Councils say that sending recycling to landfill would be a "last resort" if SKM, the City of Ballarat's contractor, goes into administration.
An industry source close to SKM, who did not wish to be named, told The Courier that the giant recycling operator's closure was likely to be before the end of this week if investors could not be found to prop it up.
It confirms earlier reports suggesting the firm was likely to go into administration.
However neither the City of Ballarat Council nor Golden Plains Shire Council - who both have contracts with SKM - have received any communication about the firm's future since the weekend.
Terry Demeo, the City of Ballarat's director of infrastructure and environment, said the council had arrangements with other parties if SKM were to shut its gates.
We will always commit to a diversion [from landfill] unless there are no other options available
He said he was not in a position to give further details of the other companies involved due to commercial sensitivities and "the limited sources for recycled material".
Sending recycling to landfill would be a "last resort", he said.
"We will always commit to a diversion [from landfill] unless there are no other options available."
The industry source also said that the state government had not directly engaged with SKM at all in recent weeks, despite 31 councils relying on the company to take their recycling.
Two of the company's sites were temporarily closed by the Environmental Protection Authority (EPA) for stockpiling back in February. The company voluntarily shut down its Geelong plant around the same time, saying it had reached capacity.
The EPA also imposed a short-term ban on it receiving any more recycling at its Laverton plant last month.
The City of Melbourne's deputy lord mayor Arron Wood told ABC radio yesterday that there was potentially an investor who would invest in SKM.
"We are not sure what this week will hold, but obviously, the best outcome is that SKM can secure an investor who is going to put some decent money into them and modernise their business model."
SKM is understood to have invested millions of dollars upgrading its recycling technology over the past few years, and has since been able to export higher-grade paper to China.
Read SKM's submission to the waste inquiry
The company employs more than 300 people. It has five facilities in Victoria at Coolaroo, Laverton, Geelong, Hallam and Mornington, as well as facilities in South Australia, New South Wales and Tasmania.
Yesterday, the state government reiterated its criticism of the company with a spokesperson saying:
"SKM's ongoing non-compliance is unacceptable and we make no apologies for taking the necessary action to protect the community from dangerous waste stockpiles.
We have been working with the 31 councils, including Ballarat, who have contracts with SKM, and the Metropolitan Waste and Resource Recovery Group to look at alternatives for managing kerbside recyclingState government spokesperson
The state government would not provide any precise detail on the assistance it would provide should SKM's recycling plants stop accepting recycling.
"We have been working with the 31 councils, including Ballarat, who have contracts with SKM, and the Metropolitan Waste and Resource Recovery Group to look at alternatives for managing kerbside recycling collection, should SKM no longer accept waste."
The City of Ballarat has worked with SKM for a number of years, with its current contract due to end in December.
Recycling collections are scheduled to take place as usual.
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