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THE DOE RUN RESOURCES CORPORATION INDEX TO FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

Commission File Number 333-66291

The Doe Run Resources Corporation
(Exact name of registrant as specified in its charter)

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

        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 proceeding 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. o Yes    ý No

        Note: The Registrant files pursuant to an indenture, but is not otherwise subject to the reporting requirements of Section 13 or 15(d).

        Number of shares outstanding of each of the issuer's classes of common stock, as of July 30, 2004:

THE DOE RUN RESOURCES CORPORATION
INDEX TO FORM 10-Q

Item 1. Financial Statements.

THE DOE RUN RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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THE DOE RUN RESOURCES CORPORATION

Condensed Consolidated Statements of Operations (unaudited)

(Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

THE DOE RUN RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows (unaudited)

(Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

THE DOE RUN RESOURCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands)

(1) Summary of Significant Accounting Policies

Unaudited Interim Financial Statements

        These interim consolidated financial statements include the accounts of The Doe Run Resources Corporation (Doe Run) and its subsidiaries (on a consolidated basis, the Company). Doe Run's issued and outstanding common stock is owned by a subsidiary of The Renco Group, Inc. (Renco). In the opinion of management, the interim consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the consolidated financial position as of January 31, 2004 and the results of operations for the three month periods ended January 31, 2004 and 2003. Interim periods are not necessarily indicative of results to be expected for the year.

Reclassifications

        Certain prior year balances have been reclassified in order to conform to current presentation.

(2) Financial Condition

        The Company has had recurring losses over several years, primarily the result of the declining treatment charges discussed below and low metal prices. Doe Run's liquidity has been affected by these factors, as well as Doe Run Peru's liquidity. Doe Run failed to meet certain financial covenant requirements contained in its revolving credit agreement and a term note (the Term Note) and Doe Run Peru failed to meet certain financial covenant requirements contained in its revolving credit agreement during fiscal 2003, which defaults continued at January 31, 2004. These agreements were amended in the second quarter of fiscal 2004. See discussion of amendments in Note 7. As discussed in Notes 4 and 5, the Company has uncertainties related to environmental and litigation matters. These issues combined raise substantial doubt about the Company's ability to continue as a going concern.

        The Company's auditors issued unqualified opinions on the 2003 audited financial statements of the Company and of Doe Run Peru that express substantial doubt about the Company's and Doe Run Peru's ability to continue as going concerns due to the factors noted above.

        Doe Run Peru's results of operations and liquidity have been severely impacted by declining treatment charges that Doe Run Peru receives for processing raw materials resulting from a shortage in the global supply of concentrates. During 2004, deliveries of copper concentrates to the La Oroya smelter were lower than the prior year. If shortages result in a significant interruption in feed supply, a material reduction in the production of metals from La Oroya or an interruption of production in the lead and zinc circuits could result, which could have a significant adverse effect on the Company's results of operations, financial condition and liquidity.

        As discussed in Note 4 (see terms defined therein), Doe Run Peru is proceeding with efforts to identify alternative methods of achieving compliance with environmental requirements. These efforts include, but are not limited to, reducing or curtailing production from a portion of the plant thus eliminating the need for the equipment presently contemplated and replacing it with another alternative. These efforts must take into consideration the impacts on profitability and liquidity, as well as other economic impacts. Doe Run Peru submitted a request in July 2004 to modify its existing requirements. There can be no assurance that the alternatives will be approved by the Peruvian government or that they will achieve compliance in the timeframe required. If the requested PAMA modification is not approved, Doe Run Peru may not be in compliance with the requirements of the

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PAMA investment schedule in 2005 and could be subject to penalties. If the requested PAMA modification is not approved and the La Oroya smelter does not comply with the investment schedule of the PAMA or the La Oroya smelter does not operate within the required limits after December 31, 2006, Doe Run Peru could be forced to cease or curtail operations at the La Oroya smelter.

        Doe Run Peru has implemented cost savings, including a reduction of approximately 10% of its workforce, acceleration of cash receipts, as well as other measures, to improve its liquidity. Doe Run Peru's ability to pay fees to Doe Run is currently limited by Doe Run Peru's revolving credit facility to $2,800 through September 2004, and $4,000 for the calendar year ended December 31, 2004, unless Doe Run Peru meets an excess cash flow test. Doe Run received $2,000 in the second quarter and expects to receive another $2,000 in October 2004.

