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 defaults resulting from the
Company's failure to maintain consolidated net worth and EBITDA for U.S.
operations, as required by the agreements governing Doe Run Revolving Credit
Facility. This waiver was subsequently extended on February 28, 2002 to run
through March 14, 2002. No other significant terms of the original agreement
were amended by this amendment.

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. In addition the lender provides a separate line of
$12.0 million for the issuance of certain classes of guarantee letters. The sum
of the advances on both of these lines is limited to $42.0 million. At October
31, 2001, $21.0 million, exclusive of $2.5 million of guarantee letters, was
outstanding under the Doe Run Peru Revolving Credit Facility. The Company also
has available, in Peru, unsecured and uncommitted credit arrangements and
additional availability related to letters of credit and customs bonds, provided
by local financial institutions. At October 31, 2001, $1.9 million in customs
bonds was outstanding under these arrangements.

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.

For 2001, cash provided by operating activities was $37.3 million, cash
used in investing activities was $19.5 million and cash used in financing
activities was $19.8 million. The cash from operating activities for 2001
includes the refund mentioned above and reductions of other Peruvian prepaid
income tax and value added tax balances due to the Company totaling
approximately $25.4 million.

The Company had capital expenditures, including equipment financed with
capital leases, of $25.2 million in 2001 and has projected total capital
expenditures of approximately $29.2 million for fiscal 2002. In the U.S., the
Company had capital expenditures of $12.7 million for 2001 and has projected
capital expenditures of approximately $12.3 million for fiscal 2002, primarily
for environmental and operational improvements and to support ongoing
operations. In addition to these capital investments, the Company's U.S.
operations expended an average of approximately $68.9 million per year on
repairs and maintenance from fiscal 1996 through fiscal 2001. As a result of
these expenditures, the Company believes that it operates and will continue to
maintain modern and efficient facilities.

As part of the acquisition of its Peruvian operations, the Company has
undertaken a capital investment program, in part to satisfy an investment
commitment of $120.0 million as set forth in the Subscription Agreement. For
expenditures through October 31, 2001 Centromin has approved qualifying
expenditures under the investment commitment of approximately $103 million.
Peruvian operations had capital expenditures, including equipment financed with
capital leases, of $12.5 million in 2001 and have projected total capital
expenditures of approximately $16.9 million for fiscal 2002, primarily for
environmental improvements and to support ongoing operations.

The Company has substantial indebtedness and debt service requirements.
As of October 31, 2001, on a consolidated basis, the Company had $496.0 million
of indebtedness outstanding, or $371.0 million net of the Special Term Deposit
made in a foreign bank as collateral for a loan made to Doe Run Peru, securing
indebtedness of a like amount.

25

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 $25.4 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 current assets of this
magnitude are very unlikely.

At October 31, 2001 the Company failed to maintain consolidated net
worth and EBITDA for U.S. operations, as required by the Doe Run Revolving
Credit Facility. The amendments discussed above waived these defaults through
March 14, 2002.

Management has made significant changes to operations, discussed
previously, which it believes will significantly improve profit margins and cash
generated from operations. In recent months the Company has also seen some
improvement in lead prices, which should improve margins and cash position.

The Doe Run Revolving Credit Facility, the Doe Run Peru Revolving
Credit Facility, and the indentures governing the Notes contain numerous
covenants and restrictions. The more restrictive covenants included limitations
on allowable indebtedness and maintenance of minimum net worth, as defined, a
limitation on capital expenditures in the U.S. and EBITDA requirements in the
U.S. The indentures covering the Notes limit principal outstanding under various
Peruvian working capital facilities to $60 million.

The ability of the Company to meet its debt service requirements and to
comply with these covenants is dependent upon future operating performance and
financial results, which are subject to financial, economic, political,
competitive and other factors affecting the Company, many of which are beyond
the Company's control.

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.

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.

26

The following tables summarize Doe Run's contractual obligations and
commercial commitments at October 31, 2001. For a discussion of environmental
and reclamation obligations, see "Item 8. Financial Statements and Supplementary
Data - Note 16 to the Company's Consolidated Financial Statements".

(a) Total long-term debt, net of the $125 special term deposit, is $308.4.
Subsequent to October 31, 2001, the Company was in default of the
covenants related to long-term debt. See "Item 8. Financial
Statements and Supplementary Data - Note 8 to the Company's
Consolidated Financial Statements".

(b) The Company has entered into tolling arrangements with major battery
manufacturers whereby the manufacturers will deliver spent lead-acid
batteries and other lead-bearing material to the Company's recycling
facility and, for a processing fee, the Company will return finished
lead metal. The largest of these contracts expire in September and
December 2003. The agreements cover approximately 10% of the Company's
anticipated combined primary and secondary lead metal production for
the 2002 fiscal year.
(c) The Company has minimum-take purchase agreements for coke and zinc
under which it has committed to purchase minimum quantities of these
products. For coke, the annual minimum-take quantity is 87,000 tons and
the contracts run through December 2003. The coke contracts are fixed
priced contracts. For zinc, the monthly minimum-take quantity is 140
tons and the contracts run through February and March 2003,
respectively. Pricing for the zinc contracts is the average market
price of zinc for the month of delivery plus a premium.
(d) The Company has commitments to sell approximately 66%, 74%, 75%, 38%
and 100% of its anticipated 2002 lead, copper, zinc, silver and gold
metal production, respectively under agreements, with terms of
generally less than one year. Sales prices are generally based on the
average quoted exchange prices for the month of shipment, plus a
premium.

27

IMPACT OF ACCOUNTING STANDARDS NOT YET ADOPTED

In June 2001, the Financial Accounting Standards Board issued Statement
No. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
standard applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and (or) normal use of the asset.

Statement No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The fair value of the
liability is added to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the asset. The
liability is accreted at the end of each period through charges to operating
expense. If the obligation is settled for other than the carrying amount of the
liability, the Company will recognize a gain or loss on settlement.

The Company plans to adopt the provisions of Statement No. 143 as of
November 1, 2002. To accomplish this, the Company must identify all legal
obligations for asset retirement obligations, if any, and determine the
fair value of these obligations on the date of adoption. The determination
of fair value is complex and will require the Company to gather market
information and develop cash flow models. Additionally, the Company will be
required to develop processes to track and monitor these obligations. Because
of the effort necessary to comply with the adoption of Statement No. 143, it is
not practicable for management to estimate the impact of adopting this Statement
at the date of this report. It is currently the Company's practice to accrue for
mine and other closure obligations at their estimated, undiscounted cost. See
"Item 8. Financial Statements and Supplementary Data", Note 16 to the Company's
Consolidated Financial Statements for disclosures related to these obligations.

In August 2001, the Financial Accounting Standards Board issued
Statement No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
ASSETS, which supersedes both FASB Statements No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF and
the accounting and reporting provisions of APB Opinion No. 30, REPORTING THE
RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A
BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND
TRANSACTIONS, for the disposal of a segment of a business. Statement 144 retains
the fundamental provisions in Statement 121 for recognizing and measuring
impairment losses on long-lived assets held for use and long-lived assets to be
disposed of by sale, while also resolving significant implementation issues
associated with Statement 121. Statement 144 retains the basic provisions of
Opinion 30 on how to present discontinued operations in the income statement but
broadens that presentation to include a component of an entity (rather than a
segment of a business.

The Company plans to adopt the provisions of Statement No. 144 as of
November 1, 2001. Management does not expect the adoption of Statement 144
for long-lived assets held for use to have a material impact on the Company's
financial statements because the impairment assessment under Statement 144 is
largely unchanged from Statement 121. The provisions of the Statement for
assets held for sale or other disposal generally are required to be applied
prospectively after the adoption date to newly initiated disposal activities.
Therefore, management cannot determine the potential effects that adoption of
Statement 144 will have on the Company's financial statements.

SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are impacted by the accounting
policies used and the estimates and assumptions made by management during their
preparation. Significant accounting policies and estimates that most impact the
consolidated financial statements are those related to revenue recognition, ore
reserves, and estimated reserves for environmental and legal claims.

