price per ton of CO₂.
Maintaining the profit margin you're currently getting, do you think?
Yes.
5 and 25.
The margins when we get into the blueprint stage will be license and royalty, which is extremely high gross margins. We don't actually supply these plants, ourselves. Yeah.
Sorry. The current income and margin that you refer to actually comes from the Water business. That margin calculation won't apply to-
Yeah. Sorry. Yeah.
What do you think it'll be with the cement companies?
The-
The gross margins.
The gross margins.
Yeah. Essentially, we're selling a license. I spent 13 years at a software company, and essentially it's technology IP that we're licensing. The gross margin will be very high because essentially it's just we have no operating costs other than the sales team and some business development support, a minor engineering group. We're collecting royalties for every ton of CO₂ that's captured. It'll be very high gross margin business.
So the-
Per ton of CO₂ every year.
The gross margin doesn't depend on how many times it's sold. The investment happens up front when you develop IP, et cetera, and then you kind of almost think of the royalties are 100% profits. Like, there's no expenditure that goes into earning i nstaller of the rolls.
I understand. The success depends upon the amount of contractual relationships you have.
Exactly.
Yeah.
Correct.
We are hopeful on that front now.
Well-
Other people are creating the furnace.
Yeah.
You're not building the furnace.
No. I mean, in the blueprint stage of the... let's call it the blueprint stage, once we go past this initial stage, the cement company can choose whoever they like to build it. And that's to both of our benefit. You know, it's not capital heavy for us, and the cement company gets to choose and drive down the cost of the technology by having competitive tendering. They're very strong on those procurement fronts, so they can get whoever they like to build it.
Phil, tell us.
Yeah.
Yes.
How many cement operations could take a one-tube solution for their capacity? Because that's proven now.
That capacity there, which is 25,000 tons, is too small for a cement plant. It's about 5% of the throughput. It's small-scale lime. Okay. In fact, some of the projects that we talk about in our pipeline, and I'll talk about our pipeline shortly, are lime projects. For a cement plant, this one here, which is 100,000 tons a year, that's not a bad, what we call commercial demonstration model, module. 100,000 tons a year CO₂ separation, because it's dealing with about 20% of the throughput of a cement plant, 20% of the CO₂ emissions. If you're in Europe, you're facing 2.2% year-on-year reduction in your allowed CO₂ emitted each year. That's coming down.
You have to go on market and buy CO₂ permits if you go above that. That could actually be a neat solution for five to 10 years for a cement plant. Ultimately, to decarbonize fully, they're going to have to multiply that out 3x, 4x, 5 x, depending on their capacity.
There's not a varying size of cement plants. Like, the Brisbane one might be smaller than the Heidelberg here.
Yeah.
That may actually be a four tube or a-
Yeah. This size here, there's not many cement plants standing around 100,000 tons a year. There's not many. Typical size, average size are about 500,000, 1 million tons per annum clinker, 500,000 tons per annum CO₂.
Yeah.
In fact, the ones we have here in Australia are about that size. They're all about 500,000 tons per annum CO₂.
Yeah.
Yeah.
You seem to be getting into the questioning before you really want to. Is that right?
I don't mind. They're just meant to be interactive, so.
All right. No, I have a few, but the main one is on the royalty agreement with Heidelberg.
Yeah.
That is the key to how one would value the company.
Yeah.
Unfortunately, you weren't able to tell us what the details are.
No.
However, I'm hoping you could give us some sort of broad indication.
We would certainly let you know if the royalty was outside what would be normal bounds.
What are normal bounds?
1%-2% is pretty low. 8%-9% is pretty high on revenue.
On revenue?
On revenue of whatever the value is. Okay? Now in this case, the value is per ton of CO₂.
Okay.
There are benchmarkable markets and systems where CO₂ can be valued. It's around EUR 80 per ton in the EU ETS, AUD 85 in the 45Q tax credit system.