        Doe Run has implemented cost savings measures over the last several years to mitigate the impact of lower metal prices, including: reductions of production levels, changes in mine plans and the elimination of hourly and salaried positions. These efforts succeeded in reducing Doe Run's costs over the last several years. Management will continue to assess market and operating conditions to maximize its operating profit or limit losses, while allowing Doe Run to fulfill its environmental obligations.

        In response to declining demand in the U.S. for lead metal and increasing global demand for clean lead concentrates, Doe Run indefinitely suspended operations at its Glover smelter in November, 2003 and will sell any concentrates on the open market that are not required to maintain production at its Herculaneum smelter. Headcount at the Glover smelter decreased from 163 employees at October 31, 2003 to 11 employees at January 31, 2004. The Company recorded a severance liability related to Glover employees of approximately $1,400 at October 31, 2003. No impairment loss was recognized with respect to this suspension of operations, as cash flows with respect to the primary lead segment should improve with the decision.

        Net unused availability at January 31, 2004 under the Doe Run Revolving Credit Facility and Doe Run Peru Revolving Credit Facility was approximately $11,200 and $2,800, respectively. In addition to the availability under its revolving credit facilities, Doe Run Peru also had $12,243 of cash at January 31, 2004. Net unused availability at October 31, 2003 was approximately $14,100 and $3,800 under the Doe Run Revolving Credit Facility and Doe Run Peru Revolving Credit Facility, respectively, and Doe Run Peru's cash balances totaled $16,794. Although the effect of the Company's risk management strategy and higher costs for the quarter ended January 31, 2004 offset the impact of higher metal prices and prevented an improvement in liquidity in the first quarter, the Company's long-term liquidity outlook has improved, due to higher prices, other revenue enhancements and cost reductions. As of June 30, 2004, net unused availability was approximately $18,800 under the Doe Run Revolving Credit Facility and $3,800 under the Doe Run Peru Revolving Credit Facility, and Doe Run Peru had cash balances of $5,348. In the U.S. the timing of annual payments of insurance and property taxes unfavorably impacted liquidity in the first quarter. In Peru, higher metal prices resulted in higher initial outlays for concentrate purchases and higher VAT payments, which will ultimately be recouped, which resulted in a decrease in availability of borrowing under its revolving credit agreement, however Doe Run Peru's working capital increased between January and June 2004. The higher metal prices resulted in an increase in inventory, accounts receivable and accounts payable during the quarter. At metal prices higher than 2003 averages, but lower than those experienced in the first quarter of 2004, Doe Run and Doe Run Peru's liquidity should improve.

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(3) Inventories

        Inventories consist of the following:

        Materials, supplies and repair parts are stated net of reserves for obsolescence of approximately $5,236 and $5,220 at January 31, 2004 and October 31, 2003, respectively.

(4) Segment Information

        The Company's operating segments are separately managed business units that are distinguished by products, location and production process. The primary lead segment includes integrated mining, milling and smelting operations located in Missouri. The secondary lead segment, located in Missouri, recycles lead-bearing materials, primarily spent batteries. The fabricated products segment produces

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value-added lead products. Doe Run Peru produces an extensive product mix of non-ferrous and precious metals.

(1)

Transactions between segments consist of metal sales recorded based on sales contracts that are negotiated between segments on terms that management feels are similar to those that would be negotiated between unrelated parties.

(2)

Other revenues consist of metal sales not attributed to operating segments and realized gains (losses) on derivative contracts. Realized losses on derivative contracts in current year are due to the effect of higher metal prices on closed positions.

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(3)

Other revenues and expenses include primarily realized gains (losses) on derivative contracts, environmental expenses relating to historic operations, and adjustments necessary to state the primary lead and recycling operation's inventories at LIFO cost.