The Company's sales revenues are generally recognized at the time
products are shipped to the customer or, in the case of tolling revenues, as the
tolling services are performed. Actual selling prices are determined by customer
contract. The Company has both fixed price contracts where the unit selling
price is fixed at the time the contract is entered into and market price based
contracts where the unit selling price is tied to some future market price or
average future market price. The Company may also have contracts that are tied
to future market prices whereby the actual selling price cannot be determined
until after the date of actual shipment. In these cases, the Company will
invoice the customer provisionally at the time of shipment and then subsequently
true-up the provisional billing with a final invoice once the actual market
price is known. Provisional invoices are based on the

28

then current market price of the product shipped. The final, actual selling
price may be more or less than the amount of the provisional invoice and can
result in subsequent period revenue adjustments.

The selling prices of certain of the Company's products and by-products
may also be dependent on the actual assay or composition of the material
shipped. The assaying process involves the exchange and independent testing of
product samples with the customer before a final assay can be determined for
billing purposes and can take several months or more to complete after the
shipment is made. In these cases, the Company will generally invoice the
customer provisionally at the time of shipment using a previously agreed upon
assay with the customer and subsequently follow this up with a final, settlement
invoice once the actual assay is known. This final, settlement invoice can
result in either a debit or credit billing to the customer and a subsequent
period revenue adjustment to the Company.

The Company's ore reserves are based on geological studies and test
hole drillings conducted by the Company's geologists. These estimates are
reviewed and certified every two years by an independent mining consultant. The
most recent independent report on the Company's ore reserves was issued in
January 2001. The ore reserves are adjusted monthly to reflect the current
month's mining activity. Ore reserves can and do fluctuate with the underlying
market price or prices of the ores to be mined. As such, there can be no
assurances that the reserves currently reported will be economic to mine in the
future.

Environmental and reclamation reserves are established by the Company
for probable and known commitments and where a reasonable estimate of the
commitment can be made. In general, these reserves are based on engineering cost
studies and estimates as well as the Company's past experiences, if any, in
completing work of a similar nature. All reserves are reviewed periodically and
adjusted as necessary and when circumstances change. However, there can be no
assurance the reserves will be sufficient to cover the costs of the actual
commitments or that in the future, new commitments will not arise that could
have a material adverse effect on the results of operations, financial condition
and liquidity of the Company. See "Item 8. Financial Statements and
Supplementary Data", Note 16 to the Company's Consolidated Financial Statements
for a more detailed discussion of environmental related matters.

Similar to the environmental and reclamation reserves discussed
previously, reserves for legal claims and judgements are established when the
expected outcome is either known or reasonably likely and where a reasonable
estimate of the claim can be determined. All legal claims and their associated
reserves are periodically reviewed with the Company's internal and external
attorneys and the reserves adjusted as necessary and when circumstances change.
As of the reporting date, no amounts had been accrued for legal claims. See
"Item 8. Financial Statements and Supplementary Data", Note 16 to the Company's
Consolidated Financial Statements for a more detailed discussion of litigation
related matters.

FORWARD-LOOKING STATEMENTS

This report includes "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 which involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company to differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such risks, uncertainties, and other important
factors include, among others: general economic and business conditions;
increasing industry capacity and levels of imports of non-ferrous metals or
non-ferrous metals products; industry trends, including product pricing;
competition; currency fluctuations; the loss of any significant customer;
availability of qualified personnel; effects of future collective bargaining
agreements; outcome of litigation; changing environmental requirements,
political uncertainty and major equipment failures. These forward-looking
statements speak only as of the date of this report. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions,
or circumstances on which any such statement is based.

29

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In the normal course of its business, the Company has used in the past,
and may use in the future, forward sales commitments and commodity put and call
option contracts to manage its exposure to fluctuations in the prices of lead,
copper, zinc, silver, and gold. Contract positions are designed to ensure that
the Company will receive a defined minimum price for certain quantities of its
production. Gains and losses and the related costs paid or premiums received for
option contracts which hedge the sales prices of commodities are recognized in
net sales when the related production is sold. None of the aforementioned
activities have been entered into for speculative purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data follow immediately and are
listed in Item 14 of Part IV of this report.

30

[KPMG LOGO]

10 South Broadway
Suite 900
St. Louis, MO 63102-1761

INDEPENDENT AUDITORS' REPORT

The Board of Directors
The Doe Run Resources Corporation
and Subsidiaries:

We have audited the accompanying consolidated balance sheets of The Doe Run
Resources Corporation and subsidiaries as of October 31, 2001 and 2000, and the
related consolidated statements of operations, comprehensive income and
shareholder's equity (deficit), and cash flows for each of the years in the
three-year period ended October 31, 2001. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Doe Run
Resources Corporation and subsidiaries as of October 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended October 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 17 to the consolidated financial statements, the Company has suffered
recurring net losses, has a net capital deficiency, and liquidity issues that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 17.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments and hedging
activities in 2001.

St. Louis, Missouri
December 14, 2001, except as to Notes 8 and 17,
which are as of April 15, 2002

KPMG LLP

31

THE DOE RUN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

32

THE DOE RUN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

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

33

THE DOE RUN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND SHAREHOLDER'S
EQUITY(DEFLICIT)
(DOLLARS IN THOUSANDS)

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

34

THE DOE RUN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

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

35

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

These consolidated financial statements include the accounts of The Doe
Run Resources Corporation and its wholly owned subsidiaries (the
Company). All material intercompany balances and transactions have been
eliminated.

RECLASSIFICATIONS

Certain balances have been reclassified from their previous
presentation in order to conform to their current presentation.

NATURE OF BUSINESS

The principal domestic business of the Company is the exploration,
development, mining and processing of base metals, primarily lead, and
recycling of lead-acid batteries and other lead-bearing materials. The
Company's fabrication businesses fabricate lead products used in
radiation and X-ray shielding, pollution control devices, and medical
equipment; produce lead oxide for use in automotive batteries and
fabricate and repair lead-lined process equipment. In Peru, the Company
is engaged in the mining, smelting and refining of polymetallic
concentrates, mainly copper, lead, zinc and silver which are sold as
refined metals primarily to customers located outside of Peru.

FOREIGN CURRENCY TRANSLATION

The functional currency of the Company's foreign subsidiaries is the
U.S. Dollar. Accordingly, foreign currency transaction gains and losses
are included in determining net income.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from these
estimates.

INVENTORIES

Finished metals and concentrates, metals and concentrates in process
and raw materials are stated at the lower of cost or market. The
last-in, first-out (LIFO) method of determining cost is used for the
majority of the Company's inventories. Supplies and repair parts are
principally stated at average cost, net of reserves for obsolescence.

Inventory costs include labor, material and other production costs.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at the lower of cost or fair
value. Long-lived assets are reviewed for impairment when events or
circumstances indicate that the carrying amount of the assets may not
be recoverable. The impairment loss on such assets, as well as
long-lived assets and certain identifiable intangibles to be disposed
of, is measured as the amount by which the carrying value of the assets
exceeds the fair value of the assets.

36

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

Major additions and improvements to property, plant and equipment are
capitalized, at cost, when they significantly increase the productive
capacity or the life of the asset. Routine or unanticipated repair and
maintenance expenditures, which do not extend the useful life or
increase the productive capacity of the asset, are charged to
operations as incurred. Major expenditures required to maintain the
originally anticipated productive capacity and life of the asset (such
as furnace rebuilds), for which both the amount and timing can be
reasonably estimated, are accrued and charged to operations over the
period through the next anticipated maintenance date.

Mineral interests are amortized using the units of production method.

Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, as follows:

Buildings and improvements 3 to 20 years
Machinery and equipment 2 to 15 years

Facilities at which operations have temporarily ceased may be placed on
a standby care and maintenance basis. The Company continues to
depreciate the related assets during the standby period and the
expected useful lives are adjusted prospectively to reflect the reduced
usage. During the standby period all care and maintenance expenditures
incurred are expensed.

DEFERRED FINANCING COSTS

Deferred financing costs represent fees paid in conjunction with the
acquisition of long-term debt or amending debt agreements and are
amortized using the interest method over the term of the respective
debt.

EXPLORATION AND DEVELOPMENT COSTS

Exploration costs are charged to operations as incurred. Development
costs incurred to maintain production at operating mines are charged to
operations as incurred. Development expenditures for mining properties
that are considered to be commercially feasible, but are not yet
producing, and major development expenditures at operating mines that
are expected to benefit future production are capitalized and amortized
using the units of production method over the estimated proven ore
reserves to be benefited.

