DOE RUN RESOURCES CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended OCTOBER 31, 2001

Or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______

COMMISSION FILE NUMBER 333-52285

THE DOE RUN RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)

NEW YORK 13-1255630
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

1801 PARK 270 DRIVE, SUITE 300
ST. LOUIS, MISSOURI 63146
(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code) (314) 453 - 7100

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
[ ] YES [X] NO

Indicate by check mark if disclosure of delinquent filers pursuant to ITEM 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

Number of shares outstanding of each of the issuer's classes of common stock, as
of May 16, 2002: COMMON STOCK, $.10 PAR VALUE 1,000 SHARES

Aggregate market value of the voting stock held by non-affiliates of the
registrant: $0; all shares of the voting stock of the registrant are owned by
its parent, DR Acquisition Corp.

THE DOE RUN RESOURCES CORPORATION
INDEX TO FORM 10-K

PART I

ITEM 1. BUSINESS

The Doe Run Resources Corporation (the Company) is a producer of base
and precious metals with operations in the United States and Peru. The Company
is the largest integrated lead producer in North America and the largest primary
lead producer in the western world. In Peru, the Company operates the La Oroya
smelter (La Oroya), one of the largest polymetallic processing facilities in the
world offering an extensive product mix of non-ferrous and precious metals,
including silver, copper, zinc, lead and gold.

All of the Company's issued and outstanding capital stock is indirectly
owned by The Renco Group, Inc. (Renco). Renco is owned by trusts established by
Mr. Ira Leon Rennert, Renco's Chairman and Chief Executive Officer, for himself
and members of his family. As a result of such ownership, Mr. Rennert controls
the Company and its subsidiaries. The Company owns 100% of Doe Run Cayman Ltd.
(Doe Run Cayman), a Cayman Islands corporation. Doe Run Cayman owns in excess of
99% of the interest in Doe Run Peru S.R.L. (Doe Run Peru, a Peruvian
corporation), with a DE MINIMIS number of shares owned by employees of both Doe
Run Peru and Empresa Minera del Centro del Peru S.A. (Centromin) pursuant to
Peruvian law. Centromin is the Peruvian government entity whose subsidiary held
the assets and liabilities of La Oroya, which was purchased on October 23, 1997
by Doe Run Peru. The Company's business in the United States includes an
integrated primary lead operation, a secondary lead operation and lead
fabrication operations. In Peru, the Company produces various base metals and
precious metals and has a copper mining and milling operation. These operations
will be discussed in greater detail in the "Overview" sections below. Reference
with respect to operating segment information is hereby made to "Item 8.
Financial Statements and Supplementary Data", Note 13 to the Company's
Consolidated Financial Statements. The Company's business does not involve: 1)
seasonal fluctuations, 2) unusual working capital requirements, 3) significant
order backlog or 4) federal contracting.

OVERVIEW -- U.S. OPERATIONS

The Company's U.S. primary lead operation consists of two primary
smelters, which obtain concentrates from the Company's four operating mills,
supplemented from time to time with concentrates purchased in the open market.
The mills are supplied with ore mined from six production shafts along
approximately 40 miles of the Viburnum Trend in southeastern Missouri, one of
the world's most productive lead deposits. As of October 31, 2001, the Company's
U.S. ore reserves consisted of approximately 50 million proven and probable
tons, containing grades of 5.85% lead, 1.34% zinc and .25% copper. The Company
also operates a secondary smelter in southeastern Missouri where it produces
lead metal from recycled lead-acid batteries and other lead bearing materials.
Through its subsidiary, Fabricated Products, Inc. (FPI), the Company produces
value-added lead products such as lead oxide, lead sheet and lead bricks at
facilities in Arizona, Washington and Texas. These operations permit the Company
to participate in and manage the entire lead life cycle from mining lead ore, to
producing refined lead metal, to fabricating value-added lead products, to
recycling batteries and other materials containing lead.

In fiscal 2001, the Company's U.S. operations shipped approximately
490,000 tons of refined lead metal and lead alloy products, including recycled
lead, representing approximately 23% of North American consumption and 8% of
western world consumption and generating net sales of $303.1 million and a net
loss of $48.4 million.

Approximately 67% of the U.S. operation's lead metal sales, in 2001,
were to battery manufacturers or their suppliers. Historically the lead-acid
battery has been the dominant technology for automotive and other starting,
lighting and ignition (SLI) batteries. Management believes this will continue to
be the case for the foreseeable future because of its cost competitiveness,
recycleability and existing infrastructure. Refined lead is also used in
products such as computer and television screens, ammunition, stationary
batteries used as backup power sources and rolled and extruded lead products
used in radiation shielding and roofing materials.

Fluctuations in lead and other base metal prices could have a material
adverse effect on the results of operations, financial condition and liquidity
of the Company. These prices are affected by numerous factors beyond the
Company's control, including expectations for inflation, speculative activities,
global and regional demand and production, political and economic conditions and
production costs in major producing regions. The aggregate effect of these
factors is impossible for the Company to predict. The Company, by taking
advantage of its extensive polymetallic ore resources, is somewhat able to
reduce its exposure to metal price volatility through adjustments to its mining
and milling plans to take advantage of prevailing market conditions for lead and
zinc. In addition, sales from tolling services, by-products and fabricated
products provide the Company with sources of revenue largely independent of lead
prices

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The average market price for refined lead, determined on the London
Metal Exchange (LME), was $428.80 per short ton in fiscal 2001. This represents
a 4% increase compared to the average for fiscal 2000. From 1998 through 2000
the LME lead price declined as new mines were developed in Australia and
Ireland, and as China increased its lead metal production and exports. During
the second and third quarters of fiscal 2000 lead prices declined to near
historic lows. Despite the modest improvement in fiscal 2001, lead prices remain
substantially below the average for the ten years 1992 through 2001.

In the U.S. market, premiums over the LME were adversely impacted by
the recessionary conditions in the U.S. economy during 2001. Slower automotive
replacement battery shipments have weakened overall demand, compared to the
prior year. Also, a significant drop in demand for batteries for the
telecommunications industry occurred as a result of lower capital expenditures
for the industry's infrastructure. In fiscal 2001, western world consumption of
lead declined by 5% and U.S. consumption declined by 10%, reflecting weakened
economic conditions. Management believes that demand is near its lowest point
and is likely to increase as a result of economic recovery and worldwide
economic growth.

Management believes that lead prices will recover from the current low
level, as several large lead-producing mines will be depleted beginning in 2001
through 2006. In 2001, mine closures and cutbacks occurred in Spain, Sweden,
Canada and the U.S., reducing supply by approximately 200,000 tons, or
approximately 3% of western world consumption. These closures should
significantly reduce western world production and bring about a deficit in
supply versus demand. In recent months, the industry has seen evidence of this
deficit as some primary smelters have cut back due to limited concentrate
availability. In publications issued in December of 2001, international
commodity consultants forecasted annual average lead prices for the years 2002
through 2007, which are higher than those experienced in 2001.

Zinc prices dropped precipitously in 2001 as a result of weak demand
and excess production. The last several years have seen large zinc mines open in
Australia, Ireland and Peru and a major expansion of a zinc mine in Alaska. In
fiscal 2001, world zinc mine production increased 5% and zinc metal production
increased 4%. Demand was weak during 2001 because of general economic
conditions, and in particular because of weakness in the auto and construction
industries. Western world zinc demand dropped 3% and U.S. zinc demand dropped
13% in 2001, compared to 2000. As a result, the average LME price for refined
zinc declined more than 19% to $846.40 per ton in fiscal 2001. Industry analysts
project this zinc surplus will continue to grow, making the prospects for a
recovery in zinc prices unlikely in 2002. If zinc mine production is reduced, in
order to balance supply and demand, lead concentrate supplies are likely to
tighten even further as lead is a by product of many zinc mines.

OVERVIEW-- PERUVIAN OPERATIONS

The Company's Peruvian operations consist of the La Oroya smelting
complex, acquired in October 1997, and the Cobriza mine and mill, acquired in
August 1998. La Oroya's unique combination of base metal smelters, refineries
and by-product circuits enable it to process complex polymetallic concentrates
and to produce high quality finished metals and by-products. For the year ended
October 31, 2001, net sales and net income were $434.3 million and $1.6 million,
respectively. Refined silver, copper, zinc, lead and gold accounted for 36%,
25%, 17%, 14% and 5%, respectively, of fiscal 2001 net sales. Sales of various
by-products accounted for the balance of fiscal 2001 sales. In 2001, La Oroya
was one of Peru's largest exporters, exporting approximately 89% of its total
shipments to North America, Europe and Asia, as well as other Latin American
countries. Its customers include end-users of base metals and metal by-products,
as well as international metal trading companies.

La Oroya 's operations consist of the smelting and refining of complex
concentrates obtained from Cobriza and from unaffiliated mining operations. La
Oroya typically purchases concentrate feedstock pursuant to contracts under
which the cost of concentrates is based on a percentage of the payable base
metal and precious metal content of the concentrates, reduced by processing
fees, treatment charges to refine the concentrates and penalties for impurities
within the concentrates, such as arsenic, antimony and bismuth, which the
smelter can process and sell as by-products. Base metal prices are generally
established by reference to international metal markets, primarily the LME.
Treatment charges and penalties are negotiated with concentrate sellers. They
are affected by numerous factors beyond the Company's control including:
expectations for inflation, global and regional demand for smelter capacity,
availability and quality of concentrates and production costs in major producing
regions. The aggregate effect of these factors is impossible for the Company to
predict. Currently, La Oroya has secured approximately 93% of its concentrate
requirements for fiscal 2002, through material supplied by Cobriza and contracts
with suppliers. For the year ended October 31, 2001, approximately 25% of the La
Oroya smelter's copper concentrate requirements were met by Cobriza,
representing 100% of Cobriza's output.