(5) Asset Retirement and Environmental Obligations

        The Company is subject to numerous federal, state and local environmental laws and regulations governing, among other things, air emissions, wastewater discharges, solid and hazardous waste treatment, storage and disposal and remediation of releases of hazardous substances. The Company's facilities are located on sites that have been used for heavy industrial purposes for decades and may require remediation. The Company has made and intends to continue making the necessary expenditures for environmental remediation and compliance with environmental laws and regulations. Environmental laws and regulations may become more stringent in the future which could increase costs of compliance.

Asset Retirement Obligations

        On November 1, 2002 the Company adopted Statement No. 143 "Accounting for Asset Retirement Obligations" (Statement No. 143). With the adoption of this Statement, asset retirement obligations (AROs) are recognized as liabilities when incurred, with the initial measurement at fair value. These liabilities will be accreted to full value over time through charges to income. In addition, an asset

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retirement cost was capitalized as part of the related asset's carrying value and will be depreciated over the asset's useful life.

        The Company's mines and related processing facilities are subject to governance by various agencies that have established minimum standards for reclamation. The Company's primary smelter slag produced by and stored at the primary smelter in Herculaneum, Missouri is currently exempt from hazardous waste regulation under the Resource Conservation and Recovery Act of 1976, as amended (RCRA), but is subject to a state closure permit, which requires activities to contain and cover the pile. The Company's mining and milling operations are subject to Missouri mine waste closure permit requirements and lease agreements which require the Company to reclaim surface areas, including remediation of mining waste disposal areas, and to perform closure activities underground. These activities, which tend to be site specific, generally include costs for earthwork, revegetation, water treatment and demolition.

        Doe Run Peru also has AROs at its Cobriza mine, related to the costs associated with closing the mine openings and covering acid rock. Doe Run Peru is also responsible for the covering and revegetation of mixed lead and copper slag stored in Huanchan, an area a short distance from the smelter where the slag is currently stored.

        The Company has a RCRA permit addressing the closure of portions of its recycling operations. The majority of the cost will arise from removing hazardous materials from the facility. No ARO liability or related asset cost has been recorded, because the fair value of the obligation cannot be determined, due to the indeterminate timing. The cost of closure, based on third party estimates for bonding purposes, is approximately $3,000. The life of the operation is considered indeterminable because there is not currently a cost-effective alternative to the lead acid battery and because battery manufacturers are required to recycle the batteries.

        The Company's total recorded liability for AROs was approximately $14,900 and $14,600 as of January 31, 2004 and October 31, 2003, respectively.

Environmental remediation—Domestic Operations

        Doe Run is subject to a voluntary Administrative Order on Consent (AOC), effective May 29, 2001, to study and address issues related to the slag pile, plant property, community soils adjacent to the primary smelter in Herculaneum, elevated blood lead levels in the community and lead releases from the plant.

        Under this AOC Doe Run completed additional soil testing in the area within a mile radius of the smelter, and subsequently signed a second AOC with the U.S. EPA on December 21, 2001, which has essentially been completed. The May 29, 2001 AOC was modified effective on May 20, 2004. This modification calls for soil replacement in an estimated 129 properties where the lead content exceeds 800 ppm. The estimated costs of remediating these properties is approximately $1,740 to be spent in 2004, and $380 in the following year. The estimated costs for the properties to be completed after 2004 assumes the use of phosphate treatment to stabilize them. If the use of such treatment is not accepted by the EPA, costs of remediation will be higher than those currently estimated.

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        Doe Run signed a Settlement Agreement with the State of Missouri on April 26, 2002 whereby it agreed to offer to purchase approximately 160 residential properties in an area close to the smelter if the owner requests such an offer. Under the terms of the residential property purchase plan, Doe Run immediately extended offers to the owners of twenty-one properties having children less than 72 months old living in them. All of these owners have requested offers and all but two have accepted offers. Of the remaining one hundred thirty-nine homeowners, those that request an offer will be extended offers by the end of 2004. The amount paid to the homeowners who accept an offer is based on an appraisal of the property's value at August 31, 2001, plus, if a replacement property is purchased, an amount for owner-occupied residences representing the lesser of the difference between the appraisal amount and the cost of a similar property in another designated community or the difference between the appraisal amount and the replacement property.

