Minergy has approached Botswana's government for a financial bailout to settle debts owed to a mining contractor, which has brought mining operations at its Masama coal mine to a halt, the company's CEO said on Wednesday.

On Tuesday, Minergy announced production had ceased at Masama after the mining contractor, Jarcon Open Cast Mining, downed tools due to overdue payments.

Minergy has blamed weakening coal prices for its operational problems, saying it has seen a 33% drop in coal prices since mid-December.

The miner is now in talks with the state-owned Mineral Development Company of Botswana (MDCB) and Botswana Development Corporation (BDC) for funding to pay the contractor, Minergy CEO Morné Du Plessis told Reuters.

He did not disclose how much cash Minergy is requesting, or how much it owes the contractor, as the company is currently in a closed period.

“Talks are ongoing and we are confident that we will get help from government. Masama is a strategic asset for Botswana in its coal industry aspirations and we are hoping to turn the situation around as quickly as we can,” Du Plessis said.

With coal miners having limited traditional funding options due to climate change concerns, the two Botswana state agencies have previously provided more than 300 million pula ($22.35 million) in funding to bring Masama into production and expand its operations.

Masama has capacity to produce 1.5-million tonnes of coal per year and is the smaller of two coal mines currently in operation in Botswana, the other being the state-owned Morupule Coal Mine, with 4.2-million tonne capacity.

Minergy’s latest annual report shows that as of June 2022, the company owed the mining contractor 79-million pula after a debt restructuring exercise. It also owed BDC 125-million pula and MDCB some 295-million pula.

Strong demand, mostly from Europe due to the fallout from Russia's invasion of Ukraine, drove Minergy’s exports up 53% in the half-year to December 31, boosting its earnings and helping it to reduce debt.

However, weakening coal prices and logistical challenges it faces when hauling coal from landlocked Botswana to export markets have impacted Minergy's earnings.