RECLAMATION COSTS

The Company's mines and related processing facilities are subject to
governance by various agencies that have established minimum standards
for reclamation. Company estimates of mine closure costs are accrued
and charged to expense using the units of production method during the
estimated life of the operations. A reserve for reclamation costs has
been established for the restoration of certain abandoned mining and
processing sites based on current estimates of the cost to comply with
existing standards. Routine environmental expenditures are expensed as
incurred or capitalized and depreciated depending on their future
economic benefit.

COMMITMENTS AND CONTINGENCIES

The Company accrues for loss contingencies, including costs associated
with environmental remediation obligations, when such costs are
probable and reasonably estimable. Accruals are reviewed and adjusted
as circumstances change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value.

37

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

REVENUE RECOGNITION

Sales are recorded as products are shipped to customers or as tolling
services are performed. Concentrate and certain smelter product sales
are recorded based on estimated weights, metal contents and prices
using applicable customer agreements and hedge contracts. Revenues with
respect to such sales are adjusted to reflect settlement when final
weights, metal contents and prices are determined.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued by the
Financial Accounting Standards Board in June 1998, and amended by
Statement No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND
CERTAIN HEDGING ACTIVITIES, AN AMENDMENT OF FASB STATEMENT NO. 133,
issued in June 2000 (collectively, FAS 133). Under FAS 133, entities
are required to carry all derivative instruments in the statement of
financial position at fair value. The accounting for changes in the
fair value (i.e. gains and losses) of a derivative instrument depends
on whether it has been designated and qualifies as part of a hedging
relationship, and if so, whether the derivative instrument is
designated as a hedge of exposures to changes in fair values, cash
flows or foreign currencies. If the hedged exposure is changes in fair
values, the gain (loss) is recognized in earnings in the period of
change, with an equal and offsetting (loss) gain recognized on the
change in value of the hedged item. If the hedged exposure is changes
in cash flows, the effective portion of the gain (loss) is reported as
a component of other comprehensive income (outside earnings) until the
forecasted hedged transaction affects earnings, when it is reclassified
into earnings.

The Company adopted FAS 133 as of November 1, 2000, in the first
quarter in which it was required by the standard, as amended. The
adoption of FAS 133 resulted in a net transition loss of $3,774, net of
income tax benefit of $480, and a gain recorded in other comprehensive
income of $70.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed when incurred and are
included in selling, general and administrative expenses on the
consolidated statements of operations. Research and development costs
are not significant.

INCOME TAXES

On January 15, 1999, The Renco Group Inc. (Renco), the Company's
ultimate parent, filed an election, with the consent of its
shareholders, with the Internal Revenue Service to change its taxable
status from that of a subchapter C corporation to that of a subchapter
S corporation, effective November 1, 1998. At the same time, Renco
elected for the Company to be treated as a qualified subchapter S
subsidiary (QSSS). Most states in which the Company operates will
follow similar tax treatment. QSSS status requires the ultimate
shareholders to include their pro rata share of the Company's income or
loss in their individual tax returns. The election does not affect
foreign income taxes related to the Company's foreign subsidiaries.

Deferred tax assets and liabilities are recognized in foreign
jurisdictions for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.

IMPACT OF ACCOUNTING STANDARDS NOT YET ADOPTED

In June 2001, the Financial Accounting Standards Board issued Statement
No. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, which addresses
financial accounting and reporting for obligations associated with the

38

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

retirement of tangible long-lived assets and the associated asset
retirement costs. The standard applies to legal obligations associated
with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) normal use of the
asset.

Statement No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The fair
value of the liability is added to the carrying amount of the
associated asset and this additional carrying amount is depreciated
over the life of the asset. The liability is accreted at the end of
each period through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, the
Company will recognize a gain or loss on settlement.

The Company is required and plans to adopt the provisions of Statement
No. 143 for the quarter ending January 31, 2003. To accomplish this,
the Company must identify all legal obligations for asset retirement
obligations, if any, and determine the fair value of these obligations
on the date of adoption. The determination of fair value is complex and
will require the Company to gather market information and develop cash
flow models. Additionally, the Company will be required to develop
processes to track and monitor these obligations. Because of the effort
necessary to comply with the adoption of Statement No. 143, it is not
practicable for management to estimate the impact of adopting this
Statement at the date of this report. It is currently the Company's
practice to accrue for mine and other closure obligations at their
estimated, undiscounted cost. See "Item 8. Financial Statements and
Supplementary Data", Note 16 to the Company's Consolidated Financial
Statements for disclosures related to these obligations.

In August 2001, the Financial Accounting Standards Board issued
Statement No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS, which supersedes both FASB Statements No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF and the accounting and reporting provisions of
APB Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS - REPORTING THE
EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY,
UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the
disposal of a segment of a business. Statement 144 retains the
fundamental provisions in Statement 121 for recognizing and measuring
impairment losses on long-lived assets held for use and long-lived
assets to be disposed of by sale, while also resolving significant
implementation issues associated with Statement 121. Statement 144
retains the basic provisions of Opinion 30 on how to present
discontinued operations in the income statement but broadens that
presentation to include a component of an entity (rather than a segment
of a business.

The Company is required and plans to adopt the provisions of Statement
No. 144 for the quarter ending January 31, 2003. Management does not
expect the adoption of Statement 144 for long-lived assets held for use
to have a material impact on the Company's financial statements because
the impairment assessment under Statement 144 is largely unchanged from
Statement 121. The provisions of the Statement for assets held for sale
or other disposal generally are required to be applied prospectively
after the adoption date to newly initiated disposal activities.
Therefore, management cannot determine the potential effects that
adoption of Statement 144 will have on the Company's financial
statements.

(2) RELATED PARTY TRANSACTIONS

The Company has entered into a management consulting agreement with
Renco. Under the agreement, Renco will provide the Company with
management services for an annual fee. The agreement is automatically
renewed every three years, unless either party gives six months prior
notice, with the current term ending October 31, 2003. Fees expensed
under this agreement were $2,400 in each of the years ended October 31,
2001, 2000, and 1999, respectively. Fees outstanding and unpaid were
$1,600 and $0 at October 31, 2001 and 2000, respectively.

39

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

To obtain the advantages of volume, Renco purchases certain categories
of property and casualty insurance for a number of its subsidiaries,
including the Company, and the actual cost of such insurance, without
markup, is reimbursed by the covered subsidiaries. For the years ended
October 31, 2001, 2000 and 1999, the Company expensed costs of
approximately $1,822, $4,294, and $3,695, respectively, under the Renco
insurance program. Outstanding and unpaid broker fees due to Renco were
$131 and $0 at October 31, 2001 and 2000, respectively.

On January 4, 2002 Renco signed a Cash Collateral Pledge Agreement and
a Limited Guarantee with the Company's primary lender in the U.S. Under
the Cash Collateral Agreement, Renco posted $5,000 cash collateral to
the lender and under the Limited Guarantee, Renco temporarily
guaranteed $2,000 of the Company's obligations to the lender. See Note
8.

(3) INVENTORIES

Inventories consist of the following:

Materials, supplies and repair parts are stated net of reserves for
obsolescence of $5,484 and $4,472 at October 31, 2001 and 2000,
respectively.

The FIFO cost of inventories valued under the LIFO cost method were
approximately $70,812 and $79,032 at October 31, 2001 and 2000,
respectively. If the FIFO cost method had been used to determine cost,
inventories would have been $5,526 lower and $1,116 higher at October
31, 2001 and 2000, respectively.

As a result of reducing certain inventory quantities valued on the LIFO
basis, inventory costs prevailing in previous years were charged to
cost of sales in 2001 and 2000. The Company calculates the effect of
LIFO liquidations on net income based on the current cost method. The
effect was a decrease in net income of $59 and increases in net income
of $27, and $400 for the years ended October 31, 2001, 2000 and 1999,
respectively.

(4) PREPAID TAXES AND TAX CREDITS

Certain of the Company's Peruvian subsidiaries had been required to
prepay income taxes monthly in previous years. The balance of prepaid
taxes was $0 and $11,893 at October 31, 2001 and 2000, respectively.