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Because La Oroya pays for the majority of the metal content of the
concentrates purchased, it derives its operating profit primarily from treatment
charges and penalties. Additional operating profit is generated from the sale of
by-products, as well as from premiums over market prices received on its refined
metal sales. Because La Oroya's metallurgical recoveries are typically greater
than the percentage of metal content paid for, it is able to sell the excess
recoveries and increase its operating profit.

The markets for La Oroya's products are global and demand depends upon
world wide economic conditions. Given the diversity of its products and
by-products, the Company's financial performance is not solely dependent upon
any single product or by-product. Also, because the La Oroya smelter is
primarily a processor of complex concentrates that are purchased based on market
prices, its financial performance is less sensitive to the volatility of metal
prices.

THE COMPANY'S U.S. OPERATIONS

PRODUCTS AND SERVICES

The principal products produced by the Company's U.S. operations
include refined lead from primary and secondary sources, zinc and copper
concentrates, fabricated lead products and other by-products. The Company also
generates revenue from tolling fees received for recycling spent lead-acid
batteries and other lead-bearing materials for its customers. The following
table sets forth net sales for the Company's products and services:

For the year ended October 31, 2001, exports represented approximately
1% of the U.S. operations' net sales. For each of the years ended October 31,
2000, and 1999 exports were approximately 2% of the U.S. operations' net sales

CUSTOMERS

The Company's U.S. operations had approximately 170 lead metal
customers including six of the eight largest lead-acid battery manufacturers in
the world. These six customers accounted for approximately 43% of U.S. net sales
in fiscal 2001. The loss of any of the Company's large customers or curtailment
of purchases by these customers could have a material adverse effect on the
results of operations, financial condition and liquidity of the Company. For
fiscal 2001, Johnson Controls Inc. accounted for approximately 11% of the U.S.
operations' net sales. In fiscal 2000 and 1999 no single customer accounted for
more than 10% of the U.S. operations' net sales.

COMPETITION

The Company is the largest integrated lead producer in North America
and the largest primary producer in the western world. The Company competes
primarily in the North American market where its competitors are other major
primary and secondary lead producers. Competition within the North American
market is based primarily on quality, price, service, timely delivery and
reliability. Because lead is generally sold on a delivered basis with freight
charges included, the Company's central U.S. location allows it to have
transportation costs significantly lower than its major competitors with
operations outside of North America. Due to its location, the Company is also

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able to provide its customers just-in-time delivery at a lower cost than most of
its competitors. In addition, management believes the Company's primary and
secondary production capacities and focus on the lead business as its core
business provide the Company with additional competitive advantages.

RAW MATERIALS

Lead concentrates are supplied by the Company's mining operations and,
from time to time, purchased from third parties. For a discussion of the
Company's mineral reserves, see "Item 2. Properties -- Ore Reserves." At planned
production rates, U.S. operations expect to produce all of the concentrates
required by its primary smelters for fiscal year 2002.

The Company's U.S. operations utilize various other raw materials,
principally spent batteries, coke, and chemicals and reagents, which are secured
from external sources, primarily on the basis of competitive bid. The Company
believes that it has adequate sources of these raw materials to meet its present
production needs.

POWER

The electric power source for the majority of the Company's U.S.
operations is Ameren UE, a public utility headquartered in St. Louis, Missouri.
The Viburnum-35 mine and Glover primary smelter obtain their electric power from
Black River Electric Cooperative, a public utility located in Southeastern
Missouri. Natural gas and propane are secured from external sources, primarily
under contracts that are awarded on the basis of competitive bid. The Company
believes that it has adequate power sources to meet its present production
needs. The cost of both natural gas and propane increased significantly in the
last quarter of fiscal 2000 and the first half of fiscal 2001, adversely
affecting the Company's results of operations. Natural gas and propane prices
declined in the last quarter of 2001 to levels lower than the average for 2000.

ENVIRONMENTAL MATTERS

The Company's U.S. operations are subject to numerous federal, state
and local environmental laws and regulations governing, among other things, air
emissions, waste water discharge, solid and hazardous waste treatment, and
storage, disposal and remediation of releases of hazardous materials. In common
with much of the mining industry, the Company's facilities are located on sites
that have been used for heavy industrial purposes for decades and may require
remediation. Environmental laws and regulations may become more stringent in the
future which could increase costs of compliance. See "Item 8. Financial
Statements and Supplementary Data", Note 16 to the Company's Consolidated
Financial Statements.

EXPLORATION

The Company continues to explore for additional reserves within the
Viburnum Trend, which is one of the world's most productive lead ore deposits,
located in southeastern Missouri. Current exploration, which has been reduced
due to the low metal prices, is focused on surface and underground drilling in
and adjacent to the operating mines for the purpose of discovering new ore
reserves, as well as delineating previously drilled ores for mining purposes. In
addition, drilling work is being pursued in most of the mines to access ore
beyond the present mining areas. The Company also holds exploration tracts
outside the Viburnum Trend in the U.S. and in the Republic of South Africa that
are being explored. In Missouri, 50 miles east of the Viburnum trend, the
Company has conducted pre-development work on a lead-zinc-cobalt deposit. In
South Africa, the Company has conducted pre-feasibility work on a lead and zinc
deposit approximately 100 miles from Kimberly, in the Northern Cape province.
These properties are currently being held with minimal cost pending further
economic evaluation. In fiscal 2001, 2000 and 1999, the Company spent $3.8
million, $4.2 million and $4.9 million, respectively, on exploration activities,
including $2.4 million, $2.4 million and $3.7 million, respectively, outside the
Viburnum Trend.

SAFETY

Throughout its operations, the Company strongly emphasizes providing
employees a safe working environment through extensive training to ensure safe
work practices and worker knowledge of proper equipment operation. In the U.S.,
the Company's mining and milling operations are regulated by the Mine Safety and
Health Administration of the Department of Labor (MSHA) and its smelting and
fabricating operations by the Occupational Safety and Health Administration of
the Department of Labor (OSHA). The Company believes it has achieved safety
results that are among the best in its industry classifications. In 2000, the
Company's Sweetwater mine was presented the Sentinels of Safety Award, for 1999,
by the National Mining Association and MSHA, for being the

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safest in the underground metal mine category. Each year between 1973 and 1999,
one of the mining units has been named either the safest or second safest
underground metal mine in the United States by MSHA. The Company has achieved
the top award 15 times in the last 29 years. Although the mining and milling
operations' safety performance in 2001 did not meet the Company's expectations,
the results were still about two times better than the industry average. The
smelting operations have achieved a strong safety record as well, with typical
lost time accident rates averaging approximately three to four times better than
industry averages in recent years.

EMPLOYEES

As of October 31, 2001, the Company had 400 active salaried employees
and 1,138 active hourly employees in the United States, of which, 139 hourly
employees were represented by Local 7450 of the United Steelworkers of America
(USWA). The Company has a three-year agreement with the union, which expires in
May 2002. The Company began negotiations in April 2002. Management believes that
its labor relations are good.

THE COMPANY'S PERUVIAN OPERATIONS

PRODUCTS

La Oroya's principal products include refined silver, copper, zinc,
lead and gold. In addition, La Oroya produces a variety of by-products,
including bismuth, indium, tellurium, antimony, cadmium, selenium, sulfuric
acid, zinc-silver concentrate, zinc sulfate, copper sulfate, arsenic trioxide
and others. The following table sets forth net sales for each of La Oroya's
principal products.

CUSTOMERS

La Oroya had approximately 375 customers in 2001, including a wide
variety of industrial and international trading companies, of which the five
largest accounted for approximately 37% of its net sales. In 2001, approximately
89% of net sales were exported, with sales to North American countries
representing approximately 29% of net sales, followed by Latin America, Europe
and Asia with 35%, 22% and 14% of net sales, respectively. Substantially all of
La Oroya's 2001 metal sales were pursuant to contractual agreements, typically
one year or less. Such contracts generally set forth minimum volumes and pricing
mechanisms. Substantially all of La Oroya's sales were denominated in U.S.
dollars.

COMPETITION

La Oroya's unique combination of base metal smelters, refineries and
by-product circuits are capable of processing complex concentrates into high
quality base and precious metals. Only three other facilities in the western
world have the capability to treat lead and copper concentrates containing high
antimony, arsenic, bismuth and precious metal values in addition to a variety of
residues. Unlike La Oroya, none of these facilities has a dedicated zinc
production circuit. As a result of La Oroya's proximity to significant sources
of concentrates, management believes that it operates at a geographic
competitive advantage. In addition, La Oroya's proximity to Lima's Callao port
provides ready access to major world markets.

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RAW MATERIALS

La Oroya's primary raw material is concentrate feedstock. In addition,
the Company's process consumes various other raw materials, principally coal and
fluxes.

COPPER. During 2001, approximately 61% of the copper concentrates
processed at La Oroya were obtained from the Peruvian domestic market,
approximately 41% of which were supplied by Cobriza. In fiscal 2002, La Oroya
expects to obtain approximately 62% of its copper concentrates from the Peruvian
domestic market, 45% of which will come from Cobriza. The balance will be
obtained primarily from neighboring Latin American countries. The Company
believes that sufficient concentrates will be available to meet its requirements
for the foreseeable future.

ZINC. All of the zinc concentrates processed at La Oroya, during 2001,
were secured from the Peruvian domestic market. La Oroya requires approximately
90,000 tons of zinc metal contained in concentrates per year to maximize
production capacity. With present mine production, the Company believes that
sufficient concentrates will be available to meet its requirements for the
foreseeable future.

