J ust give you a second.
[crosstalk] We still acknowledge the First Nations people and traditional custodians on the land on which we live and work, and respect and recognize the deep connection to the land. We pay our respect to elders, past and present, and extend that respect to all First Nations peoples. We still are committed to fostering a fairness and belonging at our workplace and believe everyone should feel safe and respected. We still have sustainability at the core of what we do. We firmly believe that Mars is for quitters, so that hasn't changed. Let's move through into the overview, if you like.
The results highlights we'd like to talk about today. Darren will take us through the numbers. Record revenues, continuing strong year-on-year growth. Operating cost discipline focus, we'll cover off all the work that we've been doing there. I'll talk a little bit about strategy. The fact that we're really starting to emphasize capital light strategy, and the evidence, I guess, to show that we're being successful in that focus. I'll talk about the commercial milestones that we've achieved this year, which have been substantial. New global strategic partners are part of that.
Rio Tinto, Norsk Hydro, Adani Group, all joining us to support the commercialization of our technology in some very, very large markets. We think it's been a very good year for us from a business perspective. We'll cover that off as we go through the presentation. Darren, do you want to take us through the key financials?
Yeah. Thanks very much, Phil, and good morning, everyone, and thank you very much for joining us. It's my pleasure to take us through the next few slides, the next few financial slides. Some really great results from my perspective to start with. Firstly, some records. Record revenue, record gross profit. Just touching on the revenue, a 16% overall increase in revenues, overall revenues, and a 28% increase in product and services revenue. Products and services revenue just exclude things like government grants and other income and things like that.
Product and services revenue grew from AUD 28.2 million to AUD 36 million in FY 2026. We've also seen significant growth in the Magnesia business, which is our wastewater treatment company part of the business. 40% increase in Magnesia products and services, touching AUD 34 million up from AUD 24.3 million in the prior period.
Obviously, we have also got contribution from Leilac and SusPro as well. The other side of the coin, and importantly, is continued discipline across OpEx and CapEx. We delivered significant improvement in revenue and gross profit at the same time as significantly reducing our operating cost base, down 24% from AUD 39.5 million last year, as well as significantly reducing our cash CapEx, down 80% on the prior year.
In summary, from my perspective, the financial highlights are a strong year of cost and cash discipline with record growth. Christineh, if I just flick to the next slide and we will talk through each of those points in a little bit more detail.
The first slide there just emphasizes, from my perspective, record revenue and record gross profit, both in terms of the actual numbers and really strong growth in gross profit as well. As I said before, 28% revenue growth and 34% growth in gross profit to AUD 14.2 million. I mentioned cost discipline across every element of our operating cost base, sales and marketing, R&D, and admin.
We have made significant changes and structured the business to continue to deliver solid revenue growth, continue to deliver the commercial milestones, which Phil will talk more about, that saw our operating cost base come down from AUD 39.6 million in FY 2025 to AUD 30 million in FY 2026. Again, we have delivered a very strong improvement in our underlying operating result.
There has even been reductions in our depreciation, amortization, share-based payments, expenses year on year. Then again, I just want to reiterate, I guess, during the year, we did have an impairment for the unincorporated joint venture. This was announced at the half year, so this is not new to the full year.
Again, essentially, as I said, at the half year, that impairment unwinds or unwound the non-cash gains that we had recorded in the accounts over the previous two financial years. A very strong improvement in the operating result of the company. Just digging into the revenue, in terms of the next slide. Thanks, Christineh.
Again, the chart on the right-hand side is one I think that most CFOs like to see. Strong growth in revenues, and that is year on year. You can see from back in 2023, where we reported AUD 18.6 million in products and services revenue, we are now almost doubled in 2026 to AUD 36 million. Importantly, we are seeing accelerating growth in the second half. In the first half, we delivered AUD 16.3 million in products and services revenue. That was up to AUD 19.7 million in the second half.
I will talk a little bit more about Magnesia, the water business on the next slide and why we are still very confident of delivering continued growth in product and services revenue. Just back to the other slide. Sorry, Christineh.
28% growth in overall products and services. We also grew our gross margin. Our gross margin last year was 39%, 40%. We have delivered strong growth in revenues at very healthy gross margins. Again, great execution and delivery by our operations team to be able to do that. Again, significant and record gross profit up 34% on the prior year. Just digging in then now on the next slide, Christineh.
The Magnesia business, which is primarily focused on serving wastewater treatment. Our wastewater treatment business. Again, very fast growth FY 2026 versus FY 2025. In FY 2026, we've achieved a 40% increase in revenue from AUD 24.3 million last year to AUD 34 million this year.
Importantly, it's worth recalling and remembering that we announced around December that we'd secured a new contract with a new customer in the U.S. that would be worth up to AUD 10 million moving forward. We've only started to deliver product and services to that customer in the early part of calendar year 2026. I think from February, we started to ramp that.
