New Zealand coal miner Solid Energy may not be financially viable, according to NZ finance minister Bill English.
The statements come on the back of Solid’s bonds, to the tune of NZ$53.9 million, being written off by its backer TSB Bank.
This equates to the total book value of its loans.
Another major bank in NZ also wrote to the miner last month expressing concern over the company’s financial solvency.
The New Zealand Government is also understood to have extended indemnity to the company.
At the time the New Zealand Government stated it was not preparing to place the miner into receivership, however it appears to have now backflipped.
This week English stated that he is unsure if the company is still viable, and raised the prospect of its potential collapse, Stuff reports.
It comes as the miner is in negotiations to reduce its levels of debt from its existing NZ$320 million position.
Yesterday English said that 18 months of regular briefings on Solid Energy’s financial state have not produced a stable vision for its future operation.
“It’s still not clear [if the company is viable], and that’s with very serious and competent efforts by the board and management of Solid Energy, and now, increasing focus from the banks,” he told Stuff.
“Solid Energy has done a lot of work to right-size itself, but the coal price has kept falling away in front of them and that's made it a continuing challenge.”
The commodity has faced a massive decline. It has fallen in price by more than a third in a year from December 2013 to December 2014, as Chinese demand waned and projects came online, flooding the market and causing excessive supply problems.
According to Anglo American CEO Mark Cutifani coal mines will be closed or suspended at a steady rate until reduced supply drives a price recovery, adding that globally they will most likely shut at a rate of around one every two to three weeks until the lack of supply finally affects price.
Earlier this year Glencore announced plans to cut 15 million tonnes from its Australian output in the wake of the falling price.
"Whatever actions [Solid have] taken, they then find they need to take more, and that of course is a discussion that includes their $300m of debt,” English said.
"In the end you have to work out whether there's a viable company or not and we're in that process. We're doing everything we can to secure the continuity of the company."
These statements have put the future of close to 700 workers in the air.
The miner has already carried out a series of job cuts at its operations across New Zealand, with the potential of more in the future.
However the miner did state it is “still looking through various different changes that could be made but no decision has been made yet and there's no timeline on it”
Solid Energy’s senior management will today appear before an NZ Parliament committee to discuss the future of the company.