1% or 2% of revenue. That's 1%. There's no way I would have thought 2%, is that it?
1% or 2% is a typical low royalty rate. 8% or 9% is a typical high. All I'm saying is we're not outside those bounds.
I'm very relieved to hear that.
The share price fell a bit when you'd made the announcement about the withdrawal of the government-
Yeah.
Would you like to expand on that situation? Because it was giving the impression that the government may not be behind the technology that you're doing.
Yeah. No. Interesting. Well, hopefully it didn't give that impression. I think, look, you know, I don't know. We're outside the official meeting. I'm not being recorded anymore. I'm not going to make a comment about politicization of grant funding, but suffice to say, I've just made one. We put in for grant funding here, as we do overseas. Those two projects, the Boral and Adbri projects, represent less than 1% of the total amount of CO₂ in our pipeline up behind me. This pipeline, 67 projects in the pipeline, okay? At various stages. You can see how the pipeline's grown since August 2021 to now. Boral and Adbri are in this pre-FEED basis of design stage because this announcement happened in May.
Obviously the new government came in and didn't like the look of the CCUS program, maybe because it didn't have their brand on it, and it had Santos on it had Glencore on it. I think that was a lightning rod for a fossil fuel backlash for the current government.
Moving forward, they've got their own plans, which we're starting to gather a little bit. We don't know it all yet, but AUD 141 million, I think, has been set aside for the new government, and they say they are supportive of this technology. Over the next, I don't know, month or two, we'll probably learn where we fit into all of that. The front end looks positive. We were surprised by what happened. The market's very skittish with everyone at the minute. I wouldn't put it all down to just an immaterial p ulling in a small amount of grant money.
Yeah, yeah. The whole, the share price, I think, has recovered from it. What sort of view does the Greens take on this sort of technology? Are they behind it? That seems to me that they don't like this sort of carbon capture stuff and that sort of thing. Are they coming around to it or?
I think, yeah, it's this fairly broad group, the Greens.
Yeah. Well, I'm talking about the political party.
Yeah. Okay. There's certainly a lot of the carbon capture gets caught up in an overall bucket that includes carbon capture from fossil fuel systems, so power systems and these sorts of things that capture the carbon after you've burned coal or burned gas. With industrial decarbonization, carbon capture and storage is absolutely necessary for cement and lime. As I mentioned, that's because what a lot of people don't realize is half their CO₂ is coming from this, and you ain't replacing cement and lime anytime soon. For those who actually think about it, and increasingly, you know, governments and environmental groups do understand the need for industrial carbon capture and storage, not power gen, not extending the life of coal, et cetera.
The debate is becoming more sophisticated, and we've seen that happen. We're not lumped in that same basket all the time anymore. In fact, the current government, even in its budget speech, said it will continue to support industrial decarbonization for industries such as cement.
Mm-hmm.
That's where we get it.
I think it may be worth adding a couple of comments as well, just to reinforce that there's no debate about the need for our technology outside of Australia. CCS is critical in Europe. CCS is critical in the U.S. and the rest of the world. In Australia, as Phil said, the current federal government has acknowledged that the technology is important for decarbonization of very hard-to-abate industries. Not only is there federal government funding available, there is also state government funding available for the project. It's really unfortunate that we were caught up in a bit of a political activity in Australia, but the rest of the world has moved on. That there's no debate.
You know, we're fairly positive given what the government has announced that you know things will settle down in Australia. Again, just to reinforce, as Phil said, that the two smallest projects in our pipeline were the ones here in Australia. We'd like to do them because you know we're an Australian tech company, and it'd be great to have some projects here locally. The company is a Global Technology business, and global is where the technology will you know have more traction.
Whether you're in love with CCS or not, what happens in the next eight years is going to be extremely difficult and extremely complex, and it's going to be there as part of the solution.
The fact of the matter, though, is that Calix only solves half the problem. It captures very well, in pure form, fantastic. You yourselves don't do anything in the sequestration, how do I say it?