That new customer, as well, has only just started to contribute to the revenues that we've been able to deliver in FY 2026. We've also just completed a new manufacturing facility in Caloundra. I guess in summary there, from our perspective, a great year in Magnesia. We're certainly looking forward to continuing to deliver strong growth in revenues and gross profit in that part of the business. The other point that I wanted to make in terms of the Magnesia business as well, and this is not in this slide, but the detail is set out in our financial statements and in the segment note.
In FY 2025, the Magnesia business delivered approximately AUD 300,000 of EBITDA for the group. In FY 2026, it delivered AUD 3.8 million worth of EBITDA for the group. A very strong performance from our water treatment business. We think there's lots of scope for that to continue to improve. Just with the next slide, Christineh, if I may.
Again, the other theme on top of revenue growth was cost and cash discipline. I think that really is illustrated quite well with this next slide. Again, I like the chart on the right-hand side of this slide in the deck. Again, we've reduced our operating costs from AUD 39.5 million in FY 2025 down to AUD 30 million. You can see looking back sort of the second half of 2024, first half of 2025, we were run rating at about AUD 44 million. We've gone from about AUD 44 million in operating cost base down to AUD 30 million of cost base, in a little over 12- 18 months.
Again, we've delivered significant revenue growth and some significant commercial milestones whilst doing that. Again, great performance in the team in terms of focused business delivery and a streamlined operating model. Again, not only on the operating cost side of the business, we've also come out of a significant period of cash CapEx spend. Again, in FY 2025, cash CapEx was AUD 10.3 million.
That was reduced by 80% down to AUD 2.1 million in FY 2026. I'll just touch in the second half of FY 2026, it's about AUD 1.5 million I think, as you can see there from that chart. The bulk of that has been some additional spend, in terms of engineering as we move towards, touch wood, an FID for the Zesty demo plant.
Again, that we've previously announced, obviously that we're working on in partnership with ARENA and Rio Tinto. There was a little bit of CapEx spent on the Zesty demo plant process, in CapEx in the second half. Again, an 80% reduction in CapEx in FY 2026. Finally from me, my last slide, is again just in terms of the cash and the cash operating performance of the company.
Again, we've been able to report a significant improvement in operating cash outflows, improved by 60% on the prior year. We had AUD 10 million of cash at the end of the financial year. After balance date, we've received AUD 5.7 million from PLS. Again, worth pointing that out. Importantly, at the half year, we said that we expected to be cash flow neutral in the 2026 calendar year, excluding the recycling of capital from the PLS midstream transaction that we announced earlier in the year. We're reaffirming that statement today.
That's going to be driven, again, those three dot points are what we said at the first half. Continued revenue and gross profit growth, and continued cash and cost discipline. The second half is significantly skewed with some significant cash inflows due associated with some grants that we've already secured. There's some milestones payments that are due, some U.K. R&D tax incentives that are due, and also a second payment of AUD 5 million from Rio Tinto under our joint development agreement that's subject to the achievement of project milestones, of which we are on track to deliver.
Finally, as I'd said previously, there has been some spend in the first half of calendar year 2026, which is in the second half of the financial year 2025-2026, for Zesty. We have taken a decision to reinvest some of the AUD 11.4 million, the capital that was released from the midstream project to accelerate the development of the Zesty project and the Zesty technology.
Other than that, again, continued cash discipline, continued focus cost discipline, strong revenue growth, strong gross profit growth, and we expect to be cash flow neutral, excluding that AUD 11.4 million of money released from PLS, the midstream project, and the recycling or the investment of about AUD 3 million of that, half of which is essentially in the first half anyway, into the Zesty demonstration project. A very strong set of results that we're very happy with and that we are looking forward to continued growth and execution in the year ahead. With that, I'll hand back to Phil.
Excellent. Thanks very much, Darren. One thing, or what I want to have a quick chat through now, we'll start broadly with how we see the landscape, if you like. We'll start with decarbonization, even though I'll expand on that particular topic a little bit later on and its relevance for our technology. Certainly, there's no avoiding the fact we're classed as a clean tech stock. We're put in that basket. As a result, there are some near-term headwinds associated with those sorts of technologies.
On the graph on this slide, you can see how much funding went into different rounds or capital raisings into clean tech companies over the years. You can also see how many deals have been done, which are the black dots there.
It is no surprise, I don't think to anyone, there has been a significant decline since about 2021- 2022, in clean tech investment in the capital raisings and capital markets. That has manifested itself through into the public capital markets. Exchange traded funds and portfolios have been not as bullish around clean tech as they were back in 2021 and 2022. That is the reality of the market we have today.
Longer- term, has there been a big retreat from global policy direction in terms of decarbonization and net zero? Certainly in the U.S., under the current administration, there is a withdrawal from the Paris Agreement, and that has had an impact, if you like, on global perception around decarbonization. Several U.S. states continue to main legislated net zero targets. It is not all one story in the U.S.
