Struggling African Minerals could seek to sell stake in mine

* Appoints Jefferies, StanChart (HKSE: 2888-OL.HK - news) to restructure finances

* Deal with China's Tewoo looks off the agenda

* Hopes Tonkolili mine to be cash positive by year-end (Updates with details, analysts comments)

By Karen Rebelo and Silvia Antonioli

Sept 30 (Reuters) - African Minerals said on Tuesday it was open to selling a minority stake in its only mine as part of a financial rescue after reporting a 97 percent fall in its first half core earnings.

The Sierra Leone-focused iron ore producer is in a critical situation, battered by a 40 percent drop in the iron ore price and the effects of the Ebola epidemic .

The company is seeking working capital and cash to fund the expansion of its Tonkolili mine and to refinance an expensive $250 million loan.

However, its problems mean that an investment deal proposed last year and worth almost $1 billion with China's Tianjin Materials and Equipment Group Corporation (Tewoo) was unlikely to happen.

The company remained confident it could generate positive cashflow from Tonkolili by the end of 2014 through a rescue plan announced earlier in September which includes renegotiation of sale prices to clients.

According to a Reuters calculation, the cost to African Minerals of producing and shipping each tonne of iron ore is roughly $15 above the price it is getting from clients.

In August it agreed with China's Shandong Iron and Steel Group, which has a 25 percent stake in Tonkolili, to immediately use as working capital funds that had been earmarked for the project's development.

Expansion is vital for the company as it would allow it to tap higher quality ore for which it could get better prices. The miner outlined last week a rescue plan that includes price renegotiation with clients.

TEWOO DEAL "NOT REALISTIC"

Shares (Berlin: DI6.BE - news) in African Minerals, which fell as much as 15 percent in early trade, regained some ground after the company published its results a few hours later than the market expected.

However, they were down 7.7 percent by 1430 GMT and the company is worth only around $100 million after losing 90 percent of its value this year. The delay in releasing the results had fuelled fears about the company's finances.

"As it turned out the results were in line with expectations and that's giving the market a little breath of hope but there are still a lot of ifs and buts," said Investec (LSE: INVP.L - news) analyst Hunter Hillcoat.

The results laid bare the problems the company is facing.

Earnings before interest, taxes, depreciation and amortisation fell to $2.7 million for the six months ended June 30, from $100 million a year earlier.

African Minerals said it had appointed Standard Chartered (HKSE: 2888.HK - news) Bank to lead a debt refinancing for the mine project and Jefferies to lead a capital markets and restructuring mandate at the group level.

It also said that given the depressed iron ore market and share price, it did not expect swift conclusion of a deal with Tewoo, China's largest import and export enterprise.

African Minerals had announced last year Tewoo's interest in investing $390 million to buy 10 percent of the company, plus $600 million for a 10 percent stake in the Tonkolili project and a long-term offtake agreement.

(Editing by Simon Jennings/Keith Weir)