        The cost associated with the residential property purchase plan could be as high as $10,000 if all qualifying homeowners request an offer and accept the purchase offer. As of June 30, 2004, a total of one hundred twenty-four homeowners have requested offers. Of the seventy-one properties whose owners were given the opportunity to request purchase in calendar 2003, fifty-eight owners have requested an appraisal, and thirty-nine of fifty-eight offers have been accepted. Of the forty-nine properties whose owners have been given the opportunity to request purchase in calendar 2004, forty-five have requested an appraisal, and five of twenty-two offers have been accepted. Management believes that it is highly unlikely that all of the qualifying homeowners will accept the offer, but it cannot currently be estimated how many of the remaining homeowners will accept the buyout offer, or, if the buyout offer is accepted, what price will be paid for the property. The rate of acceptance may be affected by the fact that the purchase plan prioritized properties that are closer to the smelter such that the remaining identified properties are farther from the smelter than those that have already received offers.

        The following summarizes the activity as of January 31, 2004 relating to the voluntary purchase plan since its inception:

        Doe Run will attempt to rent out certain purchased properties, once approval is received by the regulatory agencies. The properties must remain vacant while owned by Doe Run until regulators and the city agree that re-occupancy is not a risk to human health. Management believes that there is current evidence that no health risk exists as a result of smelter operations, due to soil remediation efforts and low concentrations of lead in the air in the buyout area, and that other sources of lead contamination could be remedied. Based on an analysis of information currently available, Doe Run believes it should ultimately be able to rent or sell the properties. If Doe Run does not comply with the material property purchase provisions of the settlement agreement, Doe Run will be subject to a $1,000 penalty.

        The Company's statement of operations reflects an impairment loss that is primarily related to properties owned in Herculaneum, as approval for reoccupancy of the properties has not yet been

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received and it cannot be assured that the cost of the properties will be recovered through future cash flows. If the cost of the property cannot be recovered through future cash flows, additional impairment losses will be recognized as properties are purchased. The Company's recorded liability for remediation does not include the future purchase costs relating to the residential property purchase plan.

        On April 11, 2002, a report in the media contained allegations by former employees of improper disposal of hazardous materials on the Herculaneum site. Doe Run 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, including having provided equipment and an operator to the government to excavate various areas of the Herculaneum smelter site, which excavations failed to turn up any evidence of illegal toxic dumping. Doe Run has been advised by counsel that the government has ended its investigation and will not prosecute.

        Doe Run has implemented a plan with the Missouri DNR and the Missouri Air Conservation Commission to bring the Herculaneum smelter in compliance with the ambient air quality standard for lead promulgated under the federal Clean Air Act. The plan was included in a consent judgment entered into by Doe Run and has been approved at the state level and by the U.S. EPA. The air quality monitors have reflected compliance since July 2002.

        Doe Run has received notice that it is a potentially responsible party (PRP) subject to liability under The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA) at the following sites: six sites in St. Francois County, Missouri, including the Big River Mine Tailings site, the Bonne Terre site, the Federal site, the National site, the Rivermines site and the Leadwood site; the Oronogo-Durenweg site in Jasper County, Missouri; the Cherokee County site in Cherokee County, Kansas; the Tar Creek site in Ottawa County, Oklahoma; the Block "P" site in Cascade County, Montana; and the Missouri Electric Works site in Cape Girardeau, Missouri. There are two additional sites in St. Francois County for which the EPA has indicated it will issue notice. CERCLA provides for strict and, in certain circumstances, joint and several liability for response costs and natural resource damages. The Company's estimate of the cost of this remediation is approximately $9,800 for these sites, including the two additional sites in St. Francois County, which the Company believes is adequate based on its investigations to date. However, depending upon the types of remediation required and certain other factors, costs at these sites, individually or collectively, could have a material adverse effect on the results of operations, financial condition and liquidity of the Company. In February 2004 the U.S. Department of Agriculture issued a Unilateral Administrative Order ordering certain remediation activities by Doe Run at the Block "P" millsite. Doe Run has requested that other parties be added to the order. Doe Run will seek reimbursement from the U.S. Government and these other parties.

        Doe Run has completed an Engineering Evaluation/Cost Analysis (EE/CA) for the Bonne Terre site, and has signed two AOCs to conduct removal actions on the west and east portions of the site. Work is completed on the West Bonne Terre site and is underway on the east side with completion expected in 2005.

