Morning, and welcome to Calix Limited's investor webinar to discuss the company's FY 2023 results. Presenting today, we have the company's CEO, Phil Hodgson, and CFO, Darren Charles, and they'll be running through the presentation that was released today on the ASX. To ask a question, please submit them via the Q&A button at the bottom of the screen, and we'll do our best to get through as many of those as possible. I'll now hand over to Phil.
Excellent. Thanks very much, Ben, and thanks all for your attention today. If we just jump into the slides that we've put up on the ASX platform. First of all, just a quick introduction to Calix for those who aren't familiar with us. Founded in 2005, it's off one core technology. We're developing multiple businesses, really targeting this area of sustainability and the transition to net zero. We've now got over 120 employees. We've invested over AUD 120 million to develop the technology. 28 patent families now in operation and active in seven countries across five continents. So, we're really listed in 2018 and really starting to develop the technology into multiple areas.
The core technology is essentially a new way to heat stuff up, a new type of kiln or furnace, if you like. In a traditional kiln or furnace, what you do is you put how you heat and what you heat in the same vessel, and effectively, the fuel and the rocks together and light a match. And it's been done much the same way for 5,000-7,000 years. What we do is we separate how you heat from what you heat, and we do that in a rather large, steel tube. That tube, I've got a little roll here to sort of demonstrate that. The biggest ones we've built are 1.8 meters in diameter and over 32 meters high. And we heat this tube to over 1,000 degrees centigrade.
And we can do that however you like. We can do that with fossil fuels. We're looking to do it using waste and biomass to burn. And also, of course, we can heat with renewable electrons, much like having sort of toaster elements, if you like, around the outside of the tube. So we heat this tube over, to over 1,000 degrees centigrade, and whatever we're heating goes down the middle of the tube. It needs to be a small particle size. Anything less than a third of a millimeter in diameter is perfect for us. And essentially, what happens is we just drop those tiny particles down the tube, and they float down over 20-30 seconds, and the radiative heat from the red-hot walls of the tube goes into those particles, and that's how we heat things up.
Why do it this way? Well, effectively, there's several great reasons for why to do it that way. The first starts with one of the applications we're developing in cement and lime. And with limestone, which is the core ingredient in cement and lime, and here's a lump here of limestone. Nearly half the weight of this is CO2 trapped in that rock. And when we heat up, when the cement and lime industries heat up that limestone, it releases that CO2, and it is mixed with the flue gases of the cement kiln, and out the stack it goes.
Now, with our kiln, the particles of cement meal, if you like, which is mainly limestone, float down, as we've said before, gets heated by the tube, and as the CO2 comes out of those tiny particles, it's not mixed with any furnace gases. It effectively comes out the top as a pure CO2 or nearly pure CO2 stream, ready for sequestration or utilization. And so what the kiln represents for the cement and lime industries is a way to directly separate the CO2 that's coming out of the rock, coming out of their raw material. And that raw material CO2 is over half their global emissions.
And so with the cement and lime industries emitting 8% of global CO2, with over half coming from the rock, you can see the reason why there's interest really growing in this particular application of our core technology. The next sort of key advantage I mentioned before, renewable energy-ready. Having a kiln, which is energy agnostic, and particularly suitable for using electrons to power up that kiln, is starting to generate a whole lot of interest from mineral processing industries. I'll talk a little bit about the deal that we've moved through now, final investment decision with Pilbara Minerals to use the kiln to heat up spodumene and spodumene fines for lithium extraction.
There are several other applications we're developing there, such as iron and steel, and in a new development that we're working on, aluminum. The last particular advantage of the technology is there's no flames and hot gases touching the particles as they fall down the tube, so we can create very highly active, and pure, if you like, products. And those products are making their way, and we're developing into water treatment, biotechnology, and battery materials applications. And I'll touch on each of these as we run through how we've gone over the year and what our targets are moving forward in those particular industries as well. So one core technology, multiple different industries. How do we sort of prioritize and target which industries to go into?
They've got to be a significant global challenge, and that's really to pick up the tailwinds that are happening around sustainability. It's got to be consistent with our purpose and values, and ethos, which is about, obviously, Mars is for quitters is the central sort of theme, but also about decarbonization, and sustainability. It's got to present a significant market share, so we're not targeting small markets. These are big problems and, big problems to solve and big markets for us to target with our technology. It's got to... Our technology has to have an exploitable competitive advantage, so our technology really has to give us, a big technology moat with whatever else is around to solve these global challenges.
