Chinese-owned miner Premier Coal is racing against the clock to thrash out a deal with electricity provider Synergy for higher prices considered vital to its survival.
Following months of fruitless negotiations, it is understood the besieged Collie miner has been given a deadline of the end of June by parent company Yancoal to work out a new agreement.
Premier, which is paid about $40 a tonne for the coal it supplies to Synergy, is believed to be seeking upwards of $10/t more to remain viable.
However, sources have said State-owned Synergy is only willing to grant the struggling miner about $7/t extra.
There have also been suggestions Synergy is demanding some form of a trade-off from Premier for any price rise.
The issue could have political ramifications given the importance of Collie coal, which in past years has provided the fuel for almost half the electricity produced in the South West grid.
Premier is the sole coal supplier to Synergy, which generates the lion's share of coal-fired power in the network, meaning any price rise would have to be recovered from higher retail electricity prices if the State was to avoid a hit to its already fragile bottom line.
The looming ultimatum shapes as a watershed for Premier, which has struggled since Yancoal bought it from Wesfarmers for nearly $300 million in 2011.
Critics have argued Yancoal, paid too much given the low price Synergy was obliged to pay for Premier's coal.
It is understood Synergy pays less for the coal than it costs Premier to produce it - a situation that has been compounded by the worsening quality of the coal deposits being mined.
Energy Minister Mike Nahan indicated last week that a solution to Premier's difficulties would need to be found soon.
Dr Nahan has acknowledged the severity of Premier's plight, saying he was "acutely aware of the challenges" faced by it and fellow Collie coal miner Griffin.
Under the terms of the Synergy supply contract, the WA utility ultimately has the right to step in and manage mining in the event Premier cannot.
But Synergy and the State Government are understood to be reluctant to do this.
Premier first produced coal as Western Collieries in 1950.
The besieged Collie miner has been given a deadline of the end of June by parent company Yancoal."On Premier Coal's negotiations with Synergy