Of course, across Europe, Asia and Australia, there are policy reviews around decarbonization, but they remain strong and they remain committed, especially say for China. They have expanded their emissions trading scheme there, and they have not moved away from their 2060 net zero target.
Despite the fact that the headlines around the U.S. are really sort of a reversal of their ambition, if you look across the global economies, then 77% of global GDP is still committed to net zero in some way, shape, or form in terms of policy. Near- term, some challenges if you are talking about decarbonization. Longer-term policy is still very much committed towards net zero. That is not the only story of Calix.
One of the things that we really want to try and emphasize if we move to the next slide, Chris, today, is that our business model is not tied to decarbonization. Our business model is tied to improving value with decarbonization as the cherry on top. Hopefully, that is starting to come through in the deals that you are seeing and the evidence that we will cover in the 2026 results. Certainly, the things that we are really trying to focus on are the largest target markets.
With limited resources, the focus really has to be around those ones to the left of this chart. Cement and iron ore. Lime in and of itself, a significant market, and alumina. You can see there, carbon dioxide removal and ultimately lithium, much, much smaller markets than the huge markets and the huge opportunities that the technology brings us in cement and lime.
With that, look at cement. One of the largest markets by far in the industrial world. There, I will talk a little bit about the Adani deal, but developing and prioritizing the customer value proposition that delivers economic benefits today without a carbon price is where we have been focused. Our Adani deal was all about that. It was all about an economic proposition for energy flexibility and debottlenecking their cement plant. Decarbonization is a cherry on top as and when there is a price on carbon. That deal is moving forward today as a result of the value proposition today.
That is really where our focus lies, big markets and opportunities for economic benefit for our customers today without a carbon price. With that development of the value proposition, obviously, we look to establish strategic partnerships with industry leaders.
Adani, again, a perfect case in point there. You will hear the word capital light. You have seen the focus on capital from Darren's numbers, and ensuring that our progress is capital light, and that as much as possibly is funded by the customer is the focus. What that speaks to is a few things.
First of all, it speaks, I guess, to some credentialing of the technology. If you have a look at the counterparties we are dealing with, the fact that they are willing to pay for us now, even though we have not built a full-scale commercial cement plant or iron ore facility yet, we are getting paid today for engineering studies. We are getting paid today to develop these projects. That speaks to the credentialing of the technology to quite some extent. Really, we are going for a lean capital light model. We are targeting large industries.
We are targeting economic solutions today without a carbon price. That is our business model, and that is our strategic focus. If we move to the next slide, Christineh. Let us have a quick look at the year in recap. It is easy to forget that it was only 12 months ago, we did not even have an ARENA grant for the iron ore facility, but we were able to announce that in July. We then moved into the announcement of the partnership with Norsk Hydro for alumina, another massive application of the technology, as you can recall from the previous slide.
Only November, we announced the joint development arrangement with Rio Tinto, where they are supporting the development of the Zesty technology with AUD 35 million in cash and in-kind, subject to project milestones.
We have already achieved one of those, which is their deep due diligence on the technology, and the release of the first AUD 3 million of that in December. Also in December, we announced that AUD 10 million per annum contract, up to AUD 10 million that Darren talked about in the financial results. Those numbers have started to flow through, but not fully yet into the second half results and the overall result. There is more to go there from that customer, and there is plenty more upside in the Magnesia business that I will talk about.
We completed construction of the mid-stream lithium demonstration plant with Pilbara Minerals, which we restructured in that February announcement, releasing another AUD 11.4 million in cash. You can see that tiny little dot on the right-hand side of the previous slide, which is the lithium market, releasing a bit of cash.
A little bit of that cash we are going to invest in the iron opportunity, because that is a massive, big stack you would have seen in the previous slide. As we said, we are going after the highest and largest markets with a capital light model. We also talked a little about the Frontier contract in January. This is Shopify and Google, again, supporting looking at ocean alkalinity as another application of lime from our Leilac technology. In March, we achieved the first ARENA grant milestone, which was a project progress milestone. Another AUD 2 million came in there.
Additionally, a tolling agreement for calcined clay. When I talk about the different projects, I will cover these as well. A tolling agreement for calcined clay, with Green360 Technologies. It is another application of our tech with zero capital required from us, which is fantastic.
We've started commissioning that midstream demonstration plant. The heating cycles and those sorts of things were being tested in a, I guess, a warm commissioning step. We're looking sometime this quarter or early next quarter to have a look at how the beta-spodumene or alpha- to beta-spodumene conversion is going through there as Pilbara Minerals commissions the rest of that plant and the rest of the hydrometallurgical circuit. In May, we announced that we'd completed pre-FEED on the ZETA piece. ZETA is our Zero Emissions Technology Australia, or it's our lime calciner in South Australia.