In Peru, value added tax (VAT) paid on purchases can be offset against
the VAT resulting from local sales, Peruvian income tax obligations and
other taxes collected by the Peruvian Public Treasury. In addition, the
Company may apply for a refund in the form of cash or negotiable credit
notes from the tax authorities. The tax credits receivable were $4,433
and $19,550 at October 31, 2001 and 2000, respectively. The credits on
Peruvian value added tax outstanding as of October 31, 2001 and 2000
were collected subsequent to the respective year-end.

40

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(5) PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consists of the following:

Depreciation and depletion expense are as follows:

Rental expense applicable to minimum rentals under operating leases was
$9,726, $8,633, and $7,567 for the years ended October 31, 2001, 2000,
and 1999, respectively. Contingent rental payments, based primarily on
equipment usage, were $520, $1,210, and $405 for the years ended
October 31, 2001, 2000, and 1999, respectively.

The Company's operating leases relate primarily to operating equipment,
office facilities and office equipment. The minimum rental commitments
under noncancellable leases, with terms in excess of one year are as
follows:

Fiscal year ending October 31:
2002 $ 7,324
2003 4,607
2004 2,495
2005 1,650
2006 918
Thereafter 2,581
------------
$ 19,575
============

(6) SPECIAL TERM DEPOSIT

The Special Term Deposit represents a deposit made in a foreign bank as
collateral for a loan made to Doe Run Mining. See further discussion in
Note 8.

41

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(7) ACCRUED LIABILITIES

Accrued liabilities consist of the following:

Reclamation and environmental costs represents the estimate of
reclamation and environmental spending for the following fiscal year.
See Note 16.

(8) DEBT

Long-term debt consists of the following:

The Company has available two revolving credit facilities. The first
facility allows the Company to borrow up to $100,000 and expires
January 15, 2003. The availability of loans under the facility is
limited to a percentage of eligible U.S. accounts receivable and
inventories, less any outstanding loans and letters of credit. The
facility bears interest at the prime rate plus .75% per annum for an
effective rate of 6.75% at October 31, 2001. The Company is also
obligated to pay an unused line fee equal to .25% on the amount by
which the maximum credit

42

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

of $100,000 exceeds the average daily balance of outstanding loans and
letters of credit. The facility is secured by accounts receivable and
inventories generated by the Company's U.S. operations. All cash
received from the Company's domestic operations is transferred by wire
daily to the financial institutions to pay down the outstanding loan
balance, if any. Revolving loans outstanding under this facility were
$37,375 and $24,891 at October 31, 2001 and 2000, respectively. Actual
availability was $1,796 at October 31, 2001 and $9,823 at March 31,
2002.

On January 4, 2002, the Company entered into an amendment of its U.S.
revolving credit facility. The amendment increased the interest rate by
.25% to prime plus 1%, reduced the maximum credit to $75,000, reduced
the maximum available to borrow based on eligible inventory from
$50,000 to $35,000 and temporarily eased a reserve against calculated
availability which gradually reverted back to a $5,000 reserve on March
14, 2002. The amendment provided for supplemental loans of up to
$5,000. Renco provided the lender with $5,000 million of cash
collateral and a limited guarantee of $2,000. See Note 2 for details of
the credit support provided by Renco. 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 credit
facility. On February 28, 2002, the Company's lender issued a letter
that extended this waiver through March 14, 2002.

The second facility allows Doe Run Peru to borrow up to $40,000 and
expires June 19, 2002. In addition, the lender approved an independent
line of $12,000 for the issuance of guarantee letters. Unlike the
Revolving Credit Facility, this independent line is not committed and
is subject to modification or cancellation at the option of the lender.
The sum of the advances on both of these lines is limited to $42,000.
The Doe Run Peru facility bears interest at LIBOR (1-month, 3-month or
6-month rate, depending on the term of the loan) plus 2.0% per annum.
The facility is secured by accounts receivable and inventories
generated by the Company's Peruvian operations. The effective rate was
6.59% at October 31, 2001. An unused line fee of .375% per annum on the
average unused portion of the line is payable quarterly, in arrears.
Availability of loans under the facility is limited to a percentage of
Doe Run Peru's eligible accounts receivable and inventories, less any
outstanding loans and letters of credit. Revolving loans outstanding
under this facility were $21,000 and $33,000 at October 31, 2001 and
2000, respectively. Actual availability was $9,692 at October 31, 2001
and $2,402 at March 31, 2002. The Company is currently in negotiations
with its lender to extend the facility, but has not yet received any
commitment.

The $200,000 11.25% senior notes (the Fixed Rate Notes) and $55,000
Floating Interest Rate Senior Notes due 2003 (collectively, the
Unsecured Notes) are guaranteed by certain subsidiaries of the Company.
See Note 18 for disclosures regarding guarantor subsidiaries. The
Company used $125,000 of the proceeds from the Unsecured Notes to make
the Special Term Deposit into a foreign bank, which in turn loaned such
amount to Doe Run Peru. The Special Term Deposit and note payable to
the foreign bank have payment terms that match the timing and amount of
the payments on $125,000 of the Fixed Rate Notes, except that
additional interest of 0.25% through September 11, 2004 is payable on
the note payable to the foreign bank. The note payable to the foreign
bank is collateralized by the Special Term Deposit.

The 11.25% senior secured notes (the Secured Notes) have a face value
of $50,000 and are secured by the property, plant and equipment
acquired and are guaranteed by certain subsidiaries of the Company. See
Note 18.

The deferred purchase price obligation was payable to the former owner
of the Company's Peruvian subsidiary for mining assets purchased. The
last of three annual payments of $1,495 was made in August 2001. The
note had no stated interest rate and the balance at October 31, 2000
was discounted to an effective rate of 10%.

43

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

The 9.89% note payable outstanding at October 31, 2000 financed the
purchase of certain equipment, and was secured by that equipment. The
equipment was sold in the current year, and the note paid off with the
proceeds. In doing so, the Company incurred prepayment penalties of
$314, for which it signed a noninterest-bearing note, payable in 36
monthly installments, commencing November 1, 2001. The new note was
discounted to a fair value of $159.

In January 1999, Doe Run Peru finalized an agreement for the sale and
leaseback of its oxygen plant at the La Oroya facility for $17,162. Doe
Run Peru has an option to repurchase the oxygen plant at the end of the
five-year lease term for $200. In April 1999, Doe Run Peru entered into
a sale and leaseback of computer equipment for $761. These transactions
have been accounted for as financing arrangements. The interest rates
applicable under the oxygen plant and computer equipment leases are
12.35% and 8.50%, respectively.

A capital lease for computer equipment caused property, plant and
equipment, prepaid expenses and long term debt to increase by $647, $99
and $746, respectively, during the year ended October 31, 2001.

The aggregate estimated amounts of long-term debt maturing after
October 31, 2001 are as follows:

Fiscal year ending October 31:
2002 $ 62,611
2003 59,459
2004 1,639
2005 372,272
-----------

$ 495,981
===========

At October 31, 2001, the Company's various debt agreements contained
certain requirements with respect to net worth, a limitation on capital
expenditures in the U.S., and requirements for earnings before
interest, taxes, depreciation, depletion and amortization (EBITDA).
These agreements also place limitations on dividend payments and other
outside borrowings. The Company was in violation of its net worth and
EBITDA covenants at October 31, 2001 but had received a waiver of any
violations through March 14, 2002, through the amendment and subsequent
extension discussed previously. Accordingly, the balance under the U.S.
revolving credit facility is classified as current.

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.

44

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

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.

Doe Run Peru has had available from time to time unsecured and
uncommitted lines of credit and additional availability for letters of
credit and custom bonds provided by local banks. Borrowings take the
form of short-term notes, with interest rates determined at the
borrowing date. Borrowings under the unsecured and uncommitted lines of
credit were $0 and $9,316 at October 31, 2001 and 2000, respectively.

(9) FAIR VALUE OF FINANCIAL INSTRUMENTS

At October 31, 2001 and 2000, the fair values of the Company's
financial instruments, except for long-term debt and the hedge
positions described in Note 15, were not materially different from
their carrying amounts.