LEAD. Approximately 96% of La Oroya's 2001 lead concentrates were
obtained from the Peruvian domestic market, with the Paragsha, Andaychagua and
Mahr Tunnel mines, owned by Volcan Compania Minera S.A., accounting for
approximately 40% of the total feedstock. La Oroya has no local Peruvian
competitors in lead smelting, therefore it has a substantial freight advantage
for all of the concentrates produced in Peru, the total of which far exceeds La
Oroya's requirements. However tightness in the market for lead concentrates has
resulted in intense competition for lead concentrates from buyers outside of
Peru, adversely affecting treatment charges received.

FEED SUPPLY. As described above, a significant portion of La Oroya's
feed supply is currently secured from the Peruvian domestic market. The effects
of low metals prices have caused some of the Company's current supplies to
suffer financial distress. If one or more of the local producers were to cease
delivery of concentrates, there can be no assurance the Company would be able to
secure sufficient replacement feedstock or at economically acceptable terms. A
significant interruption in feed supply could result in a material reduction in
the production of metals from La Oroya which would likely have a significant
adverse effect on the Company's results of operations, financial condition and
liquidity.

WATER. Water for the La Oroya facility is obtained from three main
sources: the Mantaro River, the Tishgo River and the Cuchimachay Spring.
Management believes these three sources, in addition to numerous adjacent
springs and wells provide adequate water supplies for the facility.

POWER. La Oroya receives electric power from Empresa de Electricidad de
los Andes S.A., (Electroandes), a local electric power company owned by PSGE
Global Inc. The smelting complex consumes approximately 67 megawatts of ongoing
load, which represents approximately one-third of the capacity of Electroandes.
La Oroya has a long-term power supply contract with Electroandes, which
management believes will provide sufficient power to La Oroya at satisfactory
long-term rates. The contract expires in October 2007. Most of Cobriza's
electrical power is also provided by Electroandes. Cobriza's requirements do not
represent a significant portion of Electroandes' capacity.

OTHER. At La Oroya, an oxygen plant supplies oxygen for the oxy-fuel
burners of the reverberatory furnace of the copper smelter and for the blast
furnaces of the lead smelter. The oxygen plant was installed in 1994 with a
capacity of 353 tons per day. It is owned by a local bank and leased to the
Company under a sale and leaseback agreement. Coal is imported to produce
metallurgic coke for the lead circuit blast furnaces. Fluxes consumed in the
smelting process are supplied by company-controlled mining concessions near La
Oroya. The company also purchases silica and pyrite fluxes containing precious
metal values. Management believes that its sources of these materials are
adequate to support operations for the foreseeable future.

ENVIRONMENTAL MATTERS

Modern environmental legislation has been introduced only in the last
decade in Peru. For mining and metallurgical activities, the Ministry of Energy
and Mines (MEM) is the principal regulatory authority. The MEM has issued
"maximum permissible limits" for liquid effluent and air emissions. In addition,
the Consejo Nacional del Ambiente (National Environmental Council) coordinates
government regulations and policies, including the air quality standards for
Peru. The Direccion General de Salud Ambiental (Directorate General of
Environmental

6

Health) (DIGESA), a division of the Ministerio de Salud (Ministry of Health),
issues wastewater discharge permits based on standards governing receiving water
quality. Peruvian law requires all new mining or metallurgical operations, and
existing operations that are undergoing an expansion of over 50% of installed
capacity, to submit to the MEM an Estudio de Impacto Ambiental (Environmental
Impact Study).

For mining and metallurgical operations in existence prior to 1994,
concession holders (i.e. owner/operators) were required to submit to the MEM an
Evaluacion Ambiental Preliminar (Preliminary Environmental Assessment) (EVAP)
that identified environmental impacts and twelve months of baseline monitoring.
Based on the results of the EVAP, the operator submitted to the MEM a Programa
de Adecuacion y Manejo Ambiental (Environmental Remediation and Management
Program) (PAMA) that consisted of an environmental impact analysis, monitoring
plan and data, mitigation measures and closure plan. The PAMA also sets forth
the actions and corresponding annual investments the concession holder agrees to
undertake in order to achieve compliance with the applicable standards prior to
expiration of the PAMA (ten years for smelters, such as La Oroya's operations,
and five years for any other type of mining or metallurgical operation, like
Cobriza). The required amount of annual investment must not be less than 1% of
annual sales. Once approved, the PAMA functions as the equivalent of an
operating permit with which the operator must comply. After expiration of the
PAMA, the operator must comply with all applicable standards and requirements.
Mining, metallurgical and processing operators must present annual sworn
statements to the MEM that describe their operations and resultant emissions. In
addition, Peruvian environmental law allows operators to enter into a Contrato
de Estabilidad Administrativa Ambiental (Contract for Administrative
Environmental Stabilization) (Environmental Stabilization Agreement) in order to
provide some potential limit to the applicability of new laws during the life of
the PAMA.

The initial PAMA for La Oroya's predecessor was submitted by Centromin
and approved by the MEM on January 13, 1996. The PAMA was modified in connection
with the acquisition of La Oroya to reflect a reallocation of environmental
responsibilities between Centromin and the Company, and corresponding revisions
were made to the investment schedule. The MEM approved separate PAMAs for
Centromin and the Company and an Environmental Stabilization Agreement for the
Company.

Doe Run Peru has committed under its PAMA to implement the following projects
through December 31, 2006:
o New sulfuric acid plants
o Treatment plant for the copper refinery effluent
o Industrial waste water treatment plant for the smelter and refinery
o Improve Huanchan lead and copper slag deposits
o Build an arsenic trioxide deposit
o Management and disposal of lead and copper slag wastes
o Domestic waste water treatment and domestic waste disposal
o Monitoring station

La Oroya's operations historically and currently exceed some of the
applicable MEM maximum permissible limits pertaining to air emissions, ambient
air quality and wastewater effluent quality. The PAMA projects, which are more
fully discussed below, have been designed to achieve compliance with these
requirements prior to the expiration of the PAMA on January 13, 2007. No
assurance can be given that implementation of the PAMA projects is feasible or
that their implementation will achieve compliance with the applicable legal
requirements by the end of the PAMA period. In January 2002, the Company
received permission from the MEM to change certain PAMA projects and the timing
of their completion. However, there can be no assurance that the Peruvian
government will not, in the future, require compliance with additional
environmental regulations that could adversely affect the Company's business,
financial condition or results of operations. Under the Subscription Agreement,
pursuant to which the Company acquired La Oroya, Centromin agreed to indemnify
the Company against environmental liability arising out of its prior operations,
and performance of the indemnity has been guaranteed by the Peruvian government
through the enactment of the Supreme Decree No. 042-97-PCM. However, there can
be no assurance that Centromin will satisfy its environmental obligations and
investment requirements, including those in its PAMA, or that the guarantee will
be honored. Any failure by Centromin to satisfy its environmental obligations
could adversely affect the Company's business, financial condition or results of
operations.

As part of the acquisitions of La Oroya and Cobriza, the Company
entered into certain agreements with MEM to expand and modernize their
operations, including expenditures to comply with environmental regulations in
Peru, such as those governing the treatment, handling and disposal of solid
wastes, liquid effluent discharges and gaseous emissions. Principal projects
related to environmental matters at the La Oroya smelter include: 1) building
sulfuric acid plants for the metal circuits, 2) new converter and roaster
technology for the copper circuit, 3)

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replacement of the roaster equipment for the zinc circuit, 4) water and sewage
treatment facilities, and 5) slag and slimes handling equipment and disposal
facilities. The Company estimates that expenditures related to environmental
matters and related process changes will be approximately $170 million for
fiscal 2002 through fiscal 2007.

The Cobriza mine has a separate PAMA in which the Company has committed
to complete projects to manage tailings, mine drainage, sewage and garbage by
mid-2002. After beginning construction on the largest of the projects, the
tailings backfill project, the revised project cost estimate increased
substantially. As a result, in February 2001 the Company requested a revision of
its PAMA from the MEM, which would allow it to operate for a time without
completing the backfill project. Future economic and operating conditions could
affect the Company's ability to complete the backfill project. The Company is
currently in compliance with its requirement to reduce emissions from the mine
under the PAMA through a decrease in production. In April 2002, the MEM proposed
a pending regulation extending the PAMA for all companies for an additional 18
months for work remaining under the PAMA. For companies still not in compliance
at the end of this 18-month extension period, each company would have an
additional six months to close the operation. In light of this pending
regulation, Doe Run will be re-evaluating its options with the expectation that
a decision will be made within the next six to twelve months regarding the
future course of action to be taken.

In conjunction with the MEM agreement, the Company has undertaken a
ten-year capital investment program, which runs through 2007, to enhance various
elements of its operations. The objectives of the capital investment program are
increasing net sales by improving product quality, increasing production
capacity and reducing unit costs. In addition, through planned environmental
expenditures, the Company will endeavor to achieve compliance with environmental
regulations in Peru. Management believes that additional financing will be
necessary in order to fund the capital investment program. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations --Liquidity and Capital Resources."

SAFETY

In Peru, the MEM is responsible for regulations enacted to minimize
accidents. It conducts annual inspections to ensure compliance with numerous
safety standards. The Company's Peruvian operations suffered two fatal accidents
at Cobriza during 2001. One was a Company employee and was the result of a rock
fall; the other was a contract laborer involved in a mobile equipment accident.
Management has thoroughly investigated each of these incidents and reinforced
the appropriate safety procedures with the workforce. Despite these unfortunate
incidents, the safety performance of the Peruvian operations, in terms of both
fatalities and lost time accidents, has improved significantly. Under the
Company's management, lost time accidents rates are lower by more than 60% at La
Oroya and more than 65% at Cobriza, compared to similar periods under the former
owner. With further assistance and direction provided by the U.S.
representatives of the Company, the Peruvian operations will continue to
maintain a high regard for safety and health.