        Doe Run is subject to a voluntary AOC with the EPA to remediate the Big River Mine Tailings site. The remediation work required by the AOC has been substantially completed, and will continue with revegetation and ongoing monitoring and maintenance activities.

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        Doe Run has also signed AOCs to perform an EE/CA on each of the National, Rivermines, and Leadwood sites for remediation of mine waste areas. The National EE/CA is complete, the Rivermines EE/CA is under public review and has been submitted to the EPA for approval, and the Leadwood EE/CA is due by the end of fiscal 2004. In addition, Doe Run has signed an AOC with the EPA to conduct a Remedial Investigation/Feasibility Study (RI/FS) to assess potential off-site impacts of these site operations on and the need for remediation regarding groundwater, residential soils, several creeks and a river. The initial draft of the RI/FS was submitted in early March 2002. Doe Run signed an order to conduct interim measures which consisted of blood lead testing of young children, residential soil sampling, and limited soil remediation as indicated by the testing and sampling results, which was terminated and replaced by an AOC to conduct certain additional soil remediation in the area and has included its best estimate of these efforts in its recorded liabilities. The Company believes the recorded liabilities related to these sites are adequate. However, should remediation goals or areas change, requiring substantially increased measures, there can be no assurance that the recorded liabilities would be adequate.

        In March 2004, Doe Run received notice that it is a PRP subject to liability under CERCLA for contamination along roads in Iron, Dent and Reynolds counties in Missouri, along with a number of mining companies involved in the transportation of concentrates. Approximately 412 houses were identified as potentially requiring remediation. Doe Run expects that its share of the potential remediation costs will not be significant, based on management's estimates of the number of houses requiring remediation, remediation methods and Doe Run's apportionment of the costs.

        Doe Run has been advised that the EPA is considering taking certain response actions at a mine site in Madison County, Missouri known as the Mine LaMotte Site. Doe Run and the owner of the other 50% share of stock in the company that mined the site have signed an AOC to conduct an RI/FS at the site. This site is substantially smaller than the sites in St. Francois County where the Company has been named a PRP, and the potential issues are less complex. Doe Run has also been advised that remediation is required at a related small satellite mine site. After conducting an investigation, Doe Run has determined that it was not involved in operations at the satellite site, but further review will be required before a determination can be made as to whether it has any liability at the main site. At this time, based on preliminary information and an inspection of the sites, management does not believe that any future action will result in a material adverse impact to the results of operations, financial condition or liquidity of the Company.

        Doe Run's recycling facility is subject to corrective action requirements under RCRA as a result of a storage permit for certain wastes issued in 1989. This will involve remediation of solid waste management units at the site, although the plan for corrective action will not be finalized until late in fiscal 2004. The Company's estimate of the cost of this corrective action is $2,000. The storage area is also covered under the permit, but management does not believe the cost of closure is significant. While management believes that recorded liabilities are adequate based on expectations of the closure plan requirements, regulators could require that additional measures be included in the finalized plan, which could change the estimate of the costs for corrective action.

        The domestic operating facilities have wastewater discharge permits issued under the federal Clean Water Act, as amended. Doe Run currently meets the effluent limits under these permits, but if compliance were not maintained, additional improvements to its treatment facilities could be required.

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        The Company had recorded liabilities of approximately $14,500 and $14,400 related to these remediation obligations as of January 31, 2004 and October 31, 2003, respectively.

Foreign Operations

        Metaloroya S.A., the former owner of the La Oroya smelter, at the time a subsidiary of Centromin, received approval from the Peruvian government for an Environmental Adjustment and Management Program (PAMA) that consisted of an environmental impact analysis, monitoring plan and data, mitigation measures and closure plan. Doe Run Peru assumed the obligations under the PAMA. The PAMA also sets forth the actions and corresponding annual investments the concession holder agrees to undertake in order to achieve compliance with the maximum permissible limits prior to expiration of the PAMA (ten years for smelters, such as Doe Run Peru's operations in La Oroya, and five years for any other type of mining or metallurgical operation like Cobriza). Once approved, the PAMA, as modified from time to time, 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. Future changes in legal rules and maximum permissible levels would not be applicable to Doe Run Peru for the remaining period of La Oroya's PAMA, except for certain closure requirements. Because these costs improve the property or prevent future environmental contamination, they are capitalized.