The fair values of the Company's long-term debt were based on the
estimates of incremental borrowing rates for similar types of borrowing
arrangements or dealer quotes. The fair value of the Company's
long-term debt was approximately $291,109 and $327,042 at October 31,
2001 and 2000, respectively.

(10) INCOME TAXES

On January 15, 1999, Renco filed an election, with the consent of its
shareholders, with the Internal Revenue Service to change its taxable
status from that of a subchapter C corporation to that of a subchapter
S corporation, effective November 1, 1998. At the same time, Renco
elected for the Company to be treated as a qualified subchapter S
subsidiary (QSSS). Most states in which the Company operates will
follow similar tax treatment. QSSS status requires the ultimate
shareholders to include their pro rata share of the Company's income or
loss in their individual tax returns. The election does not affect
foreign income taxes related to the Company's foreign subsidiaries. As
a result of this change in tax status, the elimination of federal and
most state deferred tax assets and liabilities for income tax purposes
totaling $6,200 was recorded as income tax.

Doe Run Cayman is subject to the regulations of the Cayman Islands,
which currently have no corporate income or capital gains tax. Doe Run
Cayman's subsidiaries located in Peru are subject to Peruvian taxation.
The statutory income tax rate in Peru is 30%. Doe Run Peru has obtained
a ten-year tax stabilization agreement with the Peruvian government,
which provides for Peruvian taxation based on tax statutes and
regulations prevailing on November 6, 1997, beginning with the Peruvian
tax year ending on December 31, 1997 through December 31, 2006.

45

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

Income tax expense is comprised of the following:

As a result of the change in tax status, the Company was not subject to
federal income taxation for the years ended October 31, 2001, 2000 and
1999.

The deferred tax expense in fiscal 2001 results from the increase in
the valuation allowance resulting from the assessment of the Company's
ability to use loss carryforwards in the future, see Note17. Current
tax expense decreased as a result of a merger between Doe Run Mining
and Doe Run Peru, offsetting taxable income of Doe Run Mining with
losses of Doe Run Peru.

The income tax expense recorded in the consolidated statement of
operations for the year ended October 31, 1999 reflects primarily: 1)
deferred federal income tax expense of $6,200 relating to the
elimination of net U.S. federal and state deferred tax assets,
including related valuation allowances, as a result of the change in
tax status, 2) current U.S. federal income tax expense resulting from
the change in tax status, which will be paid by Renco and 3) the income
tax provision of the Company's Peruvian subsidiaries. The net deferred
income tax benefit generated by the Peruvian subsidiaries for the years
ended October 31, 2000 and 1999 results primarily from the recognition
of benefits related to tax losses generated in 2000 and 1999 and to the
recognition in 1999 of an acquired tax loss of Cobriza for which no
previous benefit was recognized.

46

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:

The deferred tax balances as of October 31, 2001 and 2000 relate solely
to the Company's Peruvian subsidiaries. The deferred tax assets and
liabilities related to property, plant and equipment are principally
due to differences in book and tax allocations of the excess of the
fair value of the sum of assets acquired, less liabilities assumed over
the purchase price paid and accelerated depreciation methods used for
tax purposes.

Net operating loss carryforwards in Peru are available for use for four
years beginning with the first year the Company has taxable income
against which it can take a credit.

Management believes that sufficient uncertainty exists regarding the
realization of certain deferred tax assets and that a valuation
allowance is required. The valuation allowance increased (decreased)
$4,256 and $(7,180) in the years ended October 31, 2001 and 2000,
respectively. The increase in the valuation allowance reflects a change
in management's assessment regarding the future realization of deferred
tax assets as a result of current projections of liquidity and taxable
income, see Note 17. Benefits were realized in 2000 relating to certain
deferred tax assets against which a valuation allowance had previously
been provided.

(11) EMPLOYEE BENEFITS

DOMESTIC PLANS

DEFINED BENEFIT PLANS

The Company sponsors a noncontributory defined benefit plan for its
U.S. and expatriate employees. Benefits provided to salaried employees
under the defined benefit plan are based on final average compensation
and years of service. Benefits provided to hourly employees are based
on a flat rate and years of service. The Company has also adopted a
supplemental defined benefit plan, The Supplemental Employee Retirement
Plan (SERP), effective November 1, 1996. The SERP provides benefits to
those participants of the defined benefit plan whose benefits under the
plan are limited by Sections 401(a)(17) or 415 of the Internal Revenue
Code. Benefits under the SERP

47

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

represent the amount by which the benefits under the defined benefit
plan, if such benefits were not limited, exceed those benefits the
participants are entitled to receive. The SERP plan is unfunded.

Net periodic pension expense is comprised of the following:

The following assumptions were used in the determination of net
periodic pension expense:

The following table sets forth the funded status of the Company's
defined benefit plan:

(a) Includes accumulated benefit obligation related to the SERP plan of
$3,297 and $3,534, respectively

Change in plan assets:
Beginning of year at fair value $ 68,767 $ 59,299
Actual return on plan assets (10,064) 11,203
Employer contributions 289 1,685
Benefits paid (3,930) (3,420)
------------ ------------
End of year at fair value $ 55,062 $ 68,767
============ ============

48

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

The special termination benefits relate to an early retirement
incentive that was offered to certain eligible employees retiring
between November 1, 2001 and January 1, 2002. The early retirement
incentive provided an enhanced retirement benefit based on years of
benefit service and age compared to what is normally provided for in
the plan.

POSTRETIREMENT BENEFIT PLANS

The Company sponsors three postretirement medical plans for its U.S.
and expatriate employees. Two of these plans are self-insured plans.
The plans generally cover medical expenses subject to deductibles,
copayments and limits on specified coverage. For persons retired on or
before January 1, 1992, the retiree's contribution to the cost of these
plans varies primarily based upon the date of retirement and the
respective plan. Effective January 1, 1992, the Company's contribution
to the cost of coverage of employees retiring after that date decreased
gradually, until, beginning in 1997, retirees pay 100% of the cost of
coverage. The Company maintains stop-loss insurance for claims
exceeding $200 per person in any calendar year for those plans that are
self-insured.

Net periodic postretirement benefit cost includes the following
components:

49

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

The postretirement benefit plans are unfunded. The following
illustrates the Company's postretirement benefit obligation:

The weighted average annual assumed rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) for the
medical plans was 8% for fiscal 2001, with a decrease to 5% over 6
years, remaining level thereafter. A one percentage point
increase/(decrease) in each year would increase/(decrease) the
accumulated postretirement benefit obligation and the net periodic
postretirement benefit cost by $552/$(530) and $36/$(35), respectively.

The special termination benefits relate to the early retirement
incentive discussed above with respect to the defined benefit plan.
Most of the employees accepting the incentive received healthcare
coverage benefits for up to seven years at a cost that would not
normally be available to retirees, a portion of which will be covered
by the Company.

DEFINED CONTRIBUTION PLANS AND PROFIT SHARING PROGRAM

The Company sponsors a 401(k) plan that covers substantially all U.S.
and expatriate employees. Participants can contribute up to 15% of
compensation on a before-tax basis. The Company's mandatory match under
the plan is 25% of the first 6% of a participant's before-tax
contribution. The Company may make additional contributions at
management's discretion. For the fiscal year ended October 31, 2001,
the Company increased the match to 40% of the first 6% of a
participant's before-tax contribution. The Company's expense
representing its matching contribution was $1,101, $686, and $607 for
the years ended October 31, 2001, 2000 and 1999, respectively. Plan
assets consist primarily of investments in common stock and debt
securities.

The Company has a profit sharing program, which covers substantially
all U.S. employees. The program provides for a distribution to
employees equal to 15% of U.S. income before income tax expense, plus
any extraordinary items, excluding the related tax effect. At
management's discretion, a portion of the distribution may be made in
the form of a contribution to the 401(k) plan. The remainder is paid in
cash to employees. The Company had no expense for the years ended
October 31, 2001, 2000 and 1999 as a result of losses before income tax
expense in the U.S.

50

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

FOREIGN PLANS

Doe Run Peru is required to make semiannual deposits into a bank
account for severance indemnity benefits for Peruvian employees under
Peruvian government regulations. The balance in the account represents
the full benefit due to such employees upon termination. The Company
accrues for the additional amount that would be contributed to the
account since the last deposit date as if all such employees were to
terminate as of the balance sheet date. The Company's expense related
to severance indemnity benefits was $2,946 $2,951 and $2,786 for the
years ended October 31, 2001, 2000 and 1999, respectively.