EMPLOYEES

As of October 31, 2001, the Company's Peruvian employees included 955
active salaried employees, 2,131 active hourly employees, and 1,475 contractors.
There are three unions for hourly employees and two unions for salaried
employees. The principal union representing 82% of the hourly employees is the
Sindicato de Trabajadores Metalurgicos La Oroya (La Oroya Metallurgic Workers
Union). The Sindicato de Trabajadores Ferroviarios La Oroya (La Oroya Railway
Workers Union) and the Sindacato de Trabajudones Cobriza (Cobriza Workers Union)
represent 4% and 9%, respectively, of the hourly workers. The remaining hourly
workers, 5%, are not affiliated with a union. On July 26, 1998, the Company
entered into a five-year labor agreement with the hourly unions at La Oroya. The
salaried employees are represented by the Sindicato de Empleados Yauli-La Oroya
(Yauli-La Oroya Employees Union), representing 39% of the salaried employees and
by the Sindicato de Empleados Ferroviarios La Oroya (La Oroya Railway Employees
Union), representing 3% of salaried employees. The remaining salaried employees,
58%, are not affiliated with a union. The current salaried employees' labor
agreement continues until December 31, 2002. Management believes the Company's
contract labor relations are good. A Peruvian law adopted in January, 2002
limits employers on the number of contract employees they may have. As of
May 15, 2002, Doe Run Peru has made the necessary changes into its plans to
comply with the law, resulting in the conversion of 190 and 133 contract
employees at LA Oroya and Cobriza, respectively, to employee status.

8

ITEM 2. PROPERTIES

U.S. OPERATIONS

The Company's Missouri mining operations have eight production shafts
that form a north-south line along approximately 40 miles of the Viburnum Trend
ore body. Three production shafts, Viburnum-28, Viburnun-29 and Viburnum-35, lie
within a five-mile radius east, north and south, respectively, of Viburnum,
Missouri. Viburnum is located approximately 125 miles southwest of St. Louis,
Missouri. The Buick, Brushy Creek, Fletcher, West Fork and Sweetwater production
shafts are within thirty miles of Viburnum. Six of the production shafts are
currently operating. The Viburnum-29 and West Fork production shafts are on care
and maintenance status.

The Company also has available five grinding/floatation mills located
near its production shafts. Four of the mills are currently operating. The West
Fork mill is on care and maintenance status. All of the mining and milling
facilities are accessible by state or county roads or Company-owned haul roads.
Products are shipped by truck over public roads or by rail. The Viburnum and
Buick mills have rail access.

The production capacities of the Company's mills are as follows:

The Herculaneum primary lead smelter, with a capacity of 250,000 tons
per year, is located approximately 35 miles south of St. Louis on the
Mississippi River in Herculaneum, Missouri. The Herculaneum smelter is the
largest primary lead smelter in North America and the second largest in the
world.

Located in Glover, Missouri, approximately 20 miles southeast of the
Sweetwater production shaft, the Glover primary smelter has a capacity of
approximately 136,000 tons per year.

The secondary lead recycling smelter is located in Boss, Missouri
approximately ten miles south of Viburnum. The annual capacity of the facility
is approximately 165,000 tons. The facility operates under a Resource
Conservation and Recovery Act (RCRA) permit allowing it to handle waste,
primarily lead-bearing material.

The Company owns its two primary smelters and its secondary smelter.

The secondary facility submitted a PSD (Prevention of Significant
Deterioration) air permit application to Missouri Department of Natural
Resources, in October 2001, which would allow the facility to expand its
production limit to nearly 200,000 tons annually. The permit review for this
application should be completed by mid to late 2002.

The Company's fabricated products operations are leased facilities,
located in Casa Grande, Arizona, Vancouver, Washington, and Houston, Texas.

The Company owns the property where the necessary surface structures
for mining and milling are located. The mineral rights are held either by fee
title or mineral leases with either private landowners or the federal
government. There are also numerous prospecting permits, most of which are for
exploration of new mineral ore deposits. Five of the production leases are
private leases and 11 are government leases. The mineral leases with private
landowners have no expiration periods. The government leases are for a period of
either 10 or 20 years and are renewable. Although no assurance can be given,
management anticipates that these leases will be renewed at similar royalty
rates. The Company makes royalty payments under these leases.

9

The Company's leases from the federal government consist of the following:

The Company's $50 million Senior Secured Notes are secured by a first
priority lien in the Sweetwater and West Fork mine and mill properties and the
Glover smelter property. These properties were acquired from Asarco
Incorporated's Missouri Lead Division (MLD) in September of 1998 (MLD
Acquisition).

ORE RESERVES

The following table sets forth the mineable reserves, estimated by the
Company, as of October 31, 2001 for the Viburnum Trend mineral deposits and the
Higdon deposit, which is outside the Viburnum Trend.

MINEABLE RESERVES
AS OF OCTOBER 31, 2001

+ The estimated average extraction recovery, of metals, after allowing
for expected dilution for lead, zinc and copper are approximately 89%.
These losses are included in the above reserve table. Estimated average
metallurgical recoveries for lead, zinc and copper are 96.5%, 83.0% and
50.0%, respectively. Metallurgical recovery losses have not been
included in the above reserve table.

The term "reserve" means that part of a mineral deposit which could be
economically and legally extracted or produced at the time of the reserve
determination. The term "proven (measured) reserves" means reserves for which:
1) quantity is computed from dimensions revealed in outcrops, trenches, workings
or drill holes; grade and/or quality are computed from the results of detailed
sampling and 2) the sites for inspection, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well-established. The term "probable
(indicated) reserves" means reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven (measured)
reserves, but the sites for inspection, sampling, and measurement are farther
apart or are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven (measured) reserves, is high enough to assume
continuity between points of observation.

PERUVIAN OPERATIONS

La Oroya's operations are located in the central Peruvian Andes town of
La Oroya, approximately 110 miles from the Peruvian capital of Lima and at an
altitude of approximately 12,000 feet above sea level. The complex is linked to
port facilities by highway and railroad service. Most supply sources also have
rail service. The facilities, which the Company owns, consist of a copper
smelter, lead smelter, copper refinery, lead refinery, copper fabricating plant,
zinc refinery, precious metals refinery, antimony plant, arsenic plant, coke
plant, cadmium plant, maintenance shops and other support facilities. Current
production capacities of primary products are as follows:

10

The Cobriza mine is located approximately 250 miles southeast of Lima
in the district of San Pedro de Coris, Churcampa Province. Access to the site is
by improved dirt road through rugged terrain. Concentrates produced at the mine
are trucked 130 miles over dirt road to Huancayo and then an additional 70 miles
over paved road to the La Oroya smelter. Cobriza's mill has a capacity of 10,000
short tons per day and its current throughput is approximately 5,000 short tons
per day.

Landholdings at Cobriza include approximately 2,600 acres of surface
ownership and approximately 128,000 acres of mining concessions. The current
mining operation is located on a portion of the area held. Economic
mineralization outside the existing mining area has not been confirmed. The
Company's estimates, which have not been audited, indicate mineable proven and
probable ore reserves of approximately 6.0 million short tons containing
approximately 1.25% copper

ITEM 3. LEGAL PROCEEDINGS

Doe Run is a defendant in twelve lawsuits alleging certain damages
from lead emissions stemming from the operations at the Herculaneum smelter.
The cases brought in the Circuit Court 23rd Judicial Circuit at Hillsboro,
Jefferson County, Missouri are: KARLA RICHARDSON ET AL. V. THE DOE RUN
RESOURCES CORP., ET AL, filed September 12, 1995; RONALD HEATH, ET AL. V. THE
DOE RUN RESOURCES CORP. ET AL., filed November 20, 1995; ANDREA MASSA, ET AL.
V. THE DOE RUN RESOURCES CORP., ET AL., filed December 8, 1995; GOVREAU, ET
AL. V. THE DOE RUN RESOURCES CORP., ET AL, filed February 1, 1999, CASEY II,
ET AL. V. THE DOE RUN RESOURCES CORP., ET AL., filed March 23, 2000, SWARTS,
ET AL. VS. LEADCO INVESTMENTS, INC. ET AL., FILED JUNE 14, 1996, WARDEN, ET
AL. VS. THE DOE RUN RESOURCES CORP. ET AL. filed September 21, 2001, and ENOS
GREEN V. THE DOE RUN RESOURCES CORP. ET AL., filed November 30, 1999. The
cases brought in the Circuit Court of the City of St. Louis are: MITCHELL,
ET. AL. V. FLUOR CORPORATION, ET AL., DOYLE, ET AL. VS. FLUOR CORPORATION, ET
AL., FIGGE, ET AL. VS. FLUOR CORPORATION ET AL., all filed July 9, 2001. The
Company has been named as a defendant in JARROD GROSS VS. THE DOE RUN
RESOURCES CORPORATION ET AL., but has not yet been served.

The HEATH, SWARTS, DOYLE AND MITCHELL cases are class action lawsuits.
In the HEATH AND DOYLE cases, the plaintiffs seek to have certified a class of
property owners in a certain section of Herculaneum, alleging that property
values have been damaged due to the operations of the smelter. In the MITCHELL
case, plaintiffs seek to have certified a class of children who lived in
Herculaneum during a period of time when they were nine months to six years old
and children born to mothers who lived in Herculaneum during their pregnancies.
The remedy sought is medical monitoring for the class. In the SWARTS case,
plaintiffs seek to have certified a class of employees of a certain contractor
who worked at the Herculaneum smelter.

