Under the term sheet, AR Fuels will supply the miner with at least 5 million litres of its tallow-based biodiesel for five years. The biodiesel will be produced at the company's Picton facility.

The two companies have also agreed to construct blending infrastructure to be situated at the customer's mine site for storage of AR Fuels-supplied biodiesel.

This is subject to AR Fuels procuring funding for the blending infrastructure for an amount of up to $1.5 million or, if the company is unable to secure funding by June 30 this year, on the customer raising the funds by the end of August.

AR Fuels added that if it procures the funding for the project, it would be entitled to recoup all its outlays for the infrastructure from the customer during the term of the contract.

Construction of the blending infrastructure, including a biodiesel storage tank, is expected to take about four months from securing finance. Biodiesel production will start during the construction period.

The company said pricing of biodiesel in the term sheet is in line with its move towards ‘cost plus' basis. The term sheet will also pass on to the customer the benefits of any future carbon trading arising from the contract.