More than 20,000 tonnes of the partially processed aluminium smelter dross known as ouvea premix will be removed from the former Carter Holt Harvey paper mill and other sites in Invercargill.
Australian company Inalco Processing Ltd will start removing the substance from the old mill within the next three months.
It has a contract to remove 22,000 tonnes of it in the next six years.
The dross from the New Zealand Aluminium Smelters' (NZAS) Tiwai Point smelter is classified as a class 6 hazardous substance.
Poisonous ammonia gas is generated if the substance comes in contact with water.
Last year Gore District Council chief executive Steve Parry said Mataura had come close to environmental disaster during a flash flood in February last year.
The dross was previously owned by Taha Asia Pacific, which went into liquidation in 2016 and in March last year a $4million package to remove the substance was brokered by the NZAS, the Government and Southland councils.
Mr Parry said the contract ensured the 10,000 tonnes of premix stored near Mataura would be moved first.
"This acknowledges the significant risks posed to both the environment and people by having the premix stored next to the Mataura River," he said.
Inalco is still required to provide the logistics for a satisfactory risk-management plan before removal begins.
The substance would be transported to Inalco's processing facility at Tiwai Point where it would be processed and converted into a raw material for future use.
Mr Parry acknowledged the flexible attitude shown by NZAS which allowed Inalco to process the premix at the Tiwai Point site. That was an important for getting the contract finalised.
Gore District Mayor Tracy Hicks said it was pleasing to get a solution that would relieve the anxiety of Mataura residents.
Mr Hicks paid tribute to the efforts of Mr Parry in securing a deal.
Almost $2million of the deal would come from NZAS ($1.75million) and the Ministry for the Environment was providing $1.25million.
The landlords would contribute $350,000.
Environment Southland would contribute $250,000 and the remaining $400,000 would come from the Invercargill City Council, Southland District Council and Gore District Council on a per-capita basis.
