Zeotech (ASX:ZEO): Stronger and low-carbon concrete derived from Queensland kaolin!

Zeotech (ASX:ZEO) is attempting to play a part in helping reduce emissions from the construction sector. Over the last few years, it has been working on AusPozz™ and is at a pivotal point in its development.

What are the Best ASX stocks to invest in right now?

Check our buy/sell tips

What is AusPozz and why is it special?

AusPozz™ is a high-reactivity metakaolin and manufactured pozzolan, which is classed as a Supplementary Cementitious Material (SCM) under existing concrete standards, that can be used to produce low-carbon concrete.

When AusPozz™ is mixed with cement and water, it reacts with calcium hydroxide (portlandite) – a by-product of cement hydration – to form calcium silicate hydrate, which is a concrete binder. This allows AusPozz™ to replace a large amount of the cement in concrete, giving it significant embodied carbon reductions.

Testing results have found that the life cycle carbon footprint of end structures using AusPozz™ can be up to 79% lower. Moreover, the concrete has higher strength and lower shrinkage compared to alternative SCMs such as fly ash.

Zeotech will derive its feedstock from Australia’s highest-grade known raw ore kaolin resource (10.9Mt) within an approved Queensland Mining Lease. It will transport it to a planned facility near the Port of Bundaberg, from where it can be shipped to customers.

There’s money to be made

After spending several years developing the technology, Zeotech released its Preliminary Feasibility Study to the ASX in June 2025 to examine the business case for AusPozz™. It found a 20-year mine life with $1,014m after-tax EBITDA, an NPV of $406m, and an IRR of 42%. Beyond the financial returns, it was found that the project (at nameplate production) could reduce carbon emissions by an estimated 229,800/t CO2 per annum, which is equivalent to taking 53,600 petrol-powered cars off the road, planting and growing 3.8 million tree seedlings per year for 10 years and annual carbon emissions from electricity use in over 30,860 homes.

Moreover, there is an immediately addressable domestic market of 3-4 million tonnes per annum at 30-40% cement binder replacement, which is 10x the PFS nameplate production target of 300,000tpa.

This is just a fraction of the global opportunity since concrete is the second most widely used material after water. The global SCM market is forecast to reach ~US$40 billion by 2030. SCMs are the most viable alternative to mitigate CO2 emissions from the cement industry.

There are eyeballs on ‘the prize’

Zeotech has witnessed significant customer interest and signed its first binding offtake deal with Jiangsu Mineral Sources International Trading (MSI), an international trading house established in China and one of the world’s leading independent bulk raw material trading companies.

Over an initial 5-year term, MSI will take 800,000t of Kaolin and 150,000t of Cosmetic Kaolin. It will then have exclusive offtake and marketing rights for Zeotech’s specified kaolin products in China (including Taiwan and Hong Kong), South Korea, and Japan.

Zeotech has also been collaborating with Holcim Australia. A non-binding Memorandum of Understanding (MoU) was signed in October 2024, and the company has recently run a concrete demonstration at Holcim’s largest batching plant in Brisbane. It was commercial-scale demonstration of its type and was attended by several influential concrete and civil engineers from organisations, including Laing O’Rourke, BMD Group, Empower Construction, Icubed Consulting, and the Queensland Department of Transport and Main Roads.

In recent months, the company signed MoUs with Cement Australia and Liang O’Rourke for future collaborations, as well as a Letter of Intent with Bisley Group. The first of these companies sent representatives to view the proposed manufacturing facility and Toondoon mine site first hand, and Zeotech executives made a reciprocal visit to Cement Australia’s Gladstone operations.

Major milestones await

Zeotech’s immediate priority is to obtain required approvals to deliver on the DSO kaolin offtake by Q1 2026, in conjunction with completing the AusPozz™ Project DFS, which is underway and will lead to a Final Investment Decision in Q1 2026.

In the meantime, the company will work to secure necessary regulatory approvals, project financing, and offtake deals for AusPozz™, beyond its initial DSO kaolin offtake deal with MSI China. It also has plans to explore Toondoon Project further to expand and upgrade the Resource. The DFS will refine the technical, regulatory, and commercial aspects, providing a more accurate indication of the company’s potential.

2026 will be the year of first commercial revenues

Moreover, even though full scale production won’t begin until 2029, the company will begin selling DSO in 2026 and these sales are expected to generate approximately $30m in revenue and over $12m in EBITDA in Year 1, with this continuing to ramp up as sales increase year-on-year, driven by uplift in volumes of higher-value DSO Cosmetic Kaolin.

While AusPozz™ is expected to generate higher annual revenues than DSO kaolin, with pricing dependent on the customer mix and application, the simple dig-and-ship DSO strategy provides Zeotech with a powerful financial tailwind. Shipments of high-purity kaolin to MSI and future customers are expected to generate significant early cash flows, with the binding MSI offtake alone valued at over $200 million at a margin of ~45% during its first five years.

Investors should also anticipate continued commercial progress for AusPozz™. In our view, the depth of engagement with Laing O’Rourke, Bisley Group, and Cement Australia suggests that one or all of these collaborations could plausibly evolve into binding agreements, adding further validation and momentum to the commercial rollout.

Pitt Street Research reckons there is upside!

Our friends at Pitt Street Research have released a note on Zeotech this morning. Pitt Street sees upside to $0.27-0.38 per share, based on its own NPV modelling of the company’s project – $559.4m in a base case and $789.6m in a bull case. We encourage readers interested in finding out more about the company to review the report.

Zeotech is a research client of Pitt Street Research.