Of course, the other thing we've got to do is we've got to deliver scale with this solution and we've got to do it quickly. They're the key parameters that we use to choose which particular industries we're going to be targeting. Just on sustainability, which is really core to the company. As a company, we're providing sustainability solutions, but of course, we're also looking at our own performance with respect to sustainability. We've added some targets in there for FY 2023, reaffirming our commitment to the United Nations Global Compact. We've got a new board committee established directly associated with sustainability and we've done our first greenhouse gas baseline assessment for our activities.
And so what we're gonna be doing in FY 2024, we're gonna be looking at our own emissions reduction roadmap. We're gonna prioritize gender diversity at all levels of the company, measure and reduce waste, with the ambition of 100% sustainable inputs to the business by 2030. And our 2023, sorry, sustainability report is coming out later this year. So watch this space on that one. So just in terms of, highlights for the year just gone, if we have a look across, back across the last 12 months, there's been pretty substantial, progress made across all areas of the company.
First of all, key achievement for us was to sign the first license agreement for our CO2 mitigation technology in lime and cement with Heidelberg Materials. Not only was it first for us, it's a first of a kind for the industry, to have a royalty-type arrangement or license-type arrangement for application of the technology in that particular area. Hugely important for us. We've completed some institutional and also a share purchase plan placement across October and November last year, and Darren will talk about the strength of our balance sheet moving forward as a result of that placement. We had some funding award from ARENA for our iron and steel decarbonization project, and I'll talk a little more about that a bit further down in the presentation.
With CEMEX, again, with our CO2 abatement technology for lime and cement, we now have 3 projects and progress on developing a commercial arrangement with CEMEX for the application of the technology. And also, I mentioned before our joint venture with Pilbara Minerals. In November, we formalized that, and post-balance sheet, or post end date, financial year, just in August, a few weeks ago, we announced the progress of that project passed our final investment decision. So that project, I'll talk a little bit about as well. Some few other little surprises, I guess, not foreseen at the start of the year.
There was a green methanol project that was successful in getting some funding from ARENA and the German government to start to progress the use of CO2 that's captured from, say, lime production in the production of green methanol. I'll talk a bit about the importance of that when it comes to things like green shipping and green aviation. Lastly, another one that perhaps wasn't foreseen at the very start of the year, which progressed very nicely for us, was the signing of a memorandum of understanding with a company called Heirloom. Bill Gates backed direct air capture technology, and only recently, some pretty significant announcements have emerged around direct air capture in the United States that are very exciting. So a year that was quite really very positive for us.
We mark ourselves, of course, fairly harshly. We've got, we set our ambitions pretty high. Across the board, we did pretty well. I think we certainly did a whole lot better than a pass. Let's call it a credit, somewhere in between a credit and a distinction. But we'll talk about our water business and the progress that's really starting to make, which is excellent. In biotech, we had quite a good progress across all areas in terms of crop protection, marine coatings, and a new biotech application. A little bit delayed in a couple of those areas, which is why we sort of marked ourselves down a bit. But even since the end of the year, some really into the financial year, sorry, some really interesting progress there.
In advanced batteries, also, again, we marked ourselves pretty hard on our first commercial format battery not quite being ready by the end of the year. And of course, since the end of the year, that's started to come on now, and I'll talk a little bit about that. In sustainable processing, very good progress there. We decided not to pursue refractories just at this point in time. It's a tiny market compared to what we're focusing on in spodumene, iron and steel, and now emerging in aluminum. And lastly, in Leilac, we did pretty well. We converted a full license agreement. That was the Heidelberg license agreement. We didn't quite get there on a couple of others that have been negotiated, but watch this space.
And in Leilac-2, we had a little bit of a delay in permitting there, and I'll talk a bit about that delay, but we've started to procure long lead items, and in fact, the site works have now commenced again since the end of the financial year. So overall, a pretty good result, a credit. Let's call it a credit, 6, 6.5 out of 10 or so we'll give ourselves. But substantial progress across multiple different parts of our business. So just, I guess, on the financials, I'll hand over to Darren to have a quick chat through where we're sitting.
Yeah, thanks, Phil, and good morning, everyone. I'm really happy to be here and present our financial results for FY 2023. A year in which again we achieved a lot, notwithstanding marking ourselves down in a couple of spots. The company continues to kick many goals across all of the areas of the business that we're investing in applying the technology platform to. So in terms of kind of high-level numbers, you know, the key issue that we set out to achieve over the financial year was to continue to build our team.