The RICHARDSON, MASSA, GOVREAU, CASEY, FIGGE, AND WARDEN cases are
personal injury actions by thirty four individuals who allege damages from the
effects of lead poisoning they attribute to operations at the smelter and seek
punitive damages. The Company is vigorously defending all of these claims.

In the ENOS GREEN case, the plaintiff is seeking damages for the
alleged disposal of lead contaminated fill material on plaintiff"s property.

The Company signed a voluntary Administrative Order of Consent (AOC) in
September 2000 to study and address issues related to the operation of the
primary smelter in Herculaneum. In December 2000 the Company entered into a
consent judgment with the Missouri Department of Natural Resources and the
Missouri Air Conservation Commission. The U.S. EPA and the Missouri DNR signed
the AOC with an effective date of May 29, 2001. The Company signed a new AOC,
with the U.S. EPA on December 21, 2001, which accelerates certain requirements
of the May 29 AOC and requires certain additional cleanup activities. On April
26, 2002, the Company signed a Settlement Agreement with the State of Missouri
whereby it agreed to offer buyouts to approximately 160 homeowners in an area
close to the smelter. See "Item 8. Financial Statements and Supplementary Data",
Note 16 to the Company's Consolidated Financial Statements. On April 11, 2002, a
report in the media contained allegations by former employees of improper
disposal of hazardous materials on the Herculaneum smelter site. The

11

Company does not believe that there has been any violation of law and is
cooperating with State and federal agencies in their investigations into the
allegations.

Doe Run is a defendant in five lawsuits alleging certain damages from
past mining operations in St. Francois County. On July 9, 2001 DOWD, ET AL. V.
FLUOR CORPORATION, ET AL. was filed in the Circuit Court of the City of St.
Louis, Missouri. The case alleges injury to two children living in St. Francois
County as a result of emissions from tailings, chat piles and other wastes from
past mining operations. On December 13, 2001 Doe Run was served regarding LEE
ANN STOTLER AND KEELY STOTLER V. FLUOR CORPORATION, ET AL. This case, which was
filed in the Circuit Court of the City of St. Louis, Missouri, seeks a class
action for property damages caused by tailings and related operations. On
December 14, 2001 Doe Run was served regarding LAYNE STOTLER V. FLUOR
CORPORATION, ET AL. This case, which was filed in the Circuit Court of the City
of St. Louis, Missouri, seeks a class action for medical monitoring for minors
who lived, went to school, or went to day care in Bonne Terre, St. Francois
County, Missouri or whose mothers lived in Bonne Terre when they were pregnant.
The action alleges damages caused by tailings and related operations. On April
29, 2002, Doe Run was served regarding CHARLES MULLINS V. THE DOE RUN RESOURCES
CORPORATION and CHARLES MULLINS II V. THE DOE RUN RESOURCES CORPORATION, filed
in the Circuit Court of the City of St. Louis, Missouri, class actions for
property damage and medical monitoring, respectively, concerning alleged
damages caused by chat, tailings, and related operations in six areas in
St. Francois County, Missouri.

The Company, with several other defendants, was named in several
lawsuits alleging personal injuries as a result of lead poisoning from exposure
to lead paint and tetraethyl lead dust. These suits which have not yet been
served on the Company include: HALL V. LEAD INDUSTRIES ASSOCIATION, INC. ET AL.,
HART V. LEAD INDUSTRIES ASSOCIATION, INC. ET AL., WILLIAMS V. LEAD INDUSTRIES
ASSOCIATION, INC. ET AL. AND RANDLE V. LEAD INDUSTRIES ASSOCIATION, INC. ET AL.
The suits were all filed in the Circuit Court for Baltimore City, Maryland and
seek damages, including punitive damages.

On January 26, 2000, CITY OF ST. LOUIS V. LEAD INDUSTRIES ASSOCIATION,
INC. ET AL was filed in the Circuit Court of the City of St. Louis, Missouri.
The Company and several other parties were named defendants in the suit for
costs allegedly incurred and to be incurred by the plaintiff for the care of
lead-poisoned persons, education programs for children injured by exposure to
lead and the abatement of lead hazards purportedly created by the defendants in
the City of St. Louis. The complaint alleges that the defendants made material
misrepresentations and intentional omissions of material facts to the City
and/or its residents regarding the nature of lead and lead products, such as
paint. The suit also seeks punitive damages. Discovery has yet to be initiated.

On November 1, 2000 one hundred and seven individual cases were
filed in the Circuit Court of the City of St. Louis, Missouri, that list the
Company among the defendants, alleging that the employees or ex-employees of
Burlington Northern and Santa Fe Railway Co. who filed the cases were exposed
to lead from the hauling of lead concentrates by the railroad. On April 8,
2002, the Company was served with an additional suit bringing this total to
108 cases. The Company was served with nine additional cases on May 14, 2002
for a total of one hundred and seventeen cases.

HARRIS V. TERMINAL RAIL ROAD ASSN., ET AL. was filed in the Circuit
Court of the City of St. Louis, Missouri and the Company was served on
November 9, 2001. This is an individual action for damages by an ex-employee
of Terminal Rail Road alleging exposure to lead from hauling concentrates,
similar to the one hundred and seventeen cases discussed above.

HERD V. ASARCO, INC. ET AL., REEVES V. ASARCO, INC., ET AL., and CARR
V. ASARCO, INC., ET AL., each alleging injury to a child living in Picher,
Oklahoma as a result of lead contamination from chat piles and/or tailings, were
filed in the District Court of Ottawa County, Oklahoma on November 5, 2001,
January 10, 2002, and February 5, 2002, respectively. HERD V. ASARCO, INC. ET
AL. after originally being filed in state court, has been moved to the U.S.
District Court for the Northern District of Oklahoma and the U.S. Department of
Interior has been joined as a third party defendant.

CRAWFORD V. FABRICATED PRODUCTS, INC. ET AL, filed on February 28,
2002, is a wrongful death action regarding a former employee who died in an
accident at the Company's FPI facility in Vancouver, Washington. The suit was
filed in the Superior Court of Washington for Clark County.

On January 15, 2002, arbitration proceedings were also initiated
against the Company's Fabricated Products subsidiary by the ITHACA
CORPORATION, the former owners of the Seafab Metals Corporation. The former
owners are claiming additional monies are owed to them under the Asset
Purchase Agreement. The Company disputes this claim and has filed a
counterclaim claiming overpayment.

12

TARACORP INDUSTRIES, INC. V. FABRICATED PRODUCTS, INC., filed on March
21, 2000, alleges the Company's Fabricated Products subsidiary sold impure lead
to the plaintiff, who used the lead to manufacture a product commercially used
in radiation shielding aprons. This is a suit for breech of contract and implied
warranty.

The Company is unable at this time to estimate the expected outcome and
the final costs of any of these cases. Therefore, there can be no assurance that
these cases would not have a material adverse effect on the results of
operations, financial condition and liquidity of Doe Run.

SARA DIXON, ET AL. V. THE DOE RUN RESOURCES CORP, filed August 25,
1995, was withdrawn without prejudice by the plaintiffs on July 9, 2001.
COPPEDGE V. EAGLE-PICHER INDUSTRIES, INC., ET AL., filed January 23, 2001, was
withdrawn without prejudice by plaintiffs on November 14, 2001. CHARLES MULLINS
II, ET AL. V. THE DOE RUN RESOURCES CORP, filed May 21,1999, was withdrawn
without prejudice by the plaintiffs on February 8, 2002. YOUNG, ET AL. V. THE
LEAD INDUSTRIES ASSOCIATION, INC. and SMITH, ET AL. V. THE LEAD INDUSTRIES
ASSOCIATION, INC., both filed September 21, 1999, were dismissed with prejudice
on December 7, 2001 and February 21, 2002, respectively.

All existing litigation involving La Oroya at the time of the
acquisition was retained by Centromin. In Peru, the Company is involved in
various claims and lawsuits incidental to the ordinary course of its business
that are not expected to have a material adverse effect on the business,
financial condition and results of operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the year
ended October 31, 2001.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

All of the Company's issued and outstanding common equity, 1000 shares
of common stock, $.10 par value, are owned by a single stockholder, DR
Acquisition Corp., a wholly-owned subsidiary of Renco, which Mr. Rennert
controls. There is no established public trading market for these shares.

13

ITEM 6. SELECTED FINANCIAL DATA

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth historical consolidated financial data of The Doe
Run Resources Corporation and subsidiaries for the five fiscal years ended
October 31, 2001, which have been derived from the Company's audited
consolidated financial statements. It is important that the selected historical
consolidated financial data presented below be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's audited financial statements and the accompanying
notes included elsewhere in this document.

14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis includes both the U.S. operations
and the Peruvian operations of the Company and should be read in conjunction
with the consolidated financial statements of the Company and the notes thereto,
and other financial information included herein.

LIQUIDITY

The Company's primary available sources of liquidity are cash provided
by operating activities and two revolving credit facilities. In the U.S., the
Company has available a revolving credit facility (the Doe Run Revolving Credit
Facility) that provides for advances by the lender to a maximum of $75.0 million
less outstanding letters of credit, based on specific percentages of eligible
receivables and inventories. In Peru, the Company has available a revolving
credit facility (the Doe Run Peru Revolving Credit Facility) that provides for
advances by the lender to a maximum of $40.0 million, less outstanding letters
of credit, guarantee letters and customs bonds based upon specific percentages
of eligible receivables and inventories. These credit facilities are discussed
in more detail in the "Liquidity and Capital Resources" section below.

