Hydrophobic aggregates for use in refractory castables and gunning mixtures and methods of their preparation. The aggregates here are formed by crushing insulating fire brick and coating the resulting particles with a hydrophobic component. The hydrophobic component may be a polydimethylsiloxane having a terminal silanol group. As a result of the coating process, the coated aggregate has very low levels of alkalis. The aggregates may be used to form refractory castables that do not undergo substantial alkaline hydrolysis due to the reduced levels of alkalis. The castables made from these aggregates display superior physical properties, including lower water content, lower permanent linear change, high strength, and superior thermal conductivity/insulation properties, while at the same time possessing lower density and requiring less water to be used during castable formation. These improved properties also are observed in gunning mixtures formed from these aggregates.