To build a team of talented people to help deliver against the promise of the technology and the opportunity that it provides for us. As we can see on the screen, we've added over 37 people in engineering and R&D across the various different areas of the business. And we're also expanding our production capability, particularly in the water business, which I'll come and talk about a little bit more in the next few slides. We've also continued to invest in various different assets that we're building. Again, U.S. production capability, which I'll touch on. Some facilities down at Bacchus Marsh, as we flagged at the cap raise last year, to improve our ability to turn around testing and things like that.
Also, obviously, we've started a project, we've been working on the project with Pilbara, and as Phil mentioned, we've started long lead procurement items with Leilac, Leilac-2. So, for me, pleasingly, our overall revenue result was very strong for the year, up 42% on the last financial year. And, as well, at the same time, what was pleasing within the water business, we've seen significant increase in gross margin and gross profit. So, really kind of delivering on the promise that we previously talked about in terms of identifying those customers who we can develop, you know, good service and relationships with, deliver quality product, and get good return on our investment on.
In terms of the balance sheet, at 30 June, we had close to AUD 75 million in cash in the bank. And again, I'll talk about, you know, kind of where we're positioned on the balance sheet to move forward in the next few slides as well, so. Just honing in then on the P&L. As I said, a 42% increase in revenue, a very strong contribution from our water business. We touched on at the first half results, how we were encouraged by the performance that we're seeing and growth in the US and in Australia, in fact. In the US, our business grew over 28% in the second half compared to the same time last year.
And that was even before we've been able to sort of complete and leverage some additional production capability that we're building in the U.S., in Texas, and also in Wisconsin. So we're really positioned very well to kind of continue to grow that U.S. water business. We've also obviously achieved very significant contribution of our revenue, top-line revenue, in terms of our grants and rebates. There are a lot of incentives and programs that we've been able to kind of tap into and co-invest with our shareholder funds with various governments around the world, both here in Australia, with our research and development tax incentive, and in Europe, obviously, with the Leilac funding. So again, very strong revenue growth.
In terms of our operating expenses and our operating results, again, we sort of set out a plan when we came to shareholders in October, November last year, that with the tailwinds that we're seeing and the interest that we were seeing in the technology, we really wanted to continue to build out our team, and we've certainly done that. Again, with the majority of the investment in R&D and engineering to support all of the activities that we're doing. So, in terms of from where I sit, you know, no surprises in terms of the investment and the activity, and very strong and positive performance in terms of revenue growth.
Just on the balance sheet then again, key takeout from me, and as I sit here as the CFO of the company, we've got a very strong and clean balance sheet to take the business and support the business as it moves forward. You know, we've got significant amounts of kind of cash in the balance sheet to pursue our activities. We have no debt, which is fantastic. Yeah, we're really set up to pursue the activities that we've set out over the course of the next couple of years.
What we've got as well is strong flexibility as various different projects and opportunities emerge, to kind of identify the optimum way to fund those activities, as they emerge as well. So really strong kind of financial position for us, one that I'm very happy about, and one that sets us up, you know, as we move forward. Just the final few comments from me in terms of our operating cash flows. Again, essentially, you know, we've been investing in building our team to be able to take advantage of the platform that we're developing. There has been an increase in working capital. Primarily, that's associated with the timing on when it, when we'll receive some of our grants.
This next couple of month period, there's, there's some significant cash inflows associated with R&D tax incentives and things like that. But, but all in all, like I said, essentially, the operating cash flows reflect the operating performance that was on the previous tab. So, again, nothing in terms of surprises from my perspective. In terms of our, our plant and equipment and our IP, what are we investing the money in? As I said, we're, we're building two new production facilities in the US. We've seen significant growth of our existing platform, manufacturing platform that we have there. It's, it's given us the confidence to, to continue to expand east in terms of the US, from our Pacific Northwest base into Texas and, and Wisconsin, as I mentioned, and, and those plants will come online.
We're commissioning one, I think, at the moment, and another one will be ready in the next month or two. So really set up for continued strong growth in the U.S. As Phil mentioned before, we started procurement of long-lead items for Leilac-2, and that's included in the property, plant, and equipment line there. And again, very exciting from my perspective, you know, we've been investing in our midstream project with Pilbara Minerals. That's an unincorporated joint venture, which will be accounted for as a joint operation. And again, Phil will talk a little bit more about that, but it's essentially a production facility that will produce a lithium phosphate salt. Calix has capped its investment in that plant at AUD 17.5 million.
