Copper miner Aditya Birla Ltd. (ABY.AU) said Tuesday it will have to pay back a total of around A$112 million in copper forward sales because of the large fall in metal prices over the contract period.

The practice of selling copper on a forward basis, known as provisional pricing, has already resulted in multimillion paybacks at other copper miners such as BHP Billiton Ltd. (BHP) because of the sharp retreat in copper prices, and has added to the pressures facing miners.

In its first half of the 2008-09 financial year, BHP said significant fluctuations in the copper price as well as unplanned interruptions reduced underlying earnings before interest and tax by US$333 million.

In the case of Aditya Birla, which owns two copper operations in Australia - Nifty in Western Australia and Mount Gordon in Northern Queensland - liabilities at Dec. 31 were A$59 million.

For the outstanding unpriced sales volume, where the quotational period is yet to mature, the company expects liabilities of around A$53 million.

"The payment of the same has been deferred until May 2009. The company is exploring various alternatives to finalize funding in this regard," Aditya said in a statement.

In long-term offtake agreements between miners and their customers, the metal is first provisionally priced. The eventual amount payable is then adjusted according to the daily London Metal Exchange Grade A settlement price average for the quotational period, usually the third month from the month of arrival of a copper delivery at the customer's port.

However, the huge swings in the LME copper price during the fourth quarter, when LME prices halved, mean miners have to give large amounts of money back.

That shouldn't be a problem for large diversified miners like BHP, but companies that mostly focus copper, or are already cash-strapped, may face tough challenges.

In Australia, mid-cap miner CopperCo Ltd. (CUO.AU) went into administration because of negative provisional pricing.

Embattled OZ Minerals Ltd. (OZL.AU) - which recommended a A$2.6 billion takeover by metals trader China Minmetals Nonferrous Metals Co., or Minmetals, Monday after struggling with mounting debt - likely faces similar problems.

India's Hindalco Industries Ltd. (500440.BY) holds 51.0% in Aditya.

-By Elisabeth Behrmann, Dow Jones Newswires;

61-2-8272-4689 elisabeth.behrmann@dowjones.com
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