Sequestration.
That's a problem.
Yeah.
You have to rely on others. It may not be forthcoming as quick, and it could be very expensive.
Yeah.
Like, look at Chevron and their problems.
Yeah.
You know, off the shelf. You know, that's probably nothing to do with it. It's probably other factors involved in it. Is it a problem for Calix?
Yeah. Look, it's certainly not part of our technology, the transport storage. I will say, if you have a look at the United States, they've got CO₂ pipeline infrastructure that they've had there since the 70s. It has been used for enhanced oil recovery, but that infrastructure is being repurposed for sequestration. Their typical costs for the transport and sequestration are under AUD 20 a ton. Once that infrastructure is in place, and I think in a previous talk, I had a mud map of all the CO₂ pipelines in the U.S. and where the cement plants were. Shortly, yes, our first deployments are going to be proximate to infrastructure in the States. In Europe, they are developing that infrastructure.
They're moving as fast as they can to Port of Rotterdam is developing one of the biggest. They're part of our Leilac- 2 consortium. Obviously, there's others in the North Sea. There's a couple of others in the U.K., and the Tarmac project that you see here that's now into FEED. That's part of the HyNet infrastructure system they're developing. Yeah, if we were developing this in isolation of any other of those developments taking place, yes, there's a chasm. But it's not huge for us because we are developing with those other developments that have taken place.
For that reason, Leilac is not as important, not as interesting to me as the iron and steel industry. Because the iron and steel industry, as you do it, you don't have a CO₂ sequestration problem.
Mm.
You know. It has far more impact on the industry than the Leilac process by itself.
It's-
Because it's really going to be fundamentally changing the industry.
Yeah. Look, just to, I don't disagree that the CO₂ part of the equation is important in Leilac. I will say it's not the only part of the equation. The interest we've had in the technology, say from Adbri, is CO₂'s the sprinkle on top of the icing. What's the icing? Renewable power and calcination. They want to access a calciner that they could switch on and off when electrons are cheap and then expensive.
Yeah.
They cannot do that with their current kilns.
Mm-hmm.
I'm not saying that that is the global domination strategy for us, but I'm saying that these are opportunities for us with this technology, where CO₂ is great to have and to separate down the track when the infrastructure's there or when you use it. That's not what drove, say in Adelaide Brighton to work with us. I don't disagree though, that the fact that ZESTY doesn't have a CO₂ component to it.
Oh.
... allows us to perhaps deploy that technology independent of CO₂ infrastructure.
Yes.
Which is attractive. Yes. We need solar infrastructure. We need hydrogen infrastructure for ZESTY. Yeah, no, it's a good point, but there are advantages to the tech other than just the CO₂ separation. Yeah. Sorry. Yes.
Can I just ask a question on the timing of-
Yeah.
Our commercialization of Leilac?
Yep.
Some of the comments that you've made today have informed my question a little bit.
Yeah.
HeidelbergCement. What we've seen to date is the Leilac, the Leilac-1, the 25,000, the Leilac-2, which has just been developed for 100,000.
Yep.
You've said today, I thought very usefully the 500,000 size and 2.2% reduction so that the 100,000 would be a likely useful scale for your customers-
Yes.
... such as Heidelberg, to introduce in their existing plants which they retrofit-
Yes.
... Heidelberg are a major producer. They've got some 150 plants worldwide.
Yep.
You're in the process of jumping from Stage 1 to Stage 2, with Stage 3 being-
Yeah.
...thought out for the full plan as you've got on your screen. The question is: What is the likely time frames for the update for the uptake by Heidelberg-
Yeah.
In terms of how many applications across their raft of plants, and how quickly do you foresee other similar companies or other major companies coming on board, such as to give some fitness to our understanding of the commercialization of the Leilac-
Yeah.
... aspects of your business?