It's a AUD 105 million project, but we will own 45% of that. So 45% of the revenues and expenses and the, and the facility will be replicated, you know, into our balance sheet and accounts, you know, as that plant is constructed. So, you know, for me, in terms of the placement that we completed and the position that we're in right now, you know, we're really well set up for the next 2+ years with the current project commitments, and we've got a very strong position to keep pursuing these opportunities that the strong tailwinds that Phil will talk about provide for us. Over to you, Phil.
Excellent. Thanks very much, Darren, and just taking on Darren's theme about the tailwinds and why we're making all this investment in people. It's really a snapshot here just across a few jurisdictions across Europe, U.S., and Australia. We've seen dramatic change in policies and commitments, not only from a political perspective, but also from the corporate perspective over the course of the last two years. And all of these are really fueling a decarbonization effort that our technology is very well placed to take advantage of. I won't go through any of these in detail. This pack is available through the ASX platform, but you can see there just as a snapshot across three jurisdictions, what is happening.
And even here in Australia, where two years ago, not a whole lot was happening, we're starting to see real, I guess, pace of change here in terms of decarbonization. And the way industry is starting to react is refreshing. And so, again, we're very well placed even here in Australia, whereas our focus previously had mainly been in Europe and the States. We're certainly focusing on some interesting projects here in Australia as well now. Just moving through then, each of the lines of business. Leilac is our, a name for our Low Emissions Intensity Lime and Cement. That's the CO2 capture for lime and cement.
I mentioned before, it's as if the lime and cement are sort of 8% of global CO2 emissions, but there's some real drivers to decarbonizing that industry. We talked a little bit about jurisdictions and some of the policies that are coming in place. In Europe, the penalty for emitting a ton of CO2 is you've got to go on the market and buy a permit. That's exceeded EUR 100 per ton recently. And so that penalty, if you like, is really driving the cement and lime companies there to look at their decarbonization efforts. And in the U.S., the recent introduction of the Inflation Reduction Act saw the tax incentive increase to $85 a ton for carbon capture and sequestration.
And so these tailwinds, I guess, from a policy perspective, are really driving a lot of the behaviors we're seeing from industry. But not only that, the industries themselves, their stakeholders, their shareholders, are also demanding plans for net zero. And that, of course, is also driving across the globe, not just where there's policy jurisdiction. Across the globe, decarbonization efforts by these major companies. Just in terms of our solution, where are we at? We have built in 2019 the first pilot project there. That's a 25,000 tonnes per annum separation capacity unit at a Heidelberg Materials facility in Lixhe in Belgium. That's the second largest operating facility in the world in terms of CO2 separation today on a cement plant. In fact, the largest outside of China.
So already at scale, even though we call it pilot. Leilac-2, which is a four tube version of that module, targeting 100,000 tons per annum of CO2 separation, at a Heidelberg Materials facility in Hanover, Germany. I'll talk a bit about where we're at on that particular project, but that will be our module, and then from that module, we'll then scale to what we call Leilac-3. Multiple. You know, which is getting up to some 20 or 25 tubes of those tubes and that are focused on the CO2 separation there. And you can see along the bottom there, the industry partners that we're working with there, none of which are minor players by any sense of the imagination.
Port of Rotterdam, by the way, announced overnight environmental approval for the setup of their CO2 sequestration hub in Europe, the largest in Europe. So a partner on our project there, and a very important player in ultimately what's going to be happening with the CO2. There's, I guess, a full-scale vision of what our Leilac facility, the Leilac-3 facility will look like on a cement plant. To give everyone a sense of how big an opportunity this is, we'd need to build one to two of these a week between now and 2050 to mitigate the CO2 emissions from the cement and lime industries. So that's how big an issue it is for them and how big an opportunity it is for us. Key highlights during the year.
I talked a bit about the Heidelberg license agreement that was executed. It's a royalty or license type mechanism. Very important for us to establish this, because that establishes our business model in this area. There's a royalty floor, there's a variable component, and a cap. We can't disclose exactly what they are, but, you can imagine, in terms of typical royalty rates, we're in that typical range, low being sort of 2%, high being 10%, so it's probably somewhere in the middle there of the value of a ton of CO2.
So with 1.4 billion tons of CO2 to be mitigated, potentially, using our technology and royalties of those sorts of multiples of euros, you can start to get a sense of what the license total addressable market that we're looking at here with the technology, which is substantial. Just in terms of other areas, again, we announced the methanol-green methanol project in South Australia during the year. That one there, we're working with a number of companies, Vast Solar, and ARENA, and the German government are chipping in some money there, too. Why green methanol? If you take green hydrogen, combine that with CO2 to make methanol, methanol is one of those things that is being targeted to decarbonize shipping and potentially aviation.
