CHALLENGE Australia Dairy (CAD), which was placed in administration two weeks ago, is still looking for a white knight investor to keep the Capel and Boyanup processing plants operational and pay millions of dollars owed to dairy farmers.
Challenge Dairy Co-operative and its 50 dairy farmers were the main suppliers of milk to CAD, a joint venture between the co-op and Singapore food company QAF.
Jared Paladri, senior manager with administrators PPB (WA), said that as of September 26, CAD owed $6.9 million to shareholders and $3.4 million to the co-op.
"We have been talking to various parties who are interested in putting capital into the business, especially one party we are dealing with at the moment but they are only at very early stages," Mr Palandri said.
"They are trying to get some more information, completing due diligence."
Mr Palandri declined to name the company but said it was a national milk company.
As of Tuesday, milk was still being picked up from co-op suppliers and taken to other processors but the suppliers had so far only received an interim payment at the end of September and a minor payment in October.
Cowaramup dairy farmer Paul Miller said if they were "picked up" by other processors they would need payments similar to their own suppliers, which had been about 14c/L higher than what the co-op had recently been paying.
He estimated he would need close to 40c/L, especially going into the summer with the higher fodder prices.
"We have had 12 months of low prices and our cash reserves are gone and we are selling things to survive," he said.
"Unless we get picked up by another processor we will be gone pretty soon."
WAFarmers dairy section president Peter Evans said an announcement was expected late last week but "nothing was instigated".
"I have heard nothing since then but I am sure there is going to be an outlet for co-op farmers' milk," he said.
"We won't be tipping milk down the drain."
Last week partners of receivers PWC, Derrick Vickers and Kate Warwick, said 20 production and logistics staff from the Capel and Boyanup plants had been made redundant.
"This was a very tough decision but one we made with the future of the business top of mind," Mr Vickers said.
"We understand this is a difficult time for affected employees and will work closely with them and the State Government to provide assistance and support.
"We will also continue to work hard to keep the business operating as a whole while we try to find a buyer."
The co-op, in a statement last week, said it was in the process of "securing its customer base to receive all milk from its farmer members".
"The co-operative is still supplying fresh milk to all other WA milk processors in addition to fulfilling contracts to its overseas customers in Singapore and Malaysia," it said.
The co-op directors have appointed two independent directors to review and strengthen its corporate governance.
They are Imre Mencshelyi, recently retired chief executive of grain co-operative CBH Group and former RSM Bird Cameron partner Ron Swinney.
Mr Mencshelyi is also an independent director of CAD and is now believed to have replaced Larry Brennen as chairman.
"Challenge Dairy Co-Operative is being well served by its new chief executive officer Geoff Wilton and his team, who are intent on securing the business of the co-operative and putting new strategies in place to pay members' ongoing milk payments and what they are owed as quickly as possible," Mr Mencshelyi said.
Mr Wilton said he had been greatly reassured by the support from the co-operative's valued customers.
"National Foods is one of Australasia's largest food and beverage companies, producing household-name brands in milk and dairy beverages, and it recognises the importance of maintaining supply from our farmers," Mr Wilton said.
"We are working with National Foods and our other customers to ensure the agreements that are currently in place with the co-operative continue and flourish in the future," he said.
"It is very important to note that the Challenge Dairy Co-operative is a separate entity to Challenge Australia Dairy and that CAD was only one of the co-operative's customers," Mr Wilton said.