Yeah. No. Good question. So, you can see down here who we're working with. Heidelberg Materials, obviously a major. Tarmac is a CRH company, one of the top five cement building companies in the world also. Cemex, also one of the top five or six. I think there's, like, two or three Chinese companies in there, but these three, apart from LafargeHolcim, would be three of the four biggest outside of China. We're not just working with Heidelberg. Now, in terms of timing, we want to get this thing up and running by about 2024. That provides a proof point for us, because I mentioned before, the key challenges with this is making sure we don't interrupt the operation of the cement plant, using all the process and heat streams really efficiently.
Provided we can do that, then from there to there is actually a fairly trivial scale-up. Now, with that one, who's interested in that sort of scale or rolling out more of those scales? Here's where I go to the pipeline. This pipeline, we're not outbound marketing. These are inquiries coming in. In there's several HeidelbergCement projects, but there's also many, many others. It's outweighed by other projects from other companies under NDA. The distribution of those is Europe, the States, South America, and Asia Pacific.
Are any of those Chinese companies, because they dominate the cement?
Yeah. Yeah. None are Chinese at this point. Okay? We are engaging with Chinese companies, and people always ask about that because as you say, China's 50% of global cement production. We're engaging carefully. We see there's enough acceleration deployment of the technology happening now, not to be dealing with any sort of sovereign risk sort of capability. We do have a strategy for how we deal with China and that will unfold over time, and it starts with those Chinese companies who have global operations because they have to play by the rules. Suffice to say, just to go back to the original question, in this pipeline, about two-thirds of them are cement plants and at scale.
They're in there because if you do the timeline calculation, and you're looking at 2024 as a proving point for Leilac- 2. These guys, I think I mentioned before, the amount of investment that starts from about 2026 onwards is phenomenal. These cement plants, not only do they have net zero by 2050, they've got targets by 2030.
Mm.
They have to start to deploy from, say, 2026 onwards. Now, if you count back, that means they've got to reach their final investment decision point 2024. That means they've got to start their project planning today. Okay? Four years from inception to completion of construction of a full-scale plant, if everything goes well. These guys are under immense pressure to deploy. They want to hit that financial investment decision point at the same time that we're running through our proof points for Leilac-2 . That's why this pipeline is building, because they've got to start all that planning now. 2026, touch wood, all going well, everything will start. That's the timing that these guys are aiming for to hit their first deployment at full scale.
Calix will get the royalty and not Leilac?
Leilac will get all the royalties. Calix will get 30% of that.
Okay.
And also, we're 93% of this at the moment anyway, so we'll get 93% of that, too.
Okay.
That's only item still testing.
Yes.
You're probably going to cover that later.
Let me finish the presentation. There may be a few around the corner. I can jump around. I'll touch on.
Follow this one.
I'll touch on Pilbara, and then touch on Jesse.
Run through, and then the last question.
Yeah. Okay, Pilbara. This is an application of the tech, because it can process tiny particles and be renewably powered. Simple as that. With spodumene mining, you blast the rock out, you crush it down. These guys sell the rock offshore, Pilbara Minerals. It's got to be a large enough particle size that can go in a rotary kiln. A rotary kiln does that. Rotates around with a big flame up there, and they introduce the pebbles there, and the pebbles make their way down, and they heat them up. What happens with tiny particles in that rotary kiln? They either get blown out or they just melt, and so you can't extract the lithium from them. Pilbara Minerals separate out those tiny particles. At the moment, it's a beneficiation circuit.
It's called flotation fines. We love small particles. The work started with Pilbara Minerals over two years ago to have a look at putting their flotation fines, their waste, which still has some 4%, 5%, 6% lithium, into our calciner, renewably powered. As Peter said, we've now connected up the solar panels. What happens in spodumene is you crack it open. You go from alpha to beta spodumene. Crack it open, and that then allows you to extract the lithium. This project, we obviously got some good results. Finished the scoping study, moved into feasibility, which we're now in. We've taken those calcine particles that we've produced from their fines. We've got a bench scale full hydrometallurgical flow sheet set up, and we've produced already 75 kilos of our lithium phosphate salt.