        Doe Run Peru has committed under its PAMA to implement the following projects at its La Oroya smelter through December 31, 2006:

•

New sulfuric acid plants



•

Treatment plant for the copper refinery effluent



•

Industrial wastewater treatment plant for the smelter and refinery



•

Improve the slag handling system



•

Improve Huanchan lead and copper slag deposits



•

Build an arsenic trioxide deposit



•

Improve the zinc ferrite disposal site



•

Domestic wastewater treatment and domestic waste disposal



•

Monitoring station

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        Estimated annual spending on a calendar year basis for the projects approved in the La Oroya PAMA, as amended, most recently on January 25, 2002, are as follows:

        The current estimate for the total to be expended on environmental projects under the PAMA and on additional related process changes for Doe Run Peru is approximately $168,000 for the remaining term of the PAMA. The investment schedule in the PAMA provides a specific plan for achieving the applicable Ministry of Energy and Mines (MEM) maximum permissible limits pertaining to air emissions and wastewater effluent quality. The PAMA may be modified and amended as to the actual design and timing of projects to be implemented, provided compliance with the applicable maximum permissible limits is achieved by December 31, 2006. Although the PAMA currently requires Doe Run Peru to begin construction of certain sulfuric acid plants in 2005, estimated to cost approximately $107,500, in order to reduce emissions, Doe Run Peru is also proceeding with efforts to identify alternative methods of achieving compliance. These efforts include, but are not limited to, reducing or curtailing production from a portion of the plant thus eliminating the need for the equipment presently contemplated and replacing it with another alternative. These efforts must take into consideration the impacts on profitability and liquidity, as well as other economic impacts. Doe Run Peru submitted a request to MEM in July 2004 to modify the requirements of the existing PAMA. Although the required compliance date under the proposal would be extended, total spending will be higher than what is currently required under the existing PAMA, with an estimated cost of approximately $155,000 over the calendar years 2005-2011. There can be no assurance that the Peruvian government will approve the alternatives or that they will achieve compliance in the timeframe required by the PAMA. If the requested PAMA modification is not approved, Doe Run Peru may not be in compliance with the requirements of the PAMA investment schedule in 2005 and could be subject to penalties. If the requested PAMA modification is not approved and the La Oroya smelter does not comply with the investment schedule of the PAMA or does not operate within the current PAMA limits after December 31, 2006, Doe Run Peru could be forced to cease or curtail operations at the La Oroya smelter.

        Doe Run Peru'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 have been designed to achieve compliance with such requirements prior to the expiration of the PAMA on December 31, 2006. 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. Further, there can be no assurance that the Peruvian government will not in the future require compliance with additional or different environmental obligations that could adversely affect Doe Run Peru's business, financial condition or results of operations. Under the purchase agreement related to the acquisition of the La Oroya assets

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in October 1997, Centromin, the prior owner of the La Oroya smelter and Cobriza mine, agreed to indemnify Doe Run Peru against environmental liability arising out of its prior operations and their apportioned share of any other complaint related to emissions. 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 Doe Run Peru's business, financial condition or results of operations.

        The Cobriza mine has a separate PAMA in which Doe Run Peru has committed to complete projects to manage tailings, mine drainage, sewage and garbage. As of June 2004, Doe Run Peru ceased discharging mine waste into the Mantaro River, and was in compliance with the emissions standards required by the PAMA. Doe Run Peru will have ongoing projects, including a mine water treatment system and the production of surface paste fill from tailings that it expects to complete in August 2004.

        Doe Run Peru is responsible for the remediation costs relating to a zinc ferrite disposal site. The current closure plan provides for encapsulating the ferrite residues in place at Huanchan, an area a short distance from the smelter where they are currently stored, for which an environmental liability of $1,600 has been recorded as of January 31, 2004 and October 31, 2003.

Consolidated

        The Company believes its recorded liabilities for domestic and foreign environmental, mine closure and reclamation matters are adequate, based on the information currently available. Depending upon the type and extent of activities required, revisions to management's estimates of costs to perform these activities are reasonably possible in the near term. Therefore, there can be no assurance that additional costs, both individually and in the aggregate, would not have a material adverse effect on the results of operations, financial condition and liquidity of the Company.

