JOHANNESBURG (miningweekly.com) – Two months after shipping its first coal, London-listed Strategic Natural Resources’ (SNR’s) 74%-owned South African subsidiary Elitheni Coal has ceased operations until long-term financing could be secured and as liquidation processes got under way.

The Eastern Cape-based coal mine last week received a liquidation notice, which would be heard on December 10, from a group of creditors claiming an undisclosed amount, which the mine said exceeded legitimate claims from the relevant creditors.

However, SNR on Monday said Elitheni and a number of undisclosed parties, including SNR’s major shareholders, an international coal trader and a South African government agency, had continued discussions to secure longer-term finance and a more permanent recapitalisation for the embattled mine to enable the restart of mining operations.

However, there can be no certainty that Elitheni would be able to secure any long-term strategic funding, SNR pointed out.

Elitheni had secured a short-term funding facility of R15-million from its existing black economic-empowerment partner and 20% shareholder, Rapidtrade, which could convert the loan into a 10% shareholding of Elitheni, effectively diluting SNR's 74% equity interest.

“Elitheni and SNR are still in discussions with Rapidtrade to finalise the terms of a loan agreement between Rapidtrade, Elitheni and SNR and a further announcement will be made once the loan agreement has been entered into,” SNR said in a statement.

Elitheni and SNR were also in discussions with Land Consultants regarding the repayment of a short-term bridging loan that was due to be repaid on December 31, 2013.

To date, SNR – Elitheni’s largest creditor – had, through its subsidiary Acharnian Mining Company, advanced about £21.2-million in loans to Elitheni and would “carefully consider” its own financial position and, in particular, its ability to meet its own obligations to its creditors, should the court place Elitheni into liquidation.

SNR would, however, have no further liabilities to Elitheni and SNR would seek the recovery of its loans through the liquidation process.