The utilization of clay to produce limestone calcined clay cement (LC3) is limited in China due to environmental concerns related to clay excavation. This study explores the potential to activate the fine-grained clay sourced from excavated spoil in Shenzhen, China for LC3 production. A water washing method was introduced to treat the excavated spoil, enriching the clays’ kaolinite content in a range of 72.4% to 83.1%. Incorporation of calcined clay with different calcination procedures will modify the hydration rate for aluminate, and the longer calcination after 2 h is detrimental for clay reactivity. Additionally, using excavated spoil calcined at 800 °C with more than 2 h in paste yields compressive strength comparable to that of paste made of ordinary Portland cement (OPC). Calcining at 800 °C for 2 h is the optimal calcination procedure to activate the collected soil. Notably, this activation approach for LC3 production exhibits remarkable environmental and economic benefits, reinforcing the potential for extensive adoption of LC3 within China.