On January 4, 2002, the Company entered into an amendment to the Loan
and Security Agreement governing the Doe Run Revolving Credit Facility, under
which the lender agreed to make supplemental loans, in addition to those
originally provided for under the facility, of up to $5.0 million. Renco
provided the lender with $5.0 million of cash collateral and a limited guarantee
of $2.0 million. The amendment also waived, through February 27, 2002, existing
defaults resulting from the Company's failure to maintain consolidated net worth
and EBITDA for U.S. operations, as required by the agreements governing the Doe
Run Revolving Credit Facility. On February 28, 2002, the Company's lender issued
a letter that extended the waiver of these existing defaults through March 14,
2002.

Net unused availability at October 31, 2001 was $1.8 million under the
Doe Run Revolving Credit Facility and $9.7 million under the Doe Run Peru
Revolving Credit Facility. In addition to availability under the credit
facilities, the Company had $6.3 million of cash at October 31, 2001. At
April 30, 2002 availability was $7.4 million under the Doe Run Revolving Credit
Facility and $0.1 million under the Doe Run Peru Revolving Credit Facility, and
the Company's cash balance was $2.3 million.

Low metal prices over the past four years, coupled with the Company's
substantial debt service requirements, have severely reduced the Company's
liquidity. In fiscal 2001, cash from operating activities was sufficient to meet
the Company's capital and debt service requirements only because of a
significant reduction in working capital. In addition to a $23.7 million
reduction of taxes receivable in Peru, the Company reduced trade receivables by
$4.0 million and reduced inventories by $11.3 during 2001. The reductions in
receivables and inventory coupled with increases in borrowings on revolving
credit lines have reduced availability under revolving credit facilities to the
minimal levels discussed above. Further reductions of working capital of this
magnitude are very unlikely.

Due to the non-payment of interest due March 15, 2002 on the 11 1/4%
Senior Notes due 2005, Floating Interest Rate Senior Notes due 2003 and 11 1/4%
Senior Secured Notes due 2005 (collectively, the Notes), and the expiration of
the grace period during which the Company could cure the non-payment, and the
violation of other financial covenants, the Company is in default of its
covenants under the Notes indentures and its revolving credit facilities. In an
event of default, the lenders have the right to accelerate the payment of any
unpaid principal and interest balances. No actions have been taken by the
lenders to accelerate the payment of outstanding debt balances. The Company is
in restructuring negotiations as described below and in negotiations with the
lenders of its revolving credit facilities to execute amended revolving credit
facilities.

On April 15, 2002, the Company announced that it had reached an agreement
in principle with Renco and Regiment Capital Advisors, LLC (Regiment) for Renco
and Regiment to provide the Company with significant capital for the purpose of
restructuring its existing debt. Pursuant to the agreement in principle, Renco
will purchase $20 million of the Company's preferred stock and Regiment, a
significant holder of the Notes, will commit to lend the Company $35 million and
will offer other holders of Notes the opportunity to participate in making such
loan.

15

Under the proposed restructuring transaction, the Company would make a
cash tender offer for a portion of the Notes and an exchange offer for the
balance of the Notes. The $55 million in proceeds of the Renco investment and
the loan, together with borrowings under its revolving credit facility would be
used to finance the cash tender offer, to pay the accrued interest as of March
15, 2002 on the Notes exchanged in the exchange offer and to pay certain costs
of the transactions. If successful, the cash tender offer and the exchange
offer would significantly reduce the Company's future debt service and provide
sufficient liquidity to continue to operate all its facilities at present
levels and will not adversely affect the Company's trade creditors.

The non-binding agreement in principle is subject to agreement on the
terms of definitive documentation and the successful completion of the
transactions is subject to several conditions, including, among others, the
participation by holders of at least 90% of the aggregate principal amount of
each class of Notes in the cash tender offer and/or the exchange offer and the
satisfactory modification of Doe Run's United States and Peruvian revolving
credit facilities.

CONSOLIDATED FINANCIAL POSITION

During the fiscal year ended October 31, 2001 (2001), net cash provided
by operating activities was $37.3 million, proceeds from asset sales were $5.0
million and capital expenditures were $24.5 million. As a result, total debt,
mainly revolving loans and short-term borrowings, was reduced by $17.5 million.
The Company's working capital declined $94.8 million in 2001 due primarily to
the reclassification of revolving loan balances of $58.4 million to current
maturities of long-term debt, the reduction of Peruvian prepaid income tax and
value added tax balances due to the Company of approximately $25.4 million and a
$11.3 million reduction in inventories.

RESULTS OF OPERATIONS

FISCAL 2001 COMPARED TO FISCAL 2000

The Company reported a net loss of $46.8 million for 2001 compared to a
net loss of $23.1 million for the twelve months ended October 31, 2000 (2000).
The Company's U.S. operations reported a net loss of $48.4 million (excluding
intercompany fees and eliminations of $9.3 million) for 2001 compared to a net
loss of $36.2 million (excluding intercompany fee revenue of $18.9 million) for
2000, reflecting the effects of lower realized prices for zinc concentrates,
lower premiums for lead metal, severance costs and increased energy costs,
partially offset by improved LME lead prices and lower production costs.

Peruvian operations generated net income of $1.6 million for 2001
(excluding intercompany fees of $9.3 million) compared to net income of $13.1
million (excluding intercompany fees and eliminations of $18.9 million) for
2000. This decrease in net income is primarily due to the effects of lower
realized prices for copper, zinc and silver and lower treatment charges,
partially offset by lower production costs and lower selling and administrative,
interest and other expenses. An income tax benefit in 2001 also helped to
mitigate the lower realized prices and treatment charges.

The Company's results for the year ended October 31, 2001 reflect
declines in the market prices of copper, zinc and silver and an increase in the
price of lead compared to 2000. The following table sets forth average London
Metal Exchange (LME) prices for lead, copper and zinc and the average London
Bullion Market Association (LBMA) price for silver for the periods indicated:

16

Low metal prices, primarily lead and zinc, contributed to the operating
loss generated by the Company's U.S. operations in 2001. The Company has
implemented changes to its operations in an effort to mitigate the impact of low
metal prices. These actions, which are described below, are expected to reduce
certain costs, and achieve certain operating efficiencies resulting in lower
production cost and improved margins. However, prices sustained at these levels,
or decreasing further, are likely to result in the continuation of operating
losses for the Company's U.S. operations.

The following table sets forth the Company's production statistics for
the periods indicated:

In March 2001, in response to continued poor lead metal market
conditions, the Company announced production changes at its U.S. primary lead
operations (the Revised Operating Plan). The key elements of this plan are that
the Company's Herculaneum primary smelter reduced its annual refined metal
production rate by 80,000 tons from 250,000 to 170,000 tons by reducing blast
furnace and sinter plant operating time. The Company eliminated purchases of
lead concentrates and reduced production of concentrates at its southeast
Missouri mining operations. In May, the Company placed its No. 29 mine on care
and maintenance and plans to mine out its No. 28 mine during the second half of
fiscal 2002. The Company also reduced total concentrate production at its other
five mines. These production changes resulted in a workforce reduction of
approximately 200 employees, which was completed in early May. The changes were
made in an effort to allow the Company to compete more effectively in the global
market and improve overall financial performance. The change in operating plan
was made to reduce production costs and enhance product mix as the smelters
focus on producing specialty and alloy products. In an additional step, the
Company announced a management restructuring of its domestic operations in
September 2001, which resulted in an additional production decrease at
Herculaneum, to 155,000 tons annually, and another workforce reduction, of
approximately 80 employees, involving both terminations and an early retirement
program. This reduction was implemented in the first quarter of 2002.

The cost of severance benefits and outplacement services provided to
certain employees of approximately $1.1 million was recorded during fiscal 2001
of which approximately $0.5 million was paid in 2001 and $0.6 million will be
paid in 2002. In addition, the Company recorded a charge of $2.6 million to
adjust its pension and other post retirement benefit liabilities. The cost of
these benefits will be paid as part of the ongoing funding of these programs.
The estimated cost of closing the No. 28 mine, the Viburnum mill and related
surface structures and tailings areas of approximately $0.6 million was
previously accrued during the operating life of the mine. These closure
activities will be performed as personnel and funds are available.

Primarily due to changes associated with the Revised Operating Plan,
the Company's U.S. mining operations reduced ore production during 2001 in an
effort to increase grade and decrease unit production costs. Compared to 2000,
ore production was scaled back approximately 309,000 tons or 7% while lead ore
grade improved by 7%. The improvement in grade offset almost all of the impact
of the reduction in ore tonnage, as production of lead metal contained in
concentrates was approximately the same in fiscal years 2001 and 2000.

17

Primary lead metal production decreased 14% in 2001 period, compared to
the prior year, due to partial implementation of the lower production rate at
the Company's Herculaneum smelter and to production problems at both primary
smelters during the year.

At Herculaneum, during 2001 production was reduced as a result of the
partial implementation of the Revised Operating Plan. In addition, poor
performance of the backup furnace during scheduled maintenance, multiple cooling
system failures due to poor water quality, and poor coke quality caused outages
and caused the furnaces to run poorly for much of the first nine months of the
year. As a result, production was approximately 47,500 tons, or 19% lower in
2001, compared to 2000. The scheduled maintenance was completed during the
second quarter and the water quality and coke problems have been resolved.
Herculaneum's furnaces are currently operating at the planned 155,000 ton annual
production rate.

The Company's Glover primary smelter was forced to shut down several
times during the year due to mechanical failures of cooling system components,
the failure of a blast furnace baghouse fan motor and bearing problems with a
process baghouse fan. In addition, Glover was faced with the same coke quality
problem as Herculaneum. As a result, production at Glover was down about 4% or
5,400 tons for 2001, compared to the prior year. Repairs to the cooling system
and the blast furnace baghouse fan are complete and coke problems have been
resolved. Installation of redesigned bearings for the process baghouse was
completed during November 2001. The smelter is currently operating at its
planned production rate.