You can take the methanol and convert that into a synthetic aviation fuel. And that's off-the-shelf technology today.... So it's not as if this is, huge technical advancements that still need to take place. So this particular project here, which will be in South Australia, is quite exciting. To give you an idea of how things quickly are moving, how quickly things are moving in the shipping space, Maersk recently announced that their next 25 vessels will be dual fuel, including methanol. So methanol is really starting to come to the fore in terms of the green shipping solution. So a very exciting project there for us. And the last, advance during the year was, the announcement of this, memorandum of understanding with the Heirloom, Bill Gates-backed, direct air capture technology.
Direct air capture is capturing CO2 directly from the air, and in this case, with the Heirloom technology, they're using what's called calcium looping. So the calcium goes through our Leilac technology out into Heirloom's equipment, and in that equipment, it absorbs the CO2, turns it back into limestone, and then it cycles back through our equipment again. Pretty exciting project. And just in the last few weeks, Project Cypress, of which Heirloom is a part, was one of two hubs for direct air capture, named for $1.2 billion in support under the U.S. Department of Energy's Direct Air Capture program. So, this particular MOU outlines a royalty as well. In this case, $3 per ton of CO2 captured through our technology.
So it's a light capital touch, high-margin, royalty-type business model we're pursuing here. And Heirloom are targeting 1 billion tons of capture by 2035. Now, hugely ambitious. If they get a tenth or even a hundredth of the way there, it still represents a substantial opportunity for us, so very pleased with that particular project. Lastly, just in terms of the pipeline within the Leilac group, we've got 76 projects now in that pipeline. So that pipeline has really built over the course of the last two years. And within those projects, we've started to see some movement down the pipeline. Two projects into FEED, including Tarmac. We've got three new projects that we can talk about with CEMEX. Adbri, we're continuing to work with on a facility here in Australia.
And Leilac-2, obviously, as well, which is in FID, past FID and in construction now. So demolition has started on the site works there. We had a bit of a hold up. We had some bats taking up residence in this disused tower that needed to be demolished. That delayed the permitting somewhat, so that will push us back a little bit on our commissioning into 2025. But that demolition has now started, and the long lead item procurements is now underway. So Leilac-2 moving, albeit a little bit frustrating in terms of the permitting delays. Just moving through into sustainable processing. We mentioned before the project with Pilbara Minerals, that has now passed its final investment decision.
We're targeting that one to start construction this financial year, and targeting the first production of lithium salts, moving into financial year next financial year. So, let's call it early calendar year 2025. The CapEx has moved up a little bit on there, not surprisingly, given the inflation, inflationary impacts that have run through the economy. However, we've kept our capital commitment, as Darren mentioned, at AUD 17.5 million. And so effectively, our free carry has increased in that project, so we still have 45% equity in that project. It's targeting 3,000 tons of lithium phosphate salt. Street value today, just of the lithium in that salt, is about $85 million.
So a significant project for us, a demonstration project, but still, of small commercial consequence. And the lithium phosphate salt, in and of itself, obviously has some, quite some utility in terms of its, lower carbon footprint, provided we can make it with renewable electrons. But also in terms of, the way, lithium iron phosphate salts are really increasing in the auto industry. And so the ability to deliver the two molecules, effectively for the price of one, we think will... And we're certainly getting very strong indication, which is fed in the FID decision, that that particular new type of phosphate salt product is gonna be of high interest to the battery industry.
Just in terms of our iron and steel, key thing here, we were targeting to complete an ore program over the course of the last three months of the last financial year, just the last quarter. We've extended that ore program given the demand coming in. We're now testing iron ore from just about every iron ore producer in Australia and at least one offshore, and the offshore interest is starting to increase as well. So we've expanded our program, and we'll be running that ore testing program over the course of this quarter and next quarter. This particular project is supported nearly AUD 1 million in ARENA grant funding.
The target here is to put together a 30,000-ton per annum demonstration facility, a front-end engineering design, and then look at where and how we build that, as a first-of-its-kind demonstration facility. The key advantage of our technology here, same core technology, but the key advantage is that we minimize green hydrogen use in making green iron, which is the most expensive part. It's a highly exciting project for us. A lot of interest coming in, and an extended ore program is what we'll be focusing on in the first half of this financial year. Just under advanced batteries, really targeting here to make some interesting manganese-based materials. And also we're starting to look at iron-based materials.
