Considered to be two weeks worth of coal production, the government is negotiating the prepayment with KordaMentha under the current contract to supply state-owned utility Verve Energy.

The government’s offer requires the funds to be used only for Griffin’s operating expenses.

“At least for the time being, this will maintain Griffin Coal as a going concern and therefore help to protect jobs while a final resolution is reached,” Premier Colin Barnett said.

“This should allow the coal mining operation to move into better quality coal deposits to assist meeting the quality and volume issues of its customers, including Verve.”

Before the announcement yesterday afternoon, a KordaMentha spokesperson told ILN it was hard to say how long Griffin could continue to operate as it was, “but for at least a week or two there are no problems”

Administrators met with hundreds of workers in Collie yesterday and have had discussions with the state government every day.

The spokesperson said the government was reluctant to support a private business in this situation but suggested that advance payments on coal supplies would assist Griffin while long-term answers were being worked out.

The phones have been busy with interested parties that would like to see Griffin on the market.

The spokesperson said there had been a couple of dozen enquiries and there was clearly a lot of interest in the assets but “it’s too early to say how many of those people would be serious bidders”

He suspects the administrative process could take several months and in that scenario there will need to be at least some medium-term funding for Griffin.

While the Australian newspaper reported that former WA premier and lobbyist Brian Burke was negotiating with the administrators, the spokesperson had no direct knowledge this was the case.

The first creditors meeting is scheduled for January 13.

Leading WA thermal coal producer Wesfarmers, which benefited from the Varanus Island gas explosion in 2008 by expanding production, is tipped to be a potential buyer of Griffin’s WA coal assets.

Griffin, the state’s second-largest coal producer, entered administration after defaulting on an interest repayment last month to US bondholders owed $US475 million and missing a $A5 million payment to the tax authority.

Griffin’s debts total $700 million.

Griffin operates the Ewington and Muja mines near Collie, 220 kilometres southeast of Perth.

The company produces more than 5 million tonnes of coal per annum.