This project, we're in final documentation stage for the joint venture. The key terms of the joint venture have already been announced. 45 Calix, 55 Pilbara, 3,000 tons per annum of the lithium phosphate salt. We're targeting before the end of this financial year to get to the final investment decision on that project. AUD 50-70 million capital investment. Calix is contributing 35% of the capital required 'cause we get 10% free carry in the joint venture. 45, 55 Calix, Pilbara. This one has AUD 20 million funding for the Modern Manufacturing Initiative. That funding wasn't pulled, thank God, by the current government. Our contribution is about AUD 17.5 million.
Part of the cap raise that we did recently was for to cover our part of the contribution to this project. 3,000 tons a day just on the lithium content of a lithium phosphate salt has a street value of AUD 180 million-AUD 190 million. When we started this project, it was around AUD 10,000-$12,000 a ton for lithium carbonate. It's now over 70, ups and downs aside. This project, which was about putting together a demonstration unit for the technology, is suddenly quite a reasonable and serious commercial opportunity for both companies.
AUD 5,000 a ton of lithium salt.
So-
Operating costs.
Operating costs. We haven't talked about the operating costs yet. We're obviously undertaking the feasibility now, which will include the CapEx and OpEx studies. Okay.
AUD 5,000 to AUD 10,000 .
Suffice to say, both companies are very influenced by the gross margins available. Yeah.
I was a bit surprised that you gave away the toolbox. The joint interest, joint venture, I would have thought it's your technology it's all about. They've got the knowledge about lithium-
Mm.
... lithium markets. It's mainly about the technology that you provide. I would have thought at least half, but anyway. They were obviously hard to negotiate. What are your comments on that?
Look, I think the deal, they've got to do a lot. They've got access, obviously, to their mine. They're producing these materials. They've got access to the markets for the end products. They've got all the relationships in the markets for the end products. For us to develop that sort of expertise would have taken a hell of a lot of time and effort.
It would have taken longer, but you could have done it.
Could have done it, yeah.
Uses hydrometallurgy to extract some mineral.
Is buying guides. You can hire them.
Yeah.
That's on their part.
That's a five to 10-year process.
Yes.
People have asked, Why didn't you go with Albemarle? Too slow, that's why. Why don't we go with Pilbara and why this deal? Much quicker.
Yeah.
Is our aim to be the 45% joint venture partner with Pilbara for millions of tons a year of lithium? No. This is to demonstrate the technology and then license it to whoever wants to use it.
Yes, but if I share 45, 55.
Yeah. Yeah.
Anyway. It's all right.
Okay. Look, in the end, I think the value of the technology there as part of the overall lithium supply chain will be seen by us.
Yeah.
We do want, as I said before, the overarching strategy is very low touch business models that allows us to develop the next application next. Do we give a bit of value along the way in retrospect? Sometimes we might. Sometimes we get extra value along the way in retrospect.
It's got to be compared to some of our other priorities, too. There's a priority list that this sits in.
Your plan is very clever because you're leveraging the best companies in the world at what they do.
Yeah.
You don't reinvent the wheel, concentrate on your technology, get your life speed.
Mm.
In terms of the result for the world, you get your technology out the way quicker.
Yeah.
It's great for Pilbara and great outcome for the planet.
That's a good point because, I mean, speed is something we constantly think about. Leilac from patent to the 100,000-ton module, which will be our commercial demonstration module, will be 10 years. Okay. How do we do something in half that time is always at the top of our mind. Iron and steel, lithium, how do we do it in half that time? Okay. You always are on that curve. Do we try and do more ourselves and give less away up front or? Yeah. We could have this argument sort of all day. Honestly, yeah, I think speed will really help us here. If you look at where lithium supply and demand is, I think we'll be very pleased that we moved quickly.
