The Dairygold plant closed its doors in April 2006

Dairygold Food Products has faced calls to repay a �663,528 grant since closing its cheese packing-plant at Felinfach, near Lampeter, Ceredigion, last April.

The Irish firm was awarded the money in 2002 to expand its packing lines.

Rural Affairs Minister Carwyn Jones said legal action seemed "the only option left". Dairygold said it was working to "resolve" all issues.

Work to expand Dairygold's cheese-packing plant was completed in March 2004.

But 18 months later the firm announced plans to close its factory and the facility closed in April 2006, with the loss of 115 jobs.

An investigation by the BBC Radio Cymru programme, Manylu, found the machinery bought with the grant was sold on to the Kerrygold company, which is part-owned by Dairygold, and was being moved on to its packing plant in Leek, Staffordshire.

Last September, the assembly government said legal action was possible to recover the grant money.

Now Mr Jones has said he was "minded" to pursue that course.

'Unavoidable closure'

He said: "We have had long-running discussions with Dairygold about recovering the grant funding.

"But, unfortunately, on the basis of the position adopted by Dairygold, it seems that legal action is the only option that is left to us.

"I have now written to Dairygold's lawyers to notify them formally that we are minded to start legal proceedings very soon.

"I have given them one final opportunity to provide further information. I will ensure that everyone concerned is kept informed of further progress."

In a statement, Dairygold said: "Dairygold Food Products (UK) Ltd is actively working with the Welsh Assembly Government since the unavoidable closure of its Felinfach cheese packing facility to satisfactorily resolve all agreements on all matters."