(6) Litigation

        Doe Run is a defendant in eight lawsuits alleging certain damages stemming from the operations at the Herculaneum smelter. Three of these cases are class action lawsuits. In two 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 another case, plaintiffs seek to have certified a class of children who lived in Herculaneum during a period of time when they were less than six years old and children born to mothers who lived in Herculaneum during their pregnancies. The remedy sought is medical monitoring for the class. Five of the cases are personal injury actions by 24 individuals who allege damages from the effects of lead due to operations at the smelter. Punitive damages also are being sought in each case.

        A resident of Herculaneum has claimed personal injuries allegedly resulting from exposure to emissions from the smelter. No suit has yet been filed in this matter.

        Doe Run is a defendant in five lawsuits alleging certain damages from discontinued mine facilities in St. Francois County. Four of the cases are class action lawsuits. The first case seeks to have certified

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a class consisting of property owners in Bonne Terre, Missouri, alleging that property values have been damaged due to the tailings from the discontinued operations. In the second case plaintiffs seek to have certified a class of children who lived, went to school or day care in Bonne Terre, or whose mothers lived in Bonne Terre during their pregnancies. The third and fourth cases are class actions for property damage and medical monitoring concerning alleged damages caused by chat, tailings, and related operations in six areas in St. Francois County. The fifth case alleges personal injury to two children living in St. Francois County.

        Doe Run has been named in five suits filed by thirty-five railway employees against a railroad carrier and multiple lead mining companies alleging personal injury resulting from exposure to lead concentrates hauled by the railroad carrier. The railroad carrier has also threatened Doe Run with possible legal action for claims for indemnity allegedly arising out of contracts with Doe Run or its predecessors for payments that the railroad has made in regard to personal injury claims against the railroad by railway workers and others, including those made in 114 cases previously settled by Doe Run. Doe Run is currently in the process of investigating these claims.

        This railroad carrier has also communicated to Doe Run that it intends to seek contribution from Doe Run for cleanup actions at a rail car clean-out area that the carrier was ordered to take by the federal government. The carrier pled guilty to a felony and paid a criminal fine for its actions. It is Doe Run's position that Doe Run cannot be held liable for another's criminal actions. No lawsuit has been filed.

        Doe Run is a defendant in lawsuits alleging certain damages from past mining operations in Ottawa County, Oklahoma. Ten lawsuits have been filed alleging personal injury to twenty-five children and one adult living in Ottawa County against eight companies, including Doe Run, who allegedly, either through predecessors or subsidiaries, mined lead and zinc in Ottawa County or commercially used the chat or tailings in Ottawa County. One case is a class action lawsuit for personal injury and property damage in Ottawa County. Five of these suits were dismissed leaving claims alleged by seven children. An additional class action lawsuit for damages to natural resources and land owned by members of the Quapaw Tribe was filed on December 10, 2003 against seven companies, including Doe Run. Six individuals filed an additional class action lawsuit against six companies, including Doe Run, in Ottawa County, Oklahoma on February 9, 2004. The Company is unable at this time to estimate the expected outcome and any final costs of this action. Two additional cases alleging personal injury to forty-five children and three children, respectively, were filed in July 2004.

        Doe Run, with several other defendants, has been named in four cases in Maryland, but has not yet been joined as a defendant in any of these cases. These suits seek damages, alleging personal injuries as a result of lead poisoning from exposure to lead paint and tetraethyl lead dust. The suits seek punitive damages. Doe Run was dismissed from two similar cases in which it was joined as a defendant. Until Doe Run is actually joined as a defendant in one or more of these cases, material liability from these cases is considered remote.

        Doe Run and several other parties have been named defendants in a suit brought by the City of St. Louis, Missouri 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

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of lead hazards purportedly created by the defendants in the City of St. Louis. Doe Run was dismissed from the case in June 2004.

        Doe Run has been named in an asbestos injury suit by an individual against numerous companies, alleging that they were exposed to asbestos, including at the St. Joe Minerals Corporation (Doe Run's predecessor) premise