Green360 Technologies (ASX:GT3) has executed its first binding supply agreement with Holcim Australia, one of the world’s largest construction materials companies. This is a major milestone in the company’s history and we believe this commercial deal will be the first of many. It follows extensive technical evaluation from Holcim over many months and will encourage other prospective customers to take the plunge.

4,800 tonnes of MKX over 12 months

The deal facilitates the supply of 4,800t of MKX-CC which is GT3’s proprietary high-reactivity metakaolin and low-carbon cement replacement product (previously known as Eco-Clay). Although this morning’s announcement did not provide a revenue estimate, a conservative estimate of A$250/t would lead to $1.2m in revenue. Using $440/t as we used in our model would derive over $2m in 12 months. Moreover, GT3’ capital-light tolling model will help the company’s bottom line.

Replacing fly ash and slag in concrete

The construction sector is a major source of carbon emissions and one of the biggest contributors is emissions generated from the production of concrete. Historically industrial by-products such as fly ash and blast furnace slag were relied upon to reduce embodied carbon and improve durability of concrete. As coal-fired power stations are retiring, there is a need for alternative materials that lower emissions in finished concrete that retain the durability of existing products. MKX-CC can replace up to 40% of Portland cement and reduce carbon emissions by more than 30% on a like-for-like basis whilst maintaining the strength and durability of the incumbent products.

Valuation of A$0.10-A$13 per share reiterated

We reiterate our valuation of A$0.10 per share in a base case and $0.13 per share in an optimistic (or bull) case. We intend on publishing a more comprehensive update note and an updated valuation in the coming days.