We'd completed successfully the material, the processing of alumina successfully for Norsk Hydro. June, that important agreement with Adani Group's Ambuja Cements was signed. Joint development arrangement there, where again once we pass a go/no-go decision on that particular project there, that's zero capital from us.
That's Adani or Ambuja Cements from the Adani Group, moving forward on a project where they're paying for all the capital for our Leilac technology. Again, just to emphasize, that's nothing to do with carbon price and everything to do with economic benefits today. Let's keep moving. The next slide covers off that project slate.
The bright blue dots are all of those projects where we've got to put zero capital. That's nothing to develop it all the way through. Again, emphasizing our capital-light business model. We're partnering with pretty big counterparties who are prepared to help us develop the technology with no capital input from us. Several projects there do require a little bit of capital from us. Obviously, Zesty, the project for the green iron application of our technology with Rio Tinto and Australian Renewable Energy Agency backing.
That one there, we do need to find some capital, and we are in a process of doing that right now. That's to get the first demonstration scale or commercial demonstration scale plant away. It'll be a full-scale tube, single tube of our tech. A full commercial scale plant will be several of those tubes.
It's a commercial demonstrator, as we call it. Quite some significant progress on that during the year. That will require about 50% of the capital from us, which, as I say, we're looking to raise into the subsidiary called Zesty Limited, much the same way as we raised money into our Leilac business a few years ago. The Leilac-2 project there requires quite a reasonable amount of capital. We've now set it paused, permitting, financing.
Those are the sorts of things that we've decided, along with the consortium, to see if there's an alternative, and we're looking for alternative sites for that particular project there. That's on pause. ZETA, having passed pre-FEED, is also on pause. We do need to find a matching capital for AUD 15 million in government funding there. That project, as we announced a couple of months ago, is also paused, again, with the focus on a capital-light business model with partners like Adani. The AirLiN model as well. The AirLiN project paused.
The state of the project in Louisiana is still very unclear. That one there requires no capital from us, but remains paused. To the right of this slide, you'll see Pilbara Minerals requiring no capital from us. The upside there, we're continuing to earn revenues from engineering services.
The upside in terms of licensing fees to third parties is still there as well for us. That is in the commissioning stage now. The other one there was the Green360 Technologies, which is the clay application. Again, zero capital from us. We charge tolling fees for Green360 to put the material that they are making there in calcined clay through our unit in Bacchus Marsh. That is the project slate, and all the stuff we are working on.
As I say, the bright blue dots are all the ones where zero capital is required from us to develop. We keep moving, Christineh. Just a quick word on Magnesia. Obviously, this particular part of our business is growing very nicely.
As Darren said, we are starting to generate some pretty good EBITDA out of this business to help support the other business and help with the cash management in the company. Excuse me. What does this Magnesia business look like? Certainly, Australia has grown quite substantially in the last few years. We have added a new plant in Caloundra in Queensland on the Sunshine Coast to help serve the Unitywater business and all customers north of there. A new capacity added there just recently.
In the States, you can see a couple of new plants that we added there over the course of 2025 and 2026 in Ripon, Wisconsin, and Lufkin in Texas. The strategy there to move east and south into the food belt, and start to really generate some extra revenues and growth is really paying off for us now.
Very pleased with the way the U.S. is working. It is a great business. It is a low annual churn rate, 5%-6%. Customers that come to us tend to stay with us a while. 85% of our current customers have been buying from us for over two years. It is a nice business to be in. We are doing it well, and we remain bullish about the growth in the Magnesia business across Australia and the U.S. Just to complete the presentation today before we go to Q&A. Just to cap up, as Darren had covered, record revenues, especially driven by Magnesia.
That is allowing a big increase in our gross profit number, given the EBIT being generated by that business now. A lot of focus on reducing our costs and making sure our business remains focused on those large industries that I talked about before.
CapEx, expected to be minimal moving forward. Just enough to support growth is the target. There may be some possible CapEx and a little bit in Magnesia as we move forward to continue to expand and grow that business, but not much else. The overall operating performance therefore improves. Revenue is up, cost is down, your overall operating performance improves, simple as that. Across the priorities for FY 2027, we want to obviously continue to grow revenue and gross profit and the contribution from the Magnesia business.
In sustainable processing, we are really going to make sure we continue to progress paid campaigns, get the Final Investment Decision, and get the financing to match the Australian Renewable Energy Agency funding for the Zesty demonstration plant. In Leilac, continue the momentum in customer-funded zero capital projects to get to commercial scale there. Lots to happen in FY 2027.
We very much look forward to FY 2027. Certainly, if we tick off those boxes that are there, it will be a fairly transformative year for the company. We are very focused on those things. On that note, happy to open up to questions, Christineh.