Again, it's the unique properties of our kiln, without contaminating these materials and maximizing surface area and targeting the crystal structures we want, that's our competitive advantage. We were a little slow in getting our first commercial format together. We missed our target, as I mentioned, by the end of the last financial year. However, that commercial format pack is now ready. It has started cycle testing, and it is demonstrating great performance in terms of high power. We still need to work through the cycle performance, but the high power performance is definitely there.
So, obviously, there are some areas that we're starting to look at as to where high power is really an advantage, and power tools and these sorts of things could be quite an interesting area to look at this first material that we've produced. We're also looking at lithium iron phosphate, as I mentioned before, and also adding a little bit of nickel to increase the energy density. So our battery program is progressing well, albeit a little delayed on the commercial format cell, but that cell has now been constructed and is undergoing the cycling testing. Just on the biotech side of the business, this particular area, I still see as highly prospective for us.
If you have a look down the market trends on the right-hand side, these don't get quite the same air time as decarbonization, but they will.... In terms of antimicrobial resistance and the rise in that, I think that sort of area will start to get a whole lot of focus as this decade closes out. We have a unique product here in a high-surface area magnesium oxide material we make, again, with our core technology. And in agriculture, marine, and biotech, specific biotech areas there, such as for veterinary applications, we're really starting to get some great results and make some good progress. In agriculture, we're collaborating with a cooperative. We're in our second year of extended field trials, like, not just a tiny plot.
These are hundreds of hectares of application. And really there with the cooperative is looking at the replacement of a fungicide called Mancozeb. So that's progressing well. Marine coatings, this is replacing all, as much as possible, the copper that sits on the bottom of boats that ultimately peels off and fouls the sea with pretty poisonous material. Some great results there. We're working with two coating companies, and they're starting what they call their dynamic tests on that. And lastly, antimicrobial resistance. A little late getting this one through the clinical trial stage, which is where we wanted to get to last year.
But the part that we're playing in the CRC SAAFE, and SAAFE is the Solving Antimicrobial Resistance in Agribusiness, Food, and Environment, so it's a rather long acronym. But that one there, they're starting to use our magnesium oxide materials to focus on livestock health management. So that's a quite exciting area there that the product's now moving into as well under a structured research program with all of the SAAFE CRC participants. So lots happening on the biotech front. Lastly, in water, as Darren mentioned, I think water itself has had a great year, and we're very pleased with what's happening in the U.S. as far as growth is concerned. Really starting to see the growth stalled a little bit, I guess, during the COVID era.
But now that that's over, we're moving through much more efficiently now to establish those new production centers. Just, we've already seeded sales in Texas, and that plant is being commissioned now. A huge opportunity there. And the Wisconsin plant is also under construction, targeting before the end of this year for completion there to expand there as well. So the U.S. really starting to organically grow very nicely for us, and so I'm very pleased with what's happening in the water business. Just in terms of what we wanna do to prioritize next financial year, or should I say this financial year, the electrification of industrial processing and the unavoidable CO2 emission capture part of our business continues to be a major focus. There's no doubt there's enormous opportunities opening up there.
The pipeline, as you saw in the like, is building as it is in sustainable processing, covering iron and steel, spodumene and lithium production, and also now, alumina is emerging as an area there, too. We're gonna be combining our water and biotech business into magnesia. Magnesia is the source, if you like, of all of the activity in that line of business, in those two lines of business, so we're gonna combine into one to simplify our overall business. And we're gonna continue to look at our battery materials as well. There's great progress we've made there in terms of getting this first commercial format cell, and there's a couple of very prospective chemistries following on behind.
So just in terms of our KPIs, for the coming year, CO2 capture there, we've got to get Leilac-2 moving as quick as possible, so we wanna get all of that permitting, and the civil works complete on that site, and construction commenced. And so hopefully, if the bats are moved safely out of that tower that's been demolished, we'll get that all underway. We're gonna continue to move those projects down the pipeline. Plenty in the pipeline. It's all about movement this year. And lastly, a green methanol consortium project, we wanna get to basis of design on that. Just in terms of sustainable processing, we wanna get the construction started, of course, on the project with Pilbara Minerals.
And with respect to our iron and steel application called ZESTY, we wanna complete that front-end engineering design, leading to a financial investment decision, to move ahead and build that particular demonstration facility. That will also be contingent upon and be informed by this expanded ore program that I talked about earlier, which we're now gonna extend over most of the rest of this calendar year, given the interest and the demand that's come in. And in alumina, I'll talk a bit more about this as we move through the year. We have started to look at what the application of the technology in refining aluminum trihydroxide or aluminum hydrate down to alumina, a very potentially significant application for us. And so that one there, we're putting a bit of upfront investment into.
