Decarbonising cement with Calix

Recently, we updated our sustainable investment portfolio to include Australian process technology company Calix Ltd CXL.AX.  This is a chemical process technology company focused on applications of a new electric kiln technology to a range of carbon intensive industries, including cement. 

The firm has well-developed intellectual property, with 28 patents covering carbon efficient calcination of chemical products.

While this firm has only modest revenues, on the order of $20M AUD, we believe it has a strong intellectual property position, and a compelling pipeline of pilot plants to prove the benefits of their technology with commercial partners. These include leading cement firms such as Heidelberg Cement, CEMEX, Adbri ABC.AX, Boral BLD.AX and others. 

They have also entered into a joint venture agreement with Pilbara Minerals PLS.AX, to develop a decarbonised lithium refinery project. Finally, they have embarked on a very interesting project to adapt their original kiln designs to green steel production.

The Calix Technology

In simple terms, the Calix technology involves a tall vertical kiln, that is electrically heated under fine control of temperature, into which finely ground particles are roasted into a matrix of honeycomb like consistency, while the unwanted carbon dioxide is streamed out to be captured. 

The company has numerous explanatory videos at their website.

The method was first developed by physical chemist Dr Mark Sceats, who cofounded the company in 2005. Over many years, the kiln technology was adapted and refined to an expanding range of applications. 

James O'Loughlin did an interesting interview here. 

Calix currently has had 28 patents granted which cover different aspects of the technology platform. The have active business in water treatment, which generates most of their current revenue. However, they also have a well-developed pilot plant program called LEILAC, which is proving up the application to calcination of limestone to produce lime and cement. 

This technology could help to decarbonize cement production, which is notoriously carbon intensive. It is designed to be retrofit to cement plants to separate and capture emissions.

Calix Ltd remains an early-stage firm but has a very solid track record of patent success and a premier list of collaborators in CEMEX, Adbri and Boral. 

The decarbonization of cement production is a first-rate problem, and it seems that this Australian company has an excellent prospect of making progress.

While the valuation of this firm, at $952M, on still modest revenues of around $20M AUD, may appear steep, it has excellent industry bona-fides and what appears to be a solid patent portfolio. We include it in the model portfolio as a speculative buy.

Sustainable Portfolio

For an update to our previous sustainable investment portfolio, which we introduced in the previous wire Why is sustainable investing so difficult? see the attached research report.

The stocks selected are:

• Sims Ltd SGM.AX
• Cleanaway Waste Mgmt. Ltd CWY.AX
• Infratil Ltd IFT.AX
• Beacon Lighting Group Ltd BLX.AX
• Reece Ltd REH.AX
• Meridian Energy Ltd MEZ.AX
• Calix Ltd CXL.AX
• Genex Power Ltd GNX.AX

These are firms in: materials; engineering; building fixtures; waste and water management; recycling, mobility; and the generation and storage of electricity.

Together with our previous stock selections in electric vehicle metals, these stocks comprise our sustainable investment portfolio, for Australian listed companies.

The Global Opportunity

There is a broader scope of exposures possible in global markets.

In a future wire, we will detail our preferred global selections.

While Australia has very exciting opportunities in critical minerals, there are many parts of the decarbonisation value chain that are under-represented in Australian markets. This includes many of the utilities that own or develop Australian renewable energy projects.

There is also the conundrum that Australia has essentially no presence in the manufacture of solar photovoltaic panels, nor any of the upstream areas of that industry.

With these factors in mind, we think self-directed investors may well benefit from looking at companies that are listed on overseas exchanges. With the growth in direct share investing international portfolio management is becoming more accessible to individuals.

However, there remain many obstacles to navigate in relation to direct investment in foreign markets, such as foreign tax withholding, Australian regulation of foreign domiciled brokerage offerings, the effects of foreign currency on returns, and tax reporting.

We cannot cover all of these topics in depth but will aim to share some learnings from our own experience in trading global equities markets over the past thirty odd years. There are still gaps to be filled in the domestic service offering for Australians wishing to do direct global shares. However, it can be done, and some public discussion, in this type of forum, will likely help interested readers to better frame their own research on the topic.

Photo by ActionVance on Unsplash