signs agreements with fortescue metals

ARF signs agreements with Fortescue Metals Group, and Operational
Update
Australian Renewable Fuels Limited (“ARF” - ASX Code ARW) advises the
market of the following developments in relation to its biodiesel production
and marketing activities;
1. Execution of Agreement for the Purchase of Biodiesel between
Australian Renewable Fuels Picton Pty Ltd and FMG Chichester
Pty Ltd.
ARF is pleased to announce the execution of an agreement between FMG
Chichester Pty Ltd, a subsidiary of the Fortescue Metals Group (“FMG”)
and Australian Renewable Fuels Picton Pty Ltd for the purchase and supply
of biodiesel to FMG’s Cloudbreak mine site in the Chichester Range,
Pilbara, Western Australia. The agreement provides for the supply of a
minimum volume of 5 million litres of biodiesel per annum with a target
volume of 7.5 million litres. The term of the agreement is 5 years.
2. Execution of Agreement for the Construction and Financing of
Cloudbreak Tank and Blending Facility between Australian
Renewable Fuels Picton Pty Ltd and FMG Chichester Pty Ltd.
ARF is also pleased to announce the execution of an agreement between
FMG Chichester Pty Ltd and Australian Renewable Fuels Picton Pty Ltd for
the financing of the facilities described above at FMG’s Cloudbreak mine
site in WA. Under the agreement, ARF will provide the funding for the
capital works to be undertaken at Cloudbreak and FMG will re-imburse
ARF for any costs and expenses in connection with the facility. ARF will
Announcement 26 September 2008 Page : 2
remain the owner of the facility until such time as the financial obligation
has been discharged.
3. Procurement of funding for resource company biodiesel storage
tank and blending infrastructure.
Earlier this year ARF informed the market that it had concluded a Purchase
Term Sheet for the supply of biodiesel to a prominent West Australian
resource company. The Supply Agreement was dependant upon the
procurement of finance for a biodiesel storage tank and associated
blending infrastructure with a capital cost of approximately $1.5 million.
ARF is pleased to inform the market that it has been successful in the
procurement of funding for the design and construction of a turnkey bulk
fuel storage facility and associated blending infrastructure at the Fortescue
Metals Group’s Cloudbreak mine site. The capital works relating to the
biodiesel facilities at Cloudbreak will be undertaken by Fuel Tank and Pipe
Pty Ltd, a prominent supplier of bulk fuel storage solutions, predominantly
in Western Australia.
Work on the biodiesel facilities at Cloudbreak will commence immediately
and is expected to be completed in approximately 3 months. The supply of
biodiesel will commence following the commissioning of the facilities.
4. Procurement of working capital facilities from HSBC Bank
Australia Limited.
ARF wishes to inform the market that it has been successful in negotiating
financing facilities for the provision of working capital with its bankers,
HSBC Bank Australia Limited. The aggregate of the facilities provided to
ARF amounts to $2.036 million comprised of inventory and receivables
financing ($1.7 million) and guarantee lines ($0.336 million).
The revised bank facilities will assist ARF in funding its working capital
requirements, particularly in relation to the biodiesel supply agreements
signed with both FMG Chichester Pty Ltd and the recently announced
renewal of contract for the supply of biodiesel to Piacentini and Son Pty
Ltd.
5. Grant of Employee Options
The Board of Directors of ARF wish to announce the granting of employee
share options (under the company’s Employee Share Option Plan) to its
key management and operational staff. The total number of options
granted in this award amounts to 1.5 million with an exercise price of 10
cents per share and an expiry date of 21 September 2013.
Announcement 26 September 2008 Page : 3
The Board wishes to express its appreciation to all its staff for their
respective contributions during a particularly difficult time in the
Company’s progression back to commercial volume production.
6. Marketing initiatives
ARF is currently in negotiation with various parties from a diverse range of
industries for the future supply of its quality biodiesel. ARF will update the
market as and when significant sales contracts are concluded.