Yeah. I understand your argument. That's good.
The first thing is to get it completed. We're close, but we're not quite there. So look-
Maybe.
That's Pilbara. I'll go to iron and steel quickly, because this is the other one we're trying to do really quickly. As I say, 10 years for Leilac. How do we do iron and steel as our first demonstration unit in five years from when the patent was filed? This one here, we're lucky enough to have a fully electric calciner at Bacchus Marsh. After Mark came up with the idea, in three months, we'd converted that to be able to run hydrogen in three months. We got several different ores and tested excellent results for metallized, what's called metallization, turning the iron ore into the iron. Magnetite we're still going to do a bit more work on, but hematite was excellent. Siderite, excellent.
We don't think there will be too many other problems with other types of iron ores either. This one here, the path from here is to design this 30,000 ton per annum demonstration unit. Obviously last week it recently announced that ARENA would be funding just under AUD 1 million of that. I know that doesn't sound like it's going to set the world on fire, AUD 1 million bucks. Obviously all things going well, ARENA is then very much across this application of the technology. Where would it be? We need sun for solar power, we need hydrogen, and we need iron ore fines. That sort of suggests where the technology will be placed. Why is this important?
One thing I didn't touch on why the lithium part's important either. In lithium, Australia is responsible for majority of the world's lithium currently. Salar brines have a very significant chunk as well. So South American salt. They can currently produce lithium at about half the carbon footprint of an Australian spodumene. So in a world where you've got to decarbonize your supply chain, how does that leave Australia? Most of the carbon footprint in the spodumene supply chain is calcination, is heating that stuff up. The ability to renewably power this is critical for the spodumene industry. When we go to Pilbara, we can move really quickly with them and develop the technology to be applied to the whole industry because I believe they will need it. Back to iron ore, same thing.
Australia, 96% of our exports is hematite. Hematite is not suitable for an electric arc furnace. Every other technology being developed for decarbonization of iron and steel is being developed with magnetite for an electric arc furnace. What does Australia do as the steel, iron and steel industry decarbonize and all those hematite deposits start to become unsuitable? In terms of what we do, hematite is working very well through our technology. Once we calcine it, we can look to how we beneficiate the hematite, separate it from lower grade gangue materials. Thirdly, if you're producing a green iron, you can send that overseas to a blast furnace. Every ton of green iron they put in their blast furnace, they save 1.8 tons of carbon.
There's various depending on which blast furnace you look at, 5, 10, 15, 20, I've seen up to 30% replacement of input iron ore with green iron. It's a way for Australia to remain relevant in terms of hematite exports while that industry decarbonizes without destroying or putting a big red line through their sunk capital in blast furnaces. That's the start of it. That's ZESTY iron. ZESTY steel is where these actually do get deployed on steel sites.
Anyway, look, an exciting a pplication of the technology. Designing. Wanna get to final investment decision on this towards the end of next calendar year, and obviously then go build it. We're part of what's called the HILT CRC. They include some of the biggest iron ore players in Australia. They're a rich source, if you like, for engagement on developing this project.
Yes. Quite a few would be your prime target but, in steel making, where do you get your carbon?
In steel making?
Yeah.
It's metallurgical coal or coats that they use.
No, I mean, to produce.
For the processing question. Oh, the processing process. You only need,
I know.
1%-2% steel in your final product.
I know. Carbon. Would it be from the carbon dioxide or would it be from?
Can be both. Can be from CO₂.
Okay.
You need lime to flux your steel.
Yes.
To slag it. You have a Leilac unit to produce your lime. You've got CO₂ from your Leilac unit. That gives you plenty of carbon to steel.
You never quite said that in any of your presentations. I was confused.
No worries. Sorry.
A question on the share placement. There's about 176 million shares now on issue. Who are the major shareholders?
Our biggest shareholder is AustralianSuper.
AustralianSuper.
Yeah.
Thorney Investments. How many shares has AustralianSuper got?