Advanced batteries, we'll get that commercial format cell tested and cycled out, and so that's a key KPI for us. We're gonna complete the front-end engineering design on a cathode production facility, and we're gonna look at these other new chemistries that we've started to develop and how we can put that into, again, a commercial format to fully test out the cycling capability there. Lastly, excuse me, in magnesia, water and biotech continue down their pathways. So very pleased with both of those businesses and the progress they're making under the one banner of magnesia, but also we're adding there magnesium metal, a highly critical material in aerospace, dare I say defense, but requiring significant decarbonization. So there's some opportunities that we're seeing in magnesium metal.
We're gonna have a look at what our technology can do to help decarbonize magnesium metal, and that'll be a basis of design for a plant that we're targeting this year. So that sort of summarizes all the things we're going after this year and hopefully summarizes the year that's just gone as well. Happy to answer any questions, Ben.
... Yeah, thank you, Phil and Darren. Just a reminder, if you'd like to ask a question, please do so via the Q&A button at the bottom of the screen. All right, the first question: Can you please provide some color on the spodumene pricing mechanism with Pilbara Minerals? This is considering that the midstream project could be fed entirely from run-of-mine fines that cannot be used in conventional kilns. What discount pricing may be applied to the offtake spodumene price fed into the plan?
Yeah, so on that one there, the transfer price, if you like, between Pilbara Minerals and us, is commercial in confidence. But suffice to say, they do get paid fair value for their spodumene fines. The fact that if those spodumene fines are very low in lithium or too fine to be fed in any kiln, then obviously they're very, very low value. So we're gonna be undertaking a whole series of tests to determine what actual concentration, what particle size is best suited for the midstream salt facility. But suffice to say, the actual final grade of that and size of that material that's going into the plant is gonna be subject to that testing as we undertake that in early 2025.
Thank you, Phil. Also, what are the difficulties in going beyond 98% lithium phosphate purity with the midstream and achieving battery-grade products?
Yeah, so the aim with the midstream plant is not necessarily to target what we call battery grade. The whole idea, and the word midstream, is about the fact that what you're doing is transporting a lithium ion and a phosphate ion, if you like, to a battery materials producer. They've got quite some capability to further refine that material to what we'd then call battery-grade materials. And so the interest, if you like, from those players was critical in terms of us coming to a final investment decision on that particular project. And suffice to say, we were highly encouraged by the interest shown by those battery materials companies. So to be clear, we're not targeting battery-grade material ex the mine site, and I would only add, those who are, it's not an easy thing to do.
And so we feel that a midstream project and a midstream solution for a mine site is actually the optimum solution, which is why we ran with it.
Thank you, Phil. Can you please provide any efforts to drive down the CapEx of the Calix kiln technology? Given your modular design, are there any discussions with specialized plant builders or fabricators that may help drive down the upfront cost of construction and the time to build your kilns?
Look, absolutely. If you, if you have a look at, at how many tubes we need, how many shell casings, how many modules, we may need as we decarbonize industry, there is huge opportunity to drive the cost down. We are. Of course, we are talking to multiple different fabricators, manufacturers, engineering firms, et cetera. One thing I will say is, you know, certainly, if we have a look at, say, for Heirloom, for example, part of the the royalty regime, benefits us in terms of the royalty payment as the costs come down. So mass, if you like, mass manufacturing techniques are absolutely in our sights to get the costs down for these facilities.
The other thing is, if you have a look at the Heidelberg Materials agreement, for example, that one there, because it's a pure license arrangement, what we like about that and what made it, I guess, a win-win with Heidelberg Materials is they can use their procurement muscle to drive down the cost of our technology. We don't mind who makes the tube, who makes the structure. And so, that agreement's great because we can use others' procurement muscle to drive down the cost of our technology, which only improves, obviously, its techno economics. So yeah, very, very much at front of mind as to how we continue to do that, and there's huge opportunity to do so given the potential application of the technology across all these different areas.
As I say, it's the same one core technology. How many tubes will we need? How many furnace casings? All of those things will help drive down the cost of the technology substantially.
Thank you, Phil. Next question: So, other income rose year-over-year, primarily due to your R&D incentive income. Would it be right to assume that that's in relation to income from the EU Horizon program for Leilac-2? And there's another bit to that question, but I'll let you answer that one first.