In accordance with government regulations in Peru, employees are
entitled to receive 8% of the Doe Run Peru's taxable income, 50% of
which is distributed to employees based on number of days worked, and
the remaining distributed in proportion to their salaries. Such profit
sharing, which is tax deductible, is limited to 18 times the annual
salary for each worker. Any excess is to be reserved and used for
training of the workers. The Company had no expense relating to
workers' profit sharing payments years ended October 31, 2001, 2000 and
1999, due to tax losses in those years.

In addition, the Company recorded a deferred workers' profit sharing
asset of $0 and $2,094 at October 31, 2001 and 2000, respectively,
representing the amount the Company expects to recover through future
reduction of workers' profit sharing payments.

(12) BUSINESS AND CREDIT CONCENTRATIONS

Metal prices fluctuate and are affected by numerous factors beyond the
Company's control, including expectations for inflation, speculative
activities, the relative exchange rate of the U.S. dollar, global and
regional demand and production, political and economic conditions and
production costs in major producing regions. The aggregate effect of
these factors makes it impossible for the Company to predict metal
prices. Fluctuations in metal prices could have a material adverse
effect on the results of operations, financial condition and liquidity
of the Company.

For the years ended October 31, 2001, 2000 and 1999, approximately 67%,
70%, and 65%, respectively, of the Company's U.S. operations' revenues
from unaffiliated customers were from U.S. battery manufacturers
(primarily automotive) or their suppliers. At October 31, 2001 and
2000, the accounts receivable balances related to these U.S. battery
manufacturers were $33,425 and $33,239, respectively.

No single customer accounted for greater than 10% of consolidated
revenues for the years ended October 31, 2001, 2000 and 1999.

(13) 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 feed materials, primarily
spent batteries. The fabricated products segment produces value-added
lead products. The Peruvian operations produce an extensive product mix
of non-ferrous and precious metals through the Company's subsidiary,
Doe Run Peru.

The accounting policies of the segments are the same as those described
in the summary of significant accounting policies, except that the
primary lead, secondary lead and fabricated products segments value
finished metals and concentrates, work in process and raw materials
inventories at FIFO cost. Certain functions are performed at the
Company's corporate office for the primary lead and secondary lead
segments, such as sales and billing, as well as

51

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

the general administration of the Company. Related accounts receivable
and corporate overhead expenses are not allocated to operating
segments.

(1) Transactions between segments consist of metal sales recorded based
on sales contracts that are negotiated between segments on an
arms-length basis.
(2) Other revenues consist of metal sales not attributed to operating
segments and gains (losses) on hedging transactions.

(3) Revenues are attributed to countries based on destination of shipments.

52

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(4) Other revenues and expenses include primarily exploration expenses,
gains and losses recognized on hedge transactions, and adjustments
necessary to state inventories at LIFO cost.

(5) Unallocated corporate assets consist primarily of the Special Term
Deposit, cash, primary lead and secondary lead segments' accounts
receivable, investments in subsidiaries, pension assets, and deferred
financing costs.

(14) COMMITMENTS AND CONTINGENCIES

INVESTMENT COMMITMENT

Doe Run Peru is obligated to expend $120,000 through October 23, 2002
to expand and modernize its operations, including certain expenditures
to comply with environmental regulations within Peru, as discussed
below. In the event that Doe Run Peru has not fulfilled its obligations
under the investment commitment by the end of October 23, 2002, it will
be obligated to pay a penalty equal to 30% of any shortfall to Empresa
Minera del Centro del Peru S.A. (Centromin), the previous owner of the
La Oroya assets. As of October 31, 2001, Centromin had approved
qualifying expenditures through October 31, 2001 totaling approximately
$102,712. The Company has planned expenditures for fiscal year 2002
which management believes will satisfy the investment commitment.

53

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

However, there can be no assurance that all of these expenditures will
be completed or that these expenditures will be accepted in their
entirety as qualifying under the Contract.

TOLLING

The Company has entered into tolling arrangements with major battery
manufacturers whereby the manufacturers will deliver spent lead-acid
batteries and other lead-bearing material to the Company's recycling
facility and, for a processing fee, the Company will return finished
lead metal. The largest of these contracts expire in September and
December 2003. The agreements cover approximately 10% of the Company's
anticipated combined primary and secondary lead metal production for
the 2002 fiscal year.

SALES

The Company has commitments to sell approximately 66%, 74%, 75%, 38%
and 100% of its anticipated 2002 lead, copper, zinc, silver and gold
metal production, respectively under agreements, with terms of
generally less than one year. Sales prices are generally based on the
average quoted exchange prices for the month of shipment, plus a
premium.

LETTERS OF CREDIT

At October 31, 2001, the Company had issued irrevocable standby letters
of credit totaling $11,211 in connection with the Company's insurance
and bonding activities. The Company also had outstanding customs bonds
of $1,945 respectively, relating to concentrate and other purchases.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with a number of its senior
executives through October 31, 2002, with automatic renewal annually
unless written notice is given at least three months prior to the
expiration date.

(15) HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS

A significant portion of the Company's sales contracts are priced based
on an average London Metal Exchange (LME) or other exchange prices for
the respective metal plus a negotiated premium. As such, the prices of
the Company's products fluctuate due to factors in the market that are
beyond the Company's control. These price changes expose the Company to
variability in its cash receipts. The purpose of the Company's price
risk management program is to limit the Company's risk to acceptable
levels, while enhancing revenue through the receipt of option premiums.

The Company's price risk management program uses various derivative
instruments in its attempt to mitigate commodity price risks. The
Company uses purchased futures contracts as a fair value hedge of the
change in fair value of inventory related to firm sales commitments
with customers or as a cash flow hedge to lock in the price of lead
purchases for its fabricated products subsidiary. In fair value hedges,
the futures contracts are established at terms (quantities, prices and
timing) that mirror those of the firm commitments. The Company uses
sold futures contracts as a cash flow hedge to lock in the price of a
portion of forecasted lead metal sales and to lock in the price of
by-product sales whose prices are based on an average for a period
after they are shipped.

The Company routinely writes call options that, if exercised, will
create sold futures contracts that will be designated as cash flow
hedges of forecasted lead metal sales. The options generate premium
income, which enhance revenues. The Company also uses futures contracts
and options and combinations thereof to enhance revenue at contract
prices that are acceptable to the Company, should the options be
exercised. Because these

54

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

instruments do not meet the requirements for hedge accounting under FAS
133, the changes in fair market value related to these instruments
(including the time value portion), which reflect market prices and
volatility at the balance sheet date, are recorded in results of
operations, and are expected to increase the volatility of reported
results.

The unrealized gain reflected in the consolidated statement of
operations relates to the change in fair market value of derivative
financial instruments that are not designated as hedges. For derivative
instruments designated as hedges (futures contracts), the Company
assesses effectiveness based on changes in the forward rate, and as a
result, does not expect hedge ineffectiveness.

The fair market value of the Company's derivative financial instruments
reflected in the Company's balance sheet as of October 31, 2001 is the
difference between quoted prices at the balance sheet date and the
contract settlement value. The fair market value represents the
estimated net cash the Company would receive (pay) if the contracts
were canceled on the balance sheet date.

The Company's open derivative financial instruments at October 31, 2001
were:

SOLD (PURCHASED) FUTURES CONTRACTS (NUMBERS NOT IN THOUSANDS)

SOLD (PURCHASED) CALL OPTION CONTRACTS (NUMBERS NOT IN THOUSANDS)

55

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

SOLD (PURCHASED) PUT OPTION CONTRACTS (NUMBERS NOT IN THOUSANDS)

At October 31, 2001, the Company had recorded an asset of $1,593 and a
liability of $5,872 related to the fair market values of these
instruments. The Company also had recorded an asset of $178 for the
fair value of firm commitments designated as the hedged item in fair
value hedges. The balance of $(8) in comprehensive income will be
recognized in earnings as the forecasted sales/purchases occur through
December 2001.

