UPDATE 1-Finnish state considering Talvivaara rescue-sources
* Nickel miner hit by low prices, production setbacks
* Says needs more cash after recent fundraising
* Rescue package might be focused on debt relief-sources
* Shares slide 18 percent (Recasts, adds details on government discussions, background)
HELSINKI, Oct 30 (Reuters) - Finnish nickel miner Talvivaara , struggling for cash just months after its latest fundraising, could be rescued by the government with a package focused on debt relief, sources familiar with the discussions said on Wednesday.
Once hailed as a pioneer in cost-efficient mining, Talvivaara's sole Sotkamo mine has been hit by a slew of production problems and a near 20-percent slump in the price of nickel this year, caused by a global glut of the metal.
The government, which through its investment fund Solidium is the company's top shareholder with a stake of around 17 percent, has not yet agreed on how Talvivaara will be helped, the sources said.
One of the sources told Reuters that some officials believed the state should help Talvivaara, since bankruptcy would result in a costly dismantling and clean-up of the mine which the government would need to help pay for.
Another official, who also did not want to be named because talks were ongoing, said a final decision would likely be made by Solidium.
Hanna Masala, Solidium's investment director, had no comment when contacted by Reuters.
Talvivaara has a 130 million euro ($179 million) loan maturing in November next year, and has around 860 million euros in total liabilities. It ended the second quarter with just 101 million euros in cash.
The company said in August it produced 4,500 tonnes of nickel during the first half of 2013 and expects an improvement in the second period. But it has abandoned an earlier forecast for full-year output of 18,000 tonnes.
Analysts have said it could run out of money next year if it cannot significantly ramp up production.
Talvivaara warned this month that it needed more funds to keep Sotkamo running after a costly waste water leak and the prolonged fall in nickel prices.
The Helsingin Sanomat newspaper reported earlier that the government was considering plans including debt restructuring.
The Ministry of Employment and the Economy wanted a decision in time for Talvivaara's announcement of its third-quarter results on Nov. 7, it said.
Finland's new minister in charge of state ownership, Pekka Haavisto, said earlier this month that companies with state investment needed to "survive in the market."
Talvivaara, once praised for its breakthrough bioheap leaching Technology which uses bacteria to extract nickel, raised 261 million euros in April through selling new stock.
Analysts have said another rights issue would be difficult, with private investors wary of its repeated setbacks.
Talvivaara shares have fallen nearly 80 percent from a year earlier on worries about the company's future, and have been volatile in recent trade. They were down 18 percent at 0.076 euros at 1450 GMT. ($1 = 0.7262 euros) (Reporting by Ritsuko Ando; Editing by Jason Neely and David Cowell)