As a great shareholder, greater than 5%, they disclosed recently they had about 10.7% of the company, something like that. After AustralianSuper, the next largest shareholder would actually be a couple of high net worth individuals who live in the U.K., one of which is named in the presentation actually, Nick. The board and the management and the senior executives and all of the staff collectively own 13.5% of the company. Collectively, we're actually the largest single group. In terms of beyond those that I've named, we've got an incredibly well-developed institutional investor shareholder base. You know, I must, you know.
You know, both domestically and internationally as well, increasingly we're getting interest from Europe and the U.S. in investing in the technology. We've got a fabulous institutional very, very well supportive institutional shareholder base and a growing retail base as well. When we did the placement in the beginning of 2021, we had 1,000 shareholders. We now have almost 7,000 shareholders. We're very pleased that you know, we've got a large and growing retail shareholder base.
Is there any more share placements?
Not at this stage. No. We have capitalized the company to get us through to, you know, significant commercialization across a couple of these key lines of business. For us, we talked about 2026 for the cement opportunity. As the CFO, I'm very, very excited about the spodumene opportunity and the nearer-term opportunity, the revenues that that presents. We're talking 2024 calendar year for when the target for that project to come online is. At this point, there's no plan for any further capital raises at the head code developer company.
You went capital raising rather than debt because you felt you could get the capital raising?
Yeah, we were incredibly well-supported through both the placement and the SPP. That, for us, is the quickest way.
It could be done quickly.
There's no reason why, in terms of, as the company develops across each line of business, you know, specific project-related financing may be looked at. That's open to us. That's one of the advantages of splitting the business up on a line of business basis. We can almost look kind of in a bespoke way as to what's the right capital mix for each, the development of each of those lines of business. Yeah, speed, and as Phil said, we want to move quickly because the world needs it, to your point earlier on. As Peter said at the top of the presentation, there's an incredible amount of investment money available to help companies like Calix achieve its objectives.
Okay.
What is it? I don't know. Doubling around so much. Look, just in terms of, I guess,
What [inaudible]
Just in terms of where we're at, these are the milestones that we've set ourselves for this year, this financial year. Everything is on track except for a couple of little watch points, basically centered around Europe. We wanted to get a European border entry underway. That's proven difficult with the disruptions associated with the conflict, et cetera, happening there.
And gas.
Refractories. We've been working on a project with RHI Magnesita. That's currently on hold because they're basically wondering whether they have a future in Europe at all, at this point in time with gas. We complain about gas prices here. They're facing an existential issue right now. Everything else, though, working to achieve all of those different dot points along those different lines of businesses as published earlier. That's my very quick update on where we're at, year to date.
This presentation will be on the ASX platform.
Oh, yeah.
Sorry.
Yeah. Look, I think. Leave that one.
Which one? This one.
FY 2023.
Leave that up?
Yeah.
Oh, okay. No worries. Look, I'll finish my sort of formal speech there. Look, thanks hugely for, as Peter said, all the support for shareholders online and here today. Any questions, and we can obviously stay behind to answer some further questions. Also look, thanks to the board also, and Darren, and all of the team at Calix for their support, for what we've been able to achieve over the course of the last year. Looking very much forward to the remainder of this financial year because there's a lot on, but there's a hell of a lot we want to try to achieve as well. It's a technology for the time right now. We're going in as hard, as fast as we can.
Mm-hmm.
Thanks all.
Thank you, Phil.
Sorry.
No, no questions on the phone. That concludes the business of the meeting. Can I just say again, we really appreciate you being here and being online as well, and your support of what Calix is doing. The questioning today shows that you really do understand what we're doing and the sensitivities and the nuances around that. We really value your support, and we take very seriously keeping you informed, as I think you probably already know with the newsletters and the presentations that are regular. We look forward to doing just that, keeping you informed of progress across the 2023 financial year. Thank you all very much.
Thank you.