Green360 Technologies (ASX:GT3): Already revenue generating, but laying the foundations for an enormous future in low-carbon concrete

Green360 Technologies (ASX:GT3) is a peculiar company on the ASX. It has an existing revenue-generating business that unique because it the only company in the wet kaolin processing trade. But GT3 hopes to use this expertise to expand into low carbon concrete with low-carbon precast products and Eco-Clay.

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Overview of Green360 Technologies

GT3 has 3 parts to its business. First, its kaolin business, Second Eco-Clay and Third, its WA precast concrete business.

Kaolin underpins all of these businesses, even the latter two, because kaolin serves as an input into Eco-Clay and potentially other future products. And so GT3’s existing kaolin operations make over $12m a year even with the plant not operating at full capacity. GT3 has a kaolin deposit in Victoria’s Golden Plains Shire where it takes run-of-mine kaolin and converts it into kaolin based products.

The total resource at the Pittong pit is 5.4Mt with 3.5Mt being Indicated and this does not include a satellite deposit nearby (at Trawalla) with 12.7Mt. The appeal in the resource is not just in the size of the content but in its appropriate quality (i.e. its yield and brightness) to suit its end customers. Kaolin can be used for many purposes including in coatings, paint rubber and pharmaceutical applications. GT3’s customer list includes Dulux, Sherwin Williams, The Body Shop, Estee Lauder and Fagron.

GT3’s plan is to continue its existing operations – its Indicated Resource could keep the plant as it stands for multiple decades, but an increased resource could cater for an even larger facility. And while existing markets (at home and abroad) could arguably be good enough for investors, the kaolin from Pittong could serve as a key input to its l0w-carbon concrete ambitions.

The need for low-carbon concrete

Before we delve into the other 2 parts of the business, we need to establish the need for low-carbon concrete. Few wouldn’t appreciate how important cement and concrete are for infrastructure – some types (i.e. bridges) are made totally out of cement and concrete, others may have other elements but use concrete in structural elements and/or in individual parts (i.e. driveways of houses).

Global cement production is 4 billion tonnes per annum and this is expected to reach 5 billion in the next decade.  The broader construction materials industry is a $15bn market when measured by revenue – this does include other building products beyond concrete, although concrete is the largest segment.

But cement production is highly emissions intensive – responsible for 8% of total emissions given the ‘kiln heating’ part of the process as well as emissions generated in the production of certain types of inputs (for instance fly ash is made from burning coal power). But using kaolin as an input could help reduce emissions.

How GT3 satisfies: Eco-Clay

GT3 has Eco-Clay which can replace up to 40% of conventional cement (i.e. Portland cement) and not compromise the end application’s performance. It is sourced from GT3’s existing waste and tailings from Pittong, then the clay is is dried and milled to a controlled particle size, then heated to 700 degrees Celsius to make metakaolin. This is significantly (>40%) lower than the 1,250 degrees Celsius required to make Portland cement thereby reducing the carbon emission profile of Eco-Clay.

Eco-Clay significantly stacks up from an operational perspective, meeting both Australian and American standards for supplementary cementitious materials. Results include:

• 96% kaolinite conversion efficiency,
• High reactivity, equal to or exceeding benchmarks,
• Compressive strength meeting requirements at 3, 7 and 28 days

GT3 has delivered ~60t (or 60,000kg) of Eco-Clay to concrete batching plants in Melbourne for commercial-scale trial use. Investors should watch for results in the coming months. The purpose of the trial will be to confirm it holds up in a commercial scale (i.e. maintains handling, blending, consistency and other performance metrics even with such a large quantity). Positive results will support customer acceptance and future offtake discussion.

GT3’s plan is to enter into a toll-treatment agreement with a third-party facility to enable scale-up and broader supply to the market – so the feedstock would be derived from Pittong, but Eco-Clay would be processed and shipped from a facility with appropriate calcining equipment.

GT3’s WA business

In WA, GT3 has a further industrial processing plant that lies near a kaolin project – the Gabbin Project in WA’s Wheatbelt that has 72.5Mt kaolin – a figure larger than Andromeda’s Great White Deposit that is just 15.1Mt. At this stage, Gabbin is planned to be developed as a low-carbon concrete products-first manufacturing and distribution hub, a vision kickstarted with GT3’s arrangement with PERMAcast. There are other options available such as an eventual M&A exit.

GT3’s first WA commercial arrangements in with with PERMAcast, one of the largest manufacturers of precast and prestressed concrete products for the oil and gas, mining and resources, and infrastructure sectors in Western Australia.

GT3’s side of that deal is providing the binder recipes (i.e. mix ratios of Portland clinker) and other technical guidance to ensure strength, carbon reduction goals and durability standards; the SCMs are sourced from other facilities in WA, and the low-carbon cement will all come together on site utilising the binder made at PERMAcast’s facilities. PERMAcast is funding and installing the necessary production equipment, then the JV sells the finished formulations to PERMAcast’s customers.

The appeal in the deal is not just from the finished products, but also the repurposing of industrial waste that may occur. GT3 would likely be paid to take this waste away before needing to spend a cent on turning the waste into a low carbon cement alternative, then generating further revenue when the transformation was said and done.

Significant future upside

Our friends at Pitt Street Research this morning published an initiation note on GT3. Pitt Street GT3 at $0.10 per share in our base case and $0.13 per share in our optimistic case, using a DCF approach. These equated to market capitalisations of $112.4m and $151.5m respectively. Investors interested in more details about GT3 should check out the report, available on Pitt Street’s website.

Conclusion

Green360 Technologies is not the only technology company working on low-carbon concrete solutions, but is is arguably the only with tens of millions of dollars worth of facilities already in operations and generating revenue in the mean time. Investors have every reason to be optimistic about GT3’s future.

Green360 is a research client of Pitt Street Research