The Company's open derivative financial instruments at October 31, 2000
were:

FUTURES SALES (PURCHASE) CONTRACTS (NUMBERS NOT IN THOUSANDS)

SOLD CALL OPTION CONTRACTS (NUMBERS NOT IN THOUSANDS)

SOLD PUT OPTION CONTRACTS (NUMBERS NOT IN THOUSANDS)

56

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

Sold put option contracts used by the Company to offset certain fixed
price sales to customers did not meet the definition of a hedge prior
to the adoption of FAS 133, and the net mark to market adjustment
related to these contracts was a loss of $242, for the year ended
October 31, 2000. No net mark to market adjustment was required in the
year ended October 31, 1999.

The Company does not obtain collateral or other security to support
hedge instruments subject to credit risk, but assesses the reliability
and reputation of its counterparties before contracts are established.

(16) ENVIRONMENTAL AND LITIGATION MATTERS

ENVIRONMENTAL

The Company has recorded a liability of approximately $30,110 as of
October 31, 2001, which represents management's best estimate of known
obligations relating to the environmental and reclamation matters that
are discussed below.

DOMESTIC OPERATIONS

The Company is 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. 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.

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. The Company
has accrued approximately $1,000 related to the cost of closure
pursuant to this permit, which is management's best estimate of closure
costs under the current requirements of the permit.

The Company signed a voluntary Administrative Order on Consent (AOC) in
September 2000 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. The U.S. Environmental Protection Agency (EPA)
and the Missouri Department of Natural Resources (DNR) signed the AOC
with an effective date of May 29, 2001. In addition, the Company has
agreed to replace the soil in yards of private residences within a
four-tenths of a mile radius of the smelter. The Company also agreed to
test soils in an area outside the half-mile zone to determine if
additional remediation is required. In September 2001, the Company
agreed to an acceleration of the lead testing program on the remaining
area within one mile of the smelter. As a result of the completion of
this testing, the Company signed an AOC with the U.S. EPA on December
21, 2001. The new AOC requires additional yard replacement relating to
those residences with the highest soil lead measurements and those with
children. The current total estimated cost of community cleanup
included in the Company's accrual for remediation costs, is
approximately $2,600, with the spending to be completed by the end of
calendar 2002. At this time, it is not possible to determine the
outcome of the remaining areas of study or what additional
remediation actions, if any, may be required after the study is
completed. Estimated costs may change if required levels of
remediation are different than currently estimated or if additional
homes are identified as a result of additional regulatory decisions.

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. Under
the terms of the proposed

57

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

buyout plan, an estimated 26 homeowners, each having children less
than 72 months old living in them, would be offered immediate buyouts
with the remaining affected homeowners to be extended buyout offers
by the end of 2004. The amount to be paid to the homeowners who
accept the buyout offer will be based on an appraisal of the
property's value at August 31, 2001. The accrual for cleanup at
January 31, 2002 does not include any cost associated with the
buyout plan, which could be as high as $10,000 if all qualifying
homeowners accept the Company's buyout offer. 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 homeowners will accept the buyout offer, or, if the buyout offer
is accepted, what the price to be paid for the property will be. The
Company will attempt to rent out certain purchased houses, once they
are remediated to the standards required by the regulatory agencies.
To the extent the Company will be able to rent these properties, the
fair value will be capitalized. To the extent the properties cannot
be rented out, or the amount paid exceeds the fair value of the
property at the buyout date, an impairment loss will be recognized.

On April 11, 2002, a report in the media contained allegations by
former employees of improper disposal of hazardous materials on the
Herculaneum site. The 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.

The Company, working with the Missouri DNR and the Missouri Air
Conservation Commission, has developed a plan 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 judgement entered into by the Company in December 2000, and has
been approved at the state level and by the U.S. EPA. Capital
expenditures for this plan were $5,900 in fiscal 2001. Future capital
expenditures are expected to total $4,500 in fiscal 2002, and $1,000 in
2003. A substantial part of the equipment is now in place and the
monitors have been reflecting compliance.

The Company 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. These sites involve historical
operations of predecessors of the Company. CERCLA provides for strict
and, in certain circumstances, joint and several liability for response
costs and natural resource damages. The Company has a reserve as of
October 31, 2001 of approximately $7,800 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.

The Company 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 began
in late fiscal 2001 and is scheduled for completion within two years.

The Company signed a voluntary AOC in 1994 with the EPA to remediate
the Big River Mine Tailings site. The remediation work required by the
AOC has been substantially completed, and will be followed by
revegetation and ongoing monitoring and maintenance activities.

The Company has also signed AOC's to perform an EE/CA on each of the
National, Rivermines, and Leadwood sites for remediation of the mine
waste areas at these sites. The National EE/CA is complete, the
Rivermines EE/CA is due by the end of fiscal 2002 and the Leadwood
EE/CA is due by the end of fiscal 2003. In addition, the Company has
signed an AOC with the EPA to conduct a Remedial
Investigation/Feasibility Study (RI/FS) to

58

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

assess potential off-site impacts of 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. The Company has signed an order to conduct interim
measures until the RI/FS is complete, consisting of blood lead
testing of young children, residential soil sampling, and limited
soil remediation as indicated by the testing and sampling results.
The Company believes the current reserves assigned to these sites
are adequate. However, should remediation goals or areas change,
requiring substantially increased measures, there can be no
assurance that the reserves would be adequate.

The Company has been advised by the EPA that it is considering taking
certain response actions at a mine site in Madison County, Missouri
known as the Mine LaMotte Site. The Company and the owner of the other
50% share 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. The Company has also been advised that remediation is required
at a related small satellite mine site. After conducting an
investigation, the Company has determined that it was not involved in
operations at the satellite site. Further review will be required
before a determination can be made as to whether the Company has any
liability at the main site. At this time, based on this 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.

The Company's Buick 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
has not yet been finalized. The Company has reserves as of October 31,
2001 of approximately $1,200 for corrective action and $2,900 for
closure costs for the permitted storage area. While management believes
these reserves 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 Company's domestic operating facilities have wastewater discharge
permits issued under the federal Clean Water Act, as amended. It is
possible that stricter discharge limits than previously in effect may
be included in certain permits now in renewal. If additional treatment
facilities were required under these permits, capital expenditures of
approximately $2,500 would be required. Management does not expect an
appreciable increase in operating costs.

The Company's mining and milling operations include six mine waste
disposal facilities that are subject to Missouri mine closure permit
requirements. Certain closure requirements have already been performed,
and the remaining estimated cost of future closure activities is
approximately $7,600. The Company's mine and mill closure reserves were
approximately $7,500 as of October 31, 2001.

FOREIGN OPERATIONS

Doe Run Peru submitted to and 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. 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 applicable 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). The required amount of annual investment must not be less
than one percent 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. Future changes in legal rules
and maximum permissible levels would not be applicable to Doe Run Peru
for the remaining period of the PAMA.

59

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

Doe Run Peru has committed under its PAMA to implement the following
projects at its La Oroya smelter 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

Through October 31, 2001, the Company had spent approximately $25,000
on projects under the La Oroya PAMA.

Annual spending on a calendar year basis 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 $174,000 for the remaining term of the
PAMA.

Doe Run Peru's operations historically and currently exceed some of the
applicable Ministry of Energy and Mines (MEM) maximum permissible
limits pertaining to air emissions, ambient air quality and waste water
effluent quality. The PAMA projects, which are more fully discussed
below, have been designed to achieve compliance with such 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. 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 in October
1997, Centromin agreed to indemnify Doe Run Peru 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 Doe Run Peru's
business, financial condition or results of operations.

60

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

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. The Company has spent approximately $8,800 under
the PAMA as of October 31, 2001. After beginning construction on the
largest of the projects, the tailings backfill project, revisions to
the cost estimate increased substantially. As a result, the Company has
requested a revision of its PAMA from the MEM, which would allow it to
operate for a time after the end of the current PAMA 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.

The Company is responsible for the closure costs relating to a zinc
ferrite disposal site. The Company has accrued $7,200 for the closure
costs and, although a plan for closure of the site has not been
finalized, management believes that this reserve is adequate.

CONSOLIDATED

The Company believes its reserves for domestic and foreign
environmental and reclamation matters are adequate, based on the
information currently available. Depending upon the type and extent of
remediation activities required, costs in excess of established
reserves are reasonably possible. 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.

