Rio Tinto milestone sends shares in resources tech stock higher

Shares in resources technology company Calix Ltd (ASX: CXL) traded almost 10% higher on Monday after its recently announced joint venture with Rio Tinto Ltd (ASX: RIO) passed a key milestone

Calix said that Rio Tinto had completed due diligence for the Zesty Green Iron Demonstration Project, which paved the way for an initial cash payment of $3 million to the junior environmental technology company.

Major agreement to produce green iron

Calix in mid-November announced that it had executed a joint development agreement (JDA) with Rio Tinto – one of the world’s leading iron ore producers – for more than $35 million in cash and in-kind support for the demonstration of the company’s zero emissions steel technology.

Under the agreement, the project will be based in Kwinana, Western Australia, and the agreement also covers help to enable the future commercialisation of the technology.

The cash payments would total $8 million, including the $3 million to be paid now following due diligence, and a further $5 million prior to a final investment decision to go ahead with the project.

Rio could also take up shares in a Zesty subsidiary business to the value of its $8m contribution to the project, and would be able to use the technology under a global, non-exclusive agreement.

Range of funds to be used

Calix said in November that the demonstration project would also be supported by a grant of up to $44.9 million from the Australian Renewable Energy Agency (ARENA), subject to matched funding being secured.

The company said at the time:

The Kwinana site is in close proximity to the NeoSmelt project for downstream processing of direct reduced iron being developed jointly by Rio Tinto, BHP, BlueScope and Woodside. It provides access to established utilities, ports and other infrastructure, and is in relative proximity to other sources of iron ore in Australia.

Under the terms of the agreement, Rio’s in-kind contributions would support the project to reach a final investment decision through the provision of the project site, technical support, engineering services, and advocacy.

Calix said further:

Subject to a positive final investment decision and construction of the plant, Rio Tinto will provide up to 10,000 tonnes of a range of Pilbara iron ores for use in plant commissioning and operations, and introductions to potential users of the Zesty green iron product for material testing and downstream processing to steel.

The Zesty technology uses a combination of electric heating and hydrogen reduction to produce green iron, and ultimately green steel.

Calix shares traded as high as 56.5 cents on Monday before settling back to be 6.3% higher at 54.7 cents.

The company was valued at $111 million at the close of trade on Friday.

The post Rio Tinto milestone sends shares in resources tech stock higher appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.