Okay, let us have a look at what has come through. Just a reminder that you can ask questions using the Q&A box, which should be at the bottom of the screen, and I will go through these and relay them to Phil and Darren. Just give me one second. Let us have a look. All right. First question is, "What is the opportunity to win more business or potential M&A for the water business in the U.S.?"
We still see considerable opportunity. We conservatively estimated the U.S. business as in excess of AUD 100 million in value, where a minority percentage of that potential value just in the Magnesia business currently. We have been very successful in converting caustic to magnesia, and in fact, quite a large proportion of the new contract we won in December is to do with caustic conversion. Caustic is multiples of the size of the current Magnesia business. We see quite some considerable potential in U.S. growth. We are certainly chasing that.
Australia is not to be forgotten. We have done well on the East Coast of Australia. We have got most of the major contracts here now. The West Coast represents an opportunity for us as well, which we are working on hard. There is growth that we see across both Australia and the U.S.
This one is for Darren. "How much revenue did the new U.S. water contract contribute in FY 2026?"
Yeah. Thanks, Christineh, and thanks for the question. Fair to say, that is probably a little bit commercial in confidence, including the name of that customer is commercially in confidence. I think, it would be inappropriate for us to say that dollar amount. What I will say, though, is that started in February timeframe and has been ramping since then. Certainly the first half do not contain six months worth of full run rating from that customer.
They have been ramping up steadily from February onwards. Our team have done a great job of, I guess, onboarding that customer. It is a considerable amount of additional revenue for that U.S. business. The team have done an excellent job to service that customer. We continue to look forward to kind of a successful medium and hopefully very long-term partnership with that business.
Okay. Next one is, "Congratulations on Calix's strong performance and significant progress over the past year. While many of your recent commercial milestones are international, how do you see the opportunity in the Australian mining and industrial market? Could Australia become a major growth market for Calix over the medium- term?"
Yeah, that is a great question, and certainly, particularly in iron and steel opportunities. I think Australia is one of those areas that we are looking at to be a strong player. In other industries like cement and lime, for example, I think Australia has about three cement plants, and there is sort of 1,500 or more globally. Australia is a very small player in the cement market. Naturally, our focus with cement and lime is more overseas than in Australia.
Back onto the iron and steel, though, opportunity here. There was a report put out by The Superpower Institute, led by Rod Sims. That particular report outlined the very significant opportunities Australia has for a green iron, if you like, or lower carbon iron industry. Iron ore itself is a huge part of what Australia earns as foreign income. There is the chance to ultimately triple that almost, in green iron. A few things need to happen, if the potential is going to start to be realized there. We need the renewable electrons to help enable that to happen, and infrastructure, obviously, to progress that.
I am not saying we will hit that we will triple the size of our iron ore to iron, if we move from iron ore to iron in terms of exports, but that is a very significant opportunity, and we are working closely with quite a few parties there on having a look and seeing what potential there is there and how we could deliver that. Then there is the water business. The water business is a great earner for us here. Not quite as big as the States. They have a bit of rivalry.
I like to see them sort of play off against each other month-to-month, who's made more money. There's lots of opportunity in Australia still, in that business. I think there's certainly no lack of focus on continuing to grow that business here in Australia as well. The only other ones are, I guess, alumina. It's certainly part of the Heavy Industry Low-carbon Transition CRC or HILT CRC. There are numerous Australian companies in there. Obviously, there's companies like Rio Tinto, for example, who we're working with on iron and steel, but they're big into alumina as well.
Opportunities to look at the alumina applications of our technology in Australia, we're obviously working through as part of the HILT CRC. Biggest opportunities in Australia, iron and steel, alumina, and continued growth in water.
Okay. Next question is, "With Leilac's strong European partnerships and Carbon Direct investment, how do you see the EU and U.S. markets contributing to Calix's revenue growth over the next three to five years?"
Yes, that's a good one. Europe, as we've described in the presentation, continues to have strong policy objectives for net zero. There is debate at the moment in the European Parliament about whether they reset the ambition a little bit, but that debate is also being had with a debate around increased electrification. Despite the fact decarbonization might be a little bit reset, increased electrification is part of those discussions. I think a lot of the industry is perhaps watching and waiting to see what happens in the EU and how that legislation, if that's passed, how that will shape their strategies in the EU.
Having said that, we still have a consortium to progress Leilac-2 as best we can. As I mentioned, where that particular project in Germany is paused, but we are looking at alternate sites there, including sites in Europe.
In the U.S., obviously the administration there is perhaps not quite as favorable towards decarbonization. We still have not heard the outcome of our applications and our work with, especially, I guess, the Roanoke Cement Company plant in the U.S. where we got a grant there to look at debottlenecking. Similar to the Adani opportunity. It's a debottlenecking and energy flexibility economic proposition. I guess the wait continues with respect to the U.S. Department of Energy and what's going to happen with those particular opportunities in the States.