The Company's Buick secondary smelter installed a larger burner on the
reverberatory furnace and modifications were made to the feed delivery system
during the first quarter of 2001 in order to increase capacity. In addition,
operating procedures were changed in the plant's battery breaker, which
eliminated bottlenecks and improved throughput by 15%, making more feed
available to the furnaces. During the second quarter of 2001 Buick replaced its
blast furnace. The material feed and air control systems on the new blast
furnace were redesigned, improving output by approximately 25%. The results of
all of these improvements are reflected in Buick's production volume, which
improved approximately 9% for 2001, compared to 2000, in spite of downtime
associated with the blast furnace replacement during the second quarter.

In Peru, at the La Oroya metallurgical complex, production of refined
lead and zinc increased 2% and 1%, respectively, in 2001, compared to the prior
year. Refined copper production was down 2% for 2001 primarily due to a ductwork
failure in the copper circuit during the third quarter. Repairs were completed
in October and the copper circuit is currently producing at planned levels.
Refined silver and gold production were both lower in 2001 primarily due to
lower metal content in the concentrate feed used.

In May 2000, the Company implemented changes in operations at its
Cobriza copper mining operation intended to improve ore grade and reduce unit
production cost. The changes involved a reduction in annualized ore production
of approximately 31%. During the second quarter of 2001, a new ore zone was
identified near the existing workings in the Cobriza mine. The Company is
currently developing this area and drilling to determine whether measurable ore
reserves can be identified. During 2001 approximately 3% of Cobriza's ore
production, or 54,900 tons with a grade of approximately 1.6% were extracted
from the new ore zone. At this time it is not known whether, or for how long,
the area can continue to yield ore of similar tonnages and grades. The
combination of the operational changes and production from the new ore zone
resulted in an increase in ore grade of 18% in 2001 compared to 2000. Production
of metal contained in concentrates was 9% lower due to the reduction in
annualized ore production, partially offset by the improvement in grade.
Efficiency improved significantly, as cost per ton of ore was lower by 6% and
cost per ton of metal in concentrates was down 20% in 2001, compared to 2000.

The following tables set forth the separate operating results, sales
volumes and realized prices for the Company's U. S. and Peruvian operations
(excluding intercompany transactions) for the periods indicated:

18

RESULTS OF U.S. OPERATIONS

b) Net realized prices for metals, concentrates, and by-products include
the effects of changes in: 1) premiums received, including charges for
special alloys and shapes, 2) adjustments to provisionally priced sales,
3) treatment and refining charges and 4) net hedging activity.

20

Results of operations for the years ended October 31, 2001, 2000, and
1999 include the results of the Company's U.S. and Peruvian operations. In order
to provide a more meaningful analysis, the results of operations attributable to
Peruvian operations will be noted and discussed separately under "Results of
Peruvian Operations."

NET SALES for 2001 were $737.4 million compared to $815.0 million for
2000. A decrease of $51.7 million is attributable to Peruvian operations. U.S.
net sales decreased $25.8 million in 2001, compared to 2000, primarily due to
lower volume of lead metal, and lower realized prices for zinc concentrates,
partially offset by an increase in purchased zinc sales and increased toll
volume. Due primarily to partial implementation of the Revised Operating Plan,
discussed previously, lead metal sales volume was off 27,100 tons or 6% in 2001,
compared to the prior year, accounting for a $14.2 million reduction in net
sales. As discussed in "Overview -- U.S. Operations" the LME average lead price
improved approximately 4% during 2001, but premiums were lower. The net impact
is that realized prices for lead metal were marginally higher in 2001, compared
to 2000. Zinc concentrate net sales were $11.8 million lower in 2001, compared
to 2000, primarily due to a 19% decline in the LME average zinc price and lower
sales volume associated with the production changes discussed previously.
By-product sales were $3.0 million lower in 2001 primarily due to a reduction of
silver by-product produced by Herculanuem. Copper concentrate net sales
decreased $2.5 million in 2001 due to lower realized prices and lower volume.
These changes were partially offset by increases in purchased zinc metal sales
and toll lead volumes, which added $6.2 million to net sales.

COST OF SALES in 2001 was $665.3 million compared to $723.2 million in
2000. Of this decrease, $42.3 million is attributable to Peruvian operations.
U.S. cost of sales in 2001 was $15.6 million less than 2000. Volume changes,
primarily lower lead metal, zinc concentrate and copper concentrate sales
volumes reduced cost of sales by $14.0 million. Production costs for 2001
reflect cost reductions resulting from partial implementation of the Revised
Operating Plan, including the impact of improved ore grade. During 2001, the
Company recognized an adjustment of property tax expense at the Herculaneum
smelter resulting from the settlement of a multi-year property tax dispute,
which reduced cost of sales $1.2 million. As a result, lead metal unit
production costs for 2001 were down approximately 1%, compared to 2000, which
reduced cost of sales $1.3 million. This was accomplished despite the impacts of
reduced production volumes associated with the Revised Operating Plan and the
primary smelter problems, discussed earlier, and a significant increase in
energy costs. Energy costs for 2001 were $2.8 million higher than 2000, due to
price increases primarily for natural gas and propane, which increased
approximately 66% and 16%, respectively. During the last quarter of 2001,
natural gas and propane prices moderated to the point that they were lower than
the average prices for 2000.

SELLING, GENERAL AND ADMINISTRATIVE expenses decreased by $2.4 million
in 2001, compared to 2000. Of this decrease, $2.9 million is attributable to
Peruvian operations. The increase in selling, general and administrative
expenses for U.S. operations of $0.5 million for 2001 is primarily due to the
$2.6 million charge related to the workforce reductions, discussed previously,
partially offset by reductions in several other expense categories, including
legal fees, professional fees, association dues, travel costs. Legal fees were
down approximately $0.6 million for the 2001 period, compared to the prior year,
primarily due to reduced activity on a case that was being prepared for trial in
2000. The other expense reductions are primarily the result of continuing
efforts to reduce expenses in light of current economic conditions.

EXPLORATION expense decreased $2.7 million for 2001, compared to the
prior year. A decrease of $1.5 million is attributable to Peruvian operations.
The reductions in the U.S. are attributable to the suspension of all drilling
and fieldwork on the Company's Missouri and South African exploration properties
in an effort to conserve cash.

UNREALIZED GAIN ON DERIVATIVES relates to the change in fair market
value of derivative financial instruments pursuant to FAS 133. For 2001 the
unrealized gain on derivatives was $1.8 million, of which $1.2 million was
attributable to Peruvian operations. Gains of $0.6 million in the U.S. resulted
primarily from the factors discussed above, partially offset by the effect of
falling zinc prices on purchased futures contracts at October 31, 2001.

INCOME FROM OPERATIONS for 2001 was $12.2 million compared to $24.9
million for 2000. A decrease of $4.3 million is attributable to Peruvian
operations. In the U.S., the operating loss increased to $17.3 million in 2001
from $8.9 million in 2000 primarily due to the factors discussed above.

OTHER, net expense was $1.7 million in 2001, compared to other net
income of $0.9 million in 2000. Of the $2.6 million difference, $0.6 million is
attributable to Peruvian operations. For U.S. operations, other net expense was
$0.4 million in 2001 compared to other net income of $1.5 million in 2000. The
change is primarily due to a

21

$0.7 million reduction of rental income on the helicopter used for Peruvian
operations, which was sold in the third quarter of 2001, and to a $1.1 million
write-off, during the fourth quarter, of two dross furnaces at the Herculanuem
smelter, which will no longer be used for production.

INCOME TAX EXPENSE for 2001 reflects the provision for the Company's
Peruvian subsidiaries. As a result of the Company's tax status in the U.S., the
Company is not subject to federal and most state income taxes.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE relates to the
adoption of FAS 133. See "Item 8. Financial Statements and Supplementary Data -
Note 1 to the Company's Consolidated Financial Statements" for a discussion of
FAS 133.

FISCAL 2000 COMPARED TO FISCAL 1999

NET SALES for 2000 were $815.0 million compared to $800.3 million for
1999. An increase of $28.6 million is attributable to Peruvian operations. U.S.
net sales for 2000 were $13.9 million less than the 1999 period primarily due to
lower lead metal prices and volume, partially offset by increased realized
prices for zinc concentrates. The average LME price for lead metal declined 10%
in 2000, compared to 1999. However, as a result of improved premiums, the
Company's net realized price was only 5% lower than the prior year, reducing net
sales by $13.2 million. Lead metal sales volume was 2% lower than the prior
year, reducing net sales by $4.1 million. Sales volume was adversely affected by
reduced automotive battery demand and increased competition from imported lead.
For 2000, automotive battery demand in the U.S. was down about 1%, compared to
1999, while imports of lead metal increased by approximately 80,000 tons or 40%.
Zinc concentrate sales were $4.1 million higher in 2000 compared to 1999,
primarily due to the increase in the LME zinc price.

COST OF SALES for 2000 was $723.2 million compared to $686.0 million
for 1999. Of this increase, $35.7 million is attributable to Peruvian
operations. U.S. cost of sales for 2000 increased by $1.4 million compared to
1999. The unit production cost of primary lead metal increased by approximately
4%, compared to the prior year, accounting for an increase of $8.4 million in
cost of sales. Unit production costs for zinc and copper concentrates also
increased compared to the prior year. Primary production costs increased due to:
1) the impact of reduced mine production volume 2) repair costs and reduced
production volume associated with the major blast furnace repairs at Herculaneum
and repair of a failed and 3) costs related to increased production of lead
alloy products. The primary production cost increases were partially offset by
lower unit production costs at the Buick smelter, which reduced cost of sales by
$5.7 million, and lower lead metal sales volume.