Yeah, no, in fact, it's not. It's primarily associated with incentives that we get here in Australia. So essentially, I flagged that we've made a significant investment in our people and our engineering and R&D capability. So we've been able to take advantage of incentives that the Australian government have provide for our activity in those areas. So there's, in fact, Leilac is, I think it's - and again, it's in the annual report. It's certainly less than 15 or 20% of the amount of R&D of other income that we've reported this year.
Thank you, Darren. Just adding to that, so an extension to that question, are you able to provide some guidance on R&D incentive receipts for 2024? Will they be higher or lower than FY23?
Look, yeah, I mean, in terms of where we are as a business, we typically don't provide guidance in terms of, you know, specifics around revenues and, you know, expenses and things like that. But what I can say is that, you know, we've been very-
... fortunate to be well connected and well engaged with governments both domestically and internationally, and we've been well supported with what we've been doing through grants and rebates, either here in Australia or in Europe. And you know, we're increasingly looking to the US as well. In terms of our R&D and our engineering, it's a fine balance between you know, continuing to invest to take advantage of the technology platform and you know, go after the opportunities that we believe represent significant value—future value for shareholders. And making sure we've got access to grants and research rebates, et cetera, to help fund them. So but fair to say, we've got significant grants already secured around things like Leilac-2.
And as Phil mentioned, there are some other things like the HyGate project and ARENA. We actually haven't drawn down on the ARENA grant yet for ZESTY. So and, you know, we—as I said, we continue to be well supported and have a good working relationship. So at this point, you know, like I said, I'm very comfortable with the balance sheet, with the access to capital that we have, to kind of pursue the opportunities that we've got in front of us. And you know, it's fair to say, like I said, we continue to be very well supported by the various governments' incentives that are kind of in the areas in which we've got people.
Thank you, Darren. To the best of your ability, are you able to provide any color on your progress with CEMEX regarding the pending commercial agreement? And if you're progressing discussions with any other potential commercial partners for your Leilac technology.
Yes, we certainly are. And, I can't provide any more color than that, unfortunately. One of the things you'll notice about our KPIs, we—I think we've done ourselves a bit of a disservice setting a certain number of agreements to move from this particular phase to that particular phase. I don't think that that serves us in the best interest when it comes to negotiating those agreements. And so we're not gonna put those out in terms of a timeline. We need to get the best outcome for Calix and its shareholders. And so the commercial arrangements, we're not gonna rush to get something done for the sake of ticking a box.
But having said that, you know, there's several commercial discussions happening right now, obviously, and then we'll update the market as and when we can on substantive progress on those.
Thank you, Phil. Is the lithium to be produced by Pilbara plant, by the Pilbara plant, going to provide a nanoactive lithium? And if so, is it likely to sell at a premium?
No, we're not targeting nanoactivity with this particular area. We're using the unique properties of the kiln to maximize recovery of the lithium. So when we break open, if you like, or when we heat up those fine particles of spodumene, we're breaking open that ore. And the temperature control there is all about limiting the melting of other materials that covers up the cracks that you've made as you broke it open. So the particular aspect of the technology that's of advantage there, apart from the fact that you can heat it, heat the kiln renewably, is the fact that we have very fine temperature control to limit that melting. So no, we're not targeting nanoactivities. What we are targeting is utility.
So what we're targeting there is that a molecule of lithium and a molecule of phosphate are both of value to a potential battery producer, especially as lithium iron phosphate becomes and is the fastest growing EV battery chemistry today. And so the ability to provide two molecules into one that cuts down the carbon footprint, obviously, and transport costs and all these sorts of things. They're where we see potential upside in terms of value of lithium content. We haven't relied or quoted anything about that with respect to the potential revenue that we might see from that particular plant. We're hopeful we can get value upside, but until we actually secure that, we won't obviously be claiming that just at this point.
All right. Thank you, Phil. That concludes the Q&A segment. We'll get back to those individuals whose questions we didn't have time to answer. So I'll throw it back to you, Phil, for closing remarks.
Fantastic. Thanks, Ben. Well, thanks everyone for your time again this morning. Obviously, quite an exciting year in the past with quite a few advances across the multiple parts of our business. This particular year, we're gonna start to see some real traction on the ground in terms of physical things being built. Obviously, there's the Pilbara Minerals project, there's the Leilac-2 project. Hopefully, we can start to move quickly to close out formally around the opportunities in direct air capture and the green methanol opportunity. So quite an exciting year coming up with respect to steel, bolts, civils, and actual projects starting to appear. So really looking forward to that, and gonna be a very exciting year commercially for us as well.
Thanks everyone again for your time, your interest, and your support in Calix.