We're at a bit of a standstill there across our projects as we've disclosed previously. We'll wait and see whether and how the U.S. Department of Energy gets to assessment of those grants that they had already granted, but haven't either canceled or endorsed, and there's a whole basket in the middle of which we're one.
The U.S. remains a bit of a question mark for us for Leilac. Europe and Asia are the focus, and especially, obviously we can talk about Adani. There is another cement customer that we disclosed that we are also progressing with similar timescale to the Adani one that we announced in June. Both of those are very encouraging to see Asia moving ahead. Europe is strong policy, but there is a bit of watch and wait. The States is on hold and Asia is moving ahead faster than we expected. That is a sort of balance across the globe.
Okay. Couple of questions on Magnesia revenues. "Magnesia revenue increased by AUD 3 million in second half compared to the first half, but gross profit only increased by AUD 0.2 million between first half and second half. Can you explain these movements?"
I think that is. I just need to double-check where that comes from. I suspect that is something to do with the consolidation of the impact of, say, lower margin toll processing business like Suvo, which has contributed a little bit into the Magnesia business. Also the impact of the new U.S. customer, which is again, lower margin. Again, significant revenue, so the actual gross profit numbers are much stronger.
For us, the focus is on driving that gross profit absolute dollar number, and driving the EBITDA number. Which I think in the first half, the EBITDA from Magnesia business was AUD 1.6 million. In the second half, the EBITDA from the Magnesia business was AUD 2.2 million. Overall, the EBITDA is accelerating in the Magnesia business. I think, like I said, absolute dollar terms is what we are focusing on in terms of driving the cash result of that part of that business.
You have answered half of the next question. It was, "What sort of run rate does the Magnesia business enter FY 2027?"
Yeah. I guess as you said, Christineh, I answered that a little bit. It has accelerated in the second half in terms of its absolute cash contribution to the business. As Phil said, I think there is lots of scope for growth still in that business, and we are very excited about it. We are going to kind of continue to work on growing that business.
Okay. I have got a bunch of questions on Zesty, so I am going to group them. First one is, "Is Rio actively marketing the technology to their partners? Can you comment on any reception?"
Yeah. Obviously, as part of the joint development arrangement that we announced, there is a marketing aspect and a joint aspect to developing the market for the technology. What we could say is, yes, we are working on that with Rio closely. Obviously, as anything material comes to fruition, we can announce that to the market in due course. We are working very well with Rio and that joint development arrangement is working well.
Okay. Next one is a little bit on funding. "What is the expected timeline and when do you expect the remaining ARENA and Rio Tinto funding to be secured and released?"
Yeah. We'd love to get past our final investment decision this year, which includes the financing aspect. Things are taking a little longer than we'd wanted, but the capital market's at the moment a little tight. Joining with Rio, that certainly added a lot of momentum to that effort. That's the key piece we've got to get through, is to get the project to final investment decision point.
On the technical side and project side, that's progressing well. Obviously match the financing, that's a high area of focus for me personally and our team at the moment. Once we get that, provided we get that, then that then starts to trigger things like the ARENA payment.
Once we hit the heavy lifting part of the project where we start engineering procurement, construction, those sorts of things, there's progressive payments that come from ARENA as a result of heeding those project milestones. The timeline, we remain hopeful and focused to do this calendar year. That'll allow us to continue with the project on a timeframe which we've previously disclosed to the market. That remains our high area of focus.
Phil, I might just add a couple of comments to be clear. Again, I mentioned in my section that subject to completion of the project milestones, which we remain on track, the second cash installment of AUD 5 million, we expect this calendar year.
Yeah.
When Phil talks about this year, he was referring to this calendar year.
Calendar year. Yeah.
That would pretty much complete the cash contribution as part of that JDA. There is also obviously ongoing in-kind contribution from Rio Tinto in support of the project. In terms of the ARENA milestones, yeah, there has been one payment received of AUD 2 million, which was received in FY 2026. There are future cash milestones that are linked to FID and other project milestones. At this point, it is fair to say that I have not included those in any of our cash neutral-
Yeah.
-statements. Those would be kind of incremental to that, as and when those project milestones are complete. Those are all subject, as Phil said, to the kind of FID process that we are working very hard on.
Okay. I'm just going to flag that we've got 15 minutes left on the clock and quite a few questions, so maybe we'll treat the following ones as rapid fire and see how many we can get through. The first one is, "Noting there's a limit to what you can say, do you still feel the level of confidence of completing a subsidiary style deal in the Zesty business? What gives you confidence you can complete a deal here?"
We remain confident.
Okay. Next question. We'll drop it there. Next question is, "Has Carbon Direct made any changes to the carrying value of its investment in Leilac?"
No.