DEPLETION, DEPRECIATION AND AMORTIZATION for 2000 decreased by $0.9
million compared to 1999. An increase of $1.9 million is attributable to
Peruvian operations. The decrease in depletion, depreciation, and amortization
for U.S. operations of $2.8 million for 2000 was primarily attributable to a
significant number of assets with five-year lives that were fully depreciated in
March of 2000 and a reduction in depletion expense associated with lower mine
production rates and the shifting of production to areas with lower depletion
rates.

EXPLORATION expense for 2000 increased $0.4 million compared to the
prior year. An increase $1.5 million is attributable to Peruvian operations. In
the U.S., exploration expense decreased by $1.1 million due to the completion of
underground test work on a Missouri property, which was in process during 1999.
This reduction was partially offset by increased costs associated with an
ongoing feasibility study on a South African property.

INCOME FROM OPERATIONS for 2000 was $24.9 million compared to $48.1
million for 1999. A decrease of $11.4 million is attributable to Peruvian
operations. The remaining fluctuation is primarily due to the factors discussed
above.

INTEREST EXPENSE for 2000 increased $2.2 million compared to 1999. An
increase of $1.0 million was attributable to Peruvian operations. The remaining
fluctuation is the result of higher average borrowings and a higher rate in 2000
on floating rate debt.

OTHER, net income was $0.9 million in 2000, compared to other net
expense of $1.3 million in 1999. Of the $2.2 million difference, $0.6 million is
attributable to Peruvian operations. For U.S. operations, other net income was
$1.5 million in 2000 compared to other net expense of $0.2 million in 1999. The
change is primarily due to a full year of rental income on the helicopter
provided for Peruvian operations, compared to only four months of income in
1999.

22

INCOME TAX EXPENSE for 2000 reflects the provision for the Company's
Peruvian subsidiaries of $884 and Peruvian taxes on intercompany fees earned by
the U.S. operations. See also "Item 1. Financial Statements--Note 2 to the
Company's Consolidated Financial Statements." As a result of a change in tax
status, the Company is not subject to federal and most state income taxes.

RESULTS OF PERUVIAN OPERATIONS

FISCAL 2001 COMPARED TO FISCAL 2000

NET SALES for 2001 were $51.7 million less than 2000 due to lower
realized prices for copper, silver, zinc, and gold and lower sales volumes for
gold bullion and by products, partially offset by increased sales volumes for
lead and zinc and higher lead prices. Silver prices declined 12% in 2001,
compared to 2000, reducing net sales $20.4 million. The net realized price for
zinc was 18% lower in 2001, reducing net sales by $17.0 million. Lower prices
for copper, gold and by products decreased net sales $11.5 million. Lower sales
volumes of copper, silver, gold and by products reduced net sales another $11.3
million. These reductions were partially offset by higher realized prices for
lead metal, which increased net sales by $3.6 million, and increased sales
volumes of lead and zinc, which increased net sales $4.8 million.

COST OF SALES for 2001 was $384.5 million, compared to $426.8 million
for 2000. Changes in unit production costs, which declined for all metals except
lead, accounted for a $39.1 million reduction in cost of sales in the 2001
quarter, compared to the 2000 quarter. Unit costs declined, primarily due to
lower feed costs, which reflected the impact of lower metal prices, partially
offset by lower treatment charges. In addition, production costs at the
Company's Cobriza copper mining operation were 20% lower in 2001, compared to
2000, due to improved grade and reduced operating costs resulting from the
operating changes implemented in May of 2000 as well as the new ore zone
identified during the second quarter of 2001. Conversion costs at La Oroya were
somewhat lower, primarily due to the Company's efforts at cost containment. The
volume changes discussed above reduced net sales $6.0 million.

SELLING, GENERAL AND ADMINISTRATIVE expenses decreased by $2.9 million
for 2001, compared to the prior year, primarily due to reduced professional fees
and expenses associated with the Company's helicopter, which was sold during the
third quarter of 2001.

EXPLORATION Expense decreased $1.5 million in 2001, compared to 2000,
as the current phase of exploration work done to further delineate reserves at
the Company's Cobriza mine was completed during 2000.

UNREALIZED GAIN ON DERIVATIVES relates to the change in fair market
value of derivative financial instruments pursuant to FAS 133. Gains for 2001
resulted primarily from the effect of falling copper prices on sold futures
contracts.

INCOME FROM OPERATIONS decreased $4.3 million in 2001, compared to
2000, due primarily to the factors discussed above.

INTEREST EXPENSE decreased $1.6 million for 2001, compared to the prior
year, primarily due to lower revolver interest resulting from lower interest
rates, partially offset by higher average outstanding revolver balances.
Increased capitalized interest and lower outstanding balances on capital lease
obligations and short-term bank debt also contributed to the reduction in
interest expense.

INTEREST INCOME increased $0.3 million in 2001, compared to the prior
year, primarily due to interest on income taxes due to the Company, which was
received during 2001.

Other, net expense increased $0.6 million the 2001, compared to 2000,
primarily due to a reduction of miscellaneous sales from Cobriza and La Oroya,
offset by other miscellaneous income and expenses.

INCOME TAXES increased $7.3 million in 2001, compared to 2000,
primarily due to a change in the valuation allowance reflecting management's
assessment regarding the future realization of deferred tax assets.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE relates to the
adoption of FAS 133. See "Item 8. Financial Statements and Supplementary Data -
Note 1 to Doe Run Peru's Financial Statements" for a discussion of FAS 133.

23

FISCAL 2000 COMPARED TO FISCAL 1999

Net sales for 2000 were $486.1 million compared to $457.4 million in
1999. The increase is primarily the result of higher sales volumes for lead,
zinc, silver and gold and improved realized prices for copper, zinc and gold,
partially offset by lower realized prices for lead and silver, and reduced
by-product sales. Capital investments and other process improvements increased
the capacities of the lead and zinc refineries during 2000. These improvements
resulted in increased refined silver sales volume of 1.9 million ounces or 6%,
increased net sales by $9.6 million and a 10% increase in lead metal sales
volume which added $5.7 million to net sales. Gold bullion sales volume was up
more than 22 thousand ounces or 32%, compared to the prior year, accounting for
$6.2 million of the sales increase and higher zinc volume added another $3.4
million to the net sales improvement. The Company's net realized price for
refined copper increased by 19% in 2000, increasing net sales by $18.5 million.
Improvements in zinc realized prices added $9.2 million to the net sales
increase. These increases were partially offset by lower realized prices for
lead metal and bullion lead, which reduced net sales by $8.8 million, and the
absence $6.5 million of blister copper sales which were eliminated in 2000 in
favor of more profitable refined copper sales.

COST OF SALES for 2000 was $426.8 million, compared to $391.0 million
in 1999. A 27% increase in the unit production cost of refined copper increased
cost of sales by $25.0 million. This increase was primarily the result of higher
feed costs for copper due to a 12% increase in LME copper price, an increase in
the cost of concentrates produced by Cobriza and a reduction in copper treatment
and refining charges of approximately 11%. Higher sales volumes for refined
lead, zinc, silver and gold increased cost of sales by $21.1 million. These
increases were partially offset by lower feed cost for lead metal and bullion
lead, and reduced by-product sales volume, primarily blister copper.

DEPRECIATION AND AMORTIZATION expense increased by $1.9 million in
2000, compared to 1999 prior year, primarily due to recent capital additions.

EXPLORATION Expense increased due to work done to identify additional
reserves within, and in the immediate vicinity of, the Company's Cobriza mine.

INCOME FROM OPERATIONS decreased $11.4 million for 2000, compared to
1999 due primarily to the factors discussed above.

INTEREST EXPENSE increased $0.9 million in 2000 compared to 1999 due
primarily to an increase in the average outstanding revolver balance of
approximately $13.5 million.

INTEREST INCOME decreased $0.3 million for 2000, compared to 1999, due
primarily to interest from a customer on a past due account receivable in 1999,
which has been collected.

Other, net expense was $0.6 million in 2000 compared to $1.2 million in
1999. The decrease was primarily due to fluctuations in foreign currency
transaction gains and losses and reductions in other miscellaneous expenses,
offset by the reduction in the insurance recoveries related to the turbine
failures at La Oroya's oxygen plant, which occurred in 1998 and 1999.

INCOME TAXES for 2000 reflect the non-deductibility of certain interest
expenses, offset by the recognition of benefits relating to deferred tax assets
for which benefit had not previously been recognized.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity requirements arise from its working capital
requirements, and capital investment and debt service obligations. The Company's
primary available sources of liquidity are cash provided by operating activities
and two revolving credit facilities. In the U.S., the Company has available a
revolving credit facility (the Doe Run Revolving Credit Facility) that provides
for advances by the lender to a maximum of $75.0 million less outstanding
letters of credit, based on specific percentages of eligible receivables and
inventories. As of October 31, 2001, $37.4 million, exclusive of $8.7 million of
letters of credit, was outstanding under the Doe Run Revolving Credit Facility.

24

On January 4, 2002 the Company entered into an amendment to the Loan
and Security Agreement governing the Doe Run Revolving Credit Facility, which
increased the interest rate by .25% to prime plus 1%, reduced the maximum credit
from $100.0 million to $75.0, reduced the maximum available to borrow based on
eligible inventory from $50.0 million to $35.0 million and temporarily eased a
reserve against calculated availability which gradually reverted back to a $5.0
million reserve on March 14, 2002. Under this amendment, the lender agreed to
make supplemental loans, in addition to those originally provided for under the
facility, of up to $5.0 million. Renco provided the lender with $5.0 million of
cash collateral and a limited guarantee of $2.0 million. The amendment also
waived, through February 27, 2002, existing defaul