Okay. The next one is nice and supportive. "I love Calix's signature saying, I'm fully supportive of the company. Given how well you are doing, why have my shares dropped by about 84%? Will the shares ever be good around AUD 3.20 or above?" Always this question. It's very similar.
Yeah. Huge thanks for your support. As we know, the pathway to a better planet is never a straight one. Sometimes, you get people rallying in behind, and you get the momentum in the right direction moving, and other times you have to go through some swamps. With the change in, I guess, the national and international outlook around the U.S. administration and some of the actions that are taking place economically and militarily, it's no surprise that there's distraction from clean tech.
Our response is obviously to really focus on the technology and its economic benefits today, and then as and when. If you believe that the long-term policy directions are right across those 77% of GDP countries that I talked about before, clean tech will come back in. Yeah, it's a fairly long-winded answer, but it's one I'm fairly passionate about, Christineh.
I couldn't answer this one short. The purpose of the company remains the same. The upside value remains the same against a backdrop of importance around emissions. In the interim, we have a solution. We've got a growing revenue business in a great technology application in Magnesia, and we've got economic solutions today with the core technology that is attracting interest from huge partners. We're going to be there and ready when perhaps decarbonization is of concern to people again.
Okay. On Zesty, "Have other iron ore miners expressed interest in the Zesty technology? Would other JDAs be required?"
I'll answer the second question first. No, we don't need other JDAs to progress the project. Well, could be added, of course. It's non-exclusive with Rio, but we don't need it. Have other iron ore players expressed it? Absolutely. In the public domain, all of the majors in some way, shape, or form are part of the HILT CRC, where all of our initial test work was done. We're in close contact with all of them, and all are interested in the technology. Yeah, it's not just us and Rio, although they're a very important partner for us. The other iron ore majors are interested as well.
Okay. "Have you looked at magnetic concentration for the Zesty converted iron? If so, will that allow it to be used in EAF furnaces?"
Magnetic concentration. Magnetite is a particular iron ore type that responds to magnetism, hence the name. Part of the process of mining magnetite ores is to use magnetic means of beneficiating that particular ore ready for electric arc furnaces. There are things that we're doing to look at how we might be able to make magnetic variants of hematite, goethite ores, for example, and then benefit from those beneficiation techniques. That's internal work in progress. There's all sorts of different things that we're looking at with respect to how hematite, goethite ores could be ready for electric arc.
Certainly, the Neo Smelt project, which is right next door to us in Kwinana, is about just that as well. That's about a smelting technology to take direct reduced iron ore, say from a process like ours, and purify that into an iron that's suitable for electric arc. Magnetism's one way, but there are a few ways to skin that cat.
Okay. In lithium. "Is there much incoming inquiry on greenfield lithium projects?"
We have contacts with quite a few different lithium players. As of late, as of the last six months, there hasn't been any new inquiries coming in right now. We are dealing with several different parties who are interested in the lithium space. I think they're waiting to see. They're waiting to see how the commissioning process goes and how the technology's working at Pilgangoora with PLS. I suspect, as and when we can talk about that a bit more fully, that might pique quite a bit of interest.
There's quite a few lithium operations or potential operations around the world that are logistically challenged, with access to green electrons. I'm talking about South America, I'm talking about Canada. Our technology could be very prospective for those particular ore bodies.
Switching to Leilac, "Can we provide an update on the status of the Heidelberg agreement to utilize Calix technology?"
That agreement is on foot. We signed a license agreement with Heidelberg, I think it's three years ago, four years ago. No changes to that license agreement.
On the water business, "Do we have an aspirational target over the next five years?"
Of course, we do not give our financial forecasts. Our aspirational target is to be the premier magnesium hydroxide player across the U.S. and Australia and continue to grow that business rapidly and profitably.
Next question is, "Several Australian mining services companies have delivered very strong shareholder returns in recent years. With Calix's ambition to commercialize its technology globally, could Calix become the next generation of picks and shovels provider for the mining and metals industry?"
Yeah, engineering services is a growing part of our revenue base, so that is a good question. Will it be the major part of our revenue base? Certainly, it is a great transition revenue stream for us, and it is working very well and growing. Ultimately, the business model is to go even lighter than that in terms of capital. Not an arms and legs hirer and charger, if you like.
The licensing business model is about clipping the ticket on every ton that goes through our technology. Not a 25% or 30% gross margin business, a 90%+ gross margin business. That is what we are targeting. Our focus and effort is not into trying to grow and compete in engineering services in a more general sense. It is only services around a core technology that enables that ultimate licensing model.
Can we provide any idea on how much funding is still required to match the ARENA grant?
Well, certainly, we haven't released it because it's commercial in confidence. Out of the Rio bucket, of AUD 35 million cash and in kind, there's a reasonable component of that that counts towards the Australian Renewable Energy Agency grant. Let's call it a few tens of millions still need to be raised just to match the Australian Renewable Energy Agency grant. It's of that order.
Obviously, as and when we can disclose to the market how we're going on that side of things with respect to the financing part, we can be more explicit with the numbers. For the moment, Rio's done a great job in helping us get a reasonable way there. The financing part of it is focused on the remaining gap, which is a few tens, as I've said before.
Okay. The next question's about SaltX. We provided them with a reactor in 2021, and since then they've moved on to quite a few projects, including an arrangement with Heirloom. Does Calix regard SaltX as a competitor in Leilac's target market? What does Calix's own operating experience say on indirect calcination versus plasma arc? There's a little bit of technical questions there, but let's give them a high-level answer there."
Right. I'm not sure I can answer this one quick-fire, Christineh, but obviously we're aware of developing technologies. They are a competitor ultimately. Plasma arc is interesting. I haven't seen plasma arc at industrial scale in these large industries yet. There's massive scale-up and deployment challenges that that will face. Plasma is also one of those technologies that you can't really drop down in temperature. It has some ability, but not a lot. It's extremely hot, several thousand degrees.
The ability to control sintering and these sorts of things in mineral processes is going to be a bit more difficult with plasma arc than with our technology. Controllability, efficiency, and scale-up are the challenges that we feel plasma arc will face that are tougher than what we face with our technology. Ultimately, though, we want SaltX to succeed.
We want to see technology succeed in helping decarbonize these heavy industries. We're not there to elbow out and have 100% of the market. If it falls out that way, great. You've seen how big those markets are. At this early stage, we want to see continued development upon multiple fronts, and SaltX is one of those. Ultimately a competitor. At the moment, we wish them all the very best. We want to see them succeed as I'm sure they want to see us succeed.
Okay. "Looking closer to home, Bacchus Marsh, our facilities, in reference to Thor's Hammer, how confident are you in a successful scale-up of the direct electrification furnace?"
Yeah.
You might have to explain what Thor's Hammer is as well, just in a nutshell.
Yeah, absolutely. Thor's Hammer is a manifestation of our technology where we're not supplying heat onto the outer side of the tube with electricity. The tube itself is the electric element, much like a stovetop oven. We're passing a current through the tube and it's heating up. Thor's Hammer's been a great success. It's been an enormous success for us. It's worked very well. We don't have quite the same temperature control because we don't have heating zones. The whole tube itself heats to a certain temperature.
There's yin and yang with Thor's Hammer. It's great in terms of direct electrification, which also allows flexibility. You can have fossil fuels or other forms of energy which can work in conjunction with that electrical energy. As with all of these things, we've got to build a demonstration scale unit. Adani's one opportunity to do that.
We're working very hard on that opportunity, and there'll be others as well. Confidence is obviously good, but we've got to prove it. Adani's one of those projects that can help us do that. To date, at the scale that we've built it, we're very, very pleased with it.
Okay. We've got time probably for one more question and then we'll wrap up. On the Magnesia business, "Calix market valuation clearly undervalues the Magnesia business. This business appears more advanced and probably poised on a strong growth outlook. Is it time to spin off the Magnesia business?"
It's an interesting question, actually, and obviously, as a company, we look at generating best value for shareholders, and that includes sometimes selling of assets or acquiring new assets, et cetera. It's always on the table as to assess what's the best value for our shareholders.
The Magnesia business, we feel is sort of moving through the bottom of that S-curve into a great growth phase. We don't want to necessarily, notwithstanding that there could be some offers thrown across that are too good to refuse, but we don't necessarily sell it too cheap if we were ever going to consider selling it. The other thing is, of course, it's starting to generate great cash for us and part of, I think, the overhang on the stock price, is people think we've got to go to the market and raise capital.
The more that Magnesia business grows, the more that doubt is taken away from people. We're pretty clear on what our cash and capital strategy is, and capital light and making sure we've got a good runway out there without having to come back to shareholders all the time is our absolute focus, and the Magnesia business is an important part of that.
Any last comments from you on that, Darren?
No, I think Phil answered it perfectly.
Okay. I do see that there are some questions we did not get to. If anybody has any further questions or would like to ask anything about what we have spoken about today, please feel free to reach out to investorrelations@calix.global. I will pass it over to Phil to close the session, with any last remarks.
Fantastic. Thanks, Christineh. Thanks, everyone, for your attendance today. I think 2026 was an excellent year of progress for the business financially and commercially. You can see how we are poised across several different fronts. FY 2027 should be a very interesting year for this company. We are very focused on those three key things I talked about before. Growth in Magnesia revenues, getting past Step ID for the Zesty project and getting the matching financing there.
Then obviously continuing to pursue that really capital light business model, especially as part of the Leilac business with companies like Adani. If we are successful executing those across FY 2027, it will be quite an interesting company moving forward from there. I look forward to FY 2027, and I thank everyone for their interest and support.
Thank you.
Thank you.
Thanks all.