LITIGATION

The Company is a defendant in twelve lawsuits alleging certain damages
stemming from the operations at the Herculaneum smelter. Four of these
cases are class action lawsuits. In two separate 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 a third 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 a fourth case,
plaintiffs seek to have certified a class of employees of a certain
contractor who worked at the Herculaneum smelter. Seven of the cases
are personal injury actions by 35 individuals who allege
damages from the effects of lead poisoning due to operations at the
smelter. Punitive damages also are being sought in each case. The
last suit is a property damage case alleging lead contamination of
fill material used on the plaintiff's property.

A resident of Herculaneum has retained counsel who has forwarded to the
Company information about personal injuries allegedly because of
exposure to emissions from the smelter. No suit has yet been filed
against the Company in this matter.

The Company 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
a class consisting of property owners, 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, Missouri
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

61

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

caused by chat, tailings, and related operations in six areas in St.
Francois County. The fifth case, filed in July 2001, alleges personal
injury against two children living in St. Francois County.

Three lawsuits have been filed against the Company each alleging
personal injury to a child living in Picher, Oklahoma as a result of
lead contamination from chat piles and/or tailings generated by
historic operations of the Company's predecessor.

The Company, with several other defendants, has been named in four
cases in Maryland, but not 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. The Company has recently been
dismissed from two similar cases in which it was joined as a defendant.
Until The Company is actually joined as a defendant in one or more of
these cases, material liability from these cases is considered remote.

The Company 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 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.

One hundred and seventeen individual cases have been filed that list
the Company among other defendants, alleging that the employees or
ex-employees of Burlington Northern Railroad who filed the cases were
exposed to lead from the hauling of lead concentrates by the railroad.
An ex-employee of the Terminal Rail Road Association of St. Louis has
filed a similar case.

The Company has been named as a defendant in a breach of
contract/warranty action for damages arising from the sale of allegedly
impure lead. The plaintiff has indicated, although the amount has not
been confirmed through depositions, that its claims exceed $1,000.

On January 15, 2002, The Doe Run Company received a Demand for
Arbitration regarding payments Fabricated Products, Inc. was to make
under an Asset Purchase Agreement.

On February 28, 2002, Fabricated Products, Inc. (FPI) and others were
served with a wrongful death action on behalf of the estate of a former
worker at FPI's Vancouver facility.

Since all of the above cases are either in the pleading or discovery
stages, the Company is unable at this time to estimate the expected
outcome of and the final costs of any of these actions. Therefore,
there can be no assurance that these cases would not have a material
adverse effect, both individually and in the aggregate, on the results
of operations, financial condition and liquidity of the Company. The
Company has and will continue to vigorously defend itself against these
all these claims.

(17) LIQUIDITY

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. Reductions
in receivables and inventory coupled with increases in borrowings on
revolving credit lines and accounts payable have reduced availability
under

62

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

revolving credit facilities to the minimal levels discussed in Note 8.
Further reductions of current assets of this magnitude are very
unlikely.

At October 31, 2001 the Company failed to maintain consolidated net
worth and EBITDA for U.S. operations, as required by the Doe Run
Revolving Credit Facility. The amendment and subsequent extension
discussed above waived these defaults through March 14, 2002.

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.

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 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.

63

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(18) GUARANTOR SUBSIDIARIES

The Guarantor Subsidiaries (Fabricated Products, Inc. (FPI) and DR Land
Holdings, LLC (the Domestic Guarantors) Doe Run Cayman Ltd. (Doe Run
Cayman) and its subsidiary Doe Run Peru have jointly and severally,
fully, unconditionally and irrevocably guaranteed the Unsecured Notes
and Secured Notes of the Company. Doe Run Cayman has no operations
separate from those of Doe Run Peru. Separate financial statements and
other disclosures concerning certain Guarantor Subsidiaries and
disclosures concerning non-Guarantor Subsidiaries have not been
presented because management has determined that such information is
not material to investors. Intercompany transactions eliminated in
consolidation consist of various service and agency fees between The
Doe Run Resources Corporation and Doe Run Peru and sales of metal to
The Doe Run Resources Corporation by Doe Run Peru and to FPI by The Doe
Run Resources Corporation.

Doe Run Peru was merged with its parent, Doe Run Mining S.R.L.
effective June 1, 2001. The following consolidating statements reflect
the historical cost basis of assets and liabilities and the results of
operations assuming the merger had occurred on October 23, 1997, the
date at which common control was established. The consolidating
statements have been restated accordingly.

64

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2001

65

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 31, 2000

66

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2001

67

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000

68

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999

69

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 2001

70

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 2000

71

THE DOE RUN RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(18) Guarantor Subsidiaries (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1999

72

INDEPENDENT AUDITORS' REPORT

To the Shareholders
Doe Run Peru S.R.L.:

We have audited the accompanying combined balance sheets of Doe Run Peru
S.R.L. (a Peruvian Company) as of October 31, 2001 and 2000, and the related
combined statements of operations, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended October 31, 2001.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Doe Run Peru S.R.L.
as of October 31, 2001 and 2000, and the results of their operations and their
cash flows for each of the years in the three-year period ended October 31, 2001
in conformity with accounting principles generally accepted in the United States
of America.

As discussed in Note 4 to the combined financial statements, the Company
adopted FAS 133 beginning November 1, 2000. The adoption of FAS 133 resulted
in a net transition loss of $1,125, net of income tax benefit of $480.

The accompanying combined financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 20 to
the combined financial statements, the Company faces liquidity issues that
raise substantial doubt about its ability to continue as going concern.
Management's plans in regards to these matters are also described in Note 20.
The combined financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Lima, Peru

December 5, 2001 except as to Note 20 which is as of April 15, 2002

Countersigned by:

- ----------------------------
Juan Jose Cordova (Partner)
Peruvian Public Accountant
Registration No 18869

73

DOE RUN PERU S.R.L.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

74

DOE RUN PERU S.R.L.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

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

75

DOE RUN PERU S.R.L.
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

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

76

DOE RUN PERU S.R.L.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

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

77

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. NATURE OF BUSINESS

Doe Run Peru S.R.L. (Doe Run Peru or the Company) is a Peruvian company
incorporated on September 8, 1997 and, since June 1, 2001, 99.9% owned
by Doe Run Cayman Ltd. (Doe Run Cayman). Prior to May 31, 2001 Doe Run
Peru was 99.9% owned by Doe Run Mining S.R.L. (Doe Run Mining), a
subsidiary of Doe Run Cayman. See Note 2.

Doe Run Peru is engaged in the smelting and refining of polymetallic
concentrates, mainly copper, lead and zinc, which are sold primarily to
customers located outside of Peru as refined metals.

2. BUSINESS ACQUISITIONS

Effective March 1, 1999, Doe Run Peru was merged with Empresa Minera
Cobriza S.A. (Cobriza), an entity previously controlled by Doe Run
Mining since the acquisition of substantially all of Cobriza's
outstanding shares on August 31, 1998. The accompanying combined
financial statements of the Company reflect the historical cost basis
of assets and liabilities and the results of operations of Cobriza for
the periods before the merger, during which Doe Run Peru and Cobriza
were under common control. These financial statements have been
prepared as if the merger occurred October 31, 1998.

At the General Shareholders' Meetings held on May 14, 2001 by Doe Run
Peru and Doe Run Mining, respectively, the merger by absorption of
these two companies was approved, with Doe Run Peru the absorbing
company and Doe Run Mining the absorbed company. This merger was
effective as of June 1, 2001.

On the day before the effective date of the merger Doe Run Mining's
shareholders' equity transferred to Doe Run Peru, the absorbing
company. As a result of the transfer of the shareholders' equity of Doe
Run Mining to Doe Run Peru after the merger, and taking into account
that Doe Run Mining was the majority shareholder of Doe Run Peru,
several accounts were consolidated, such as the capital stock of Doe
Run Peru and the investment account of Doe Run Mining, resulting in a
decrease in the capital stock of Doe Run Peru from $271,435 to $2,005.
The capital stock of Doe Run Peru is comprised of 15,912,083,739 shares
with a par value of $ 0.01 each, less an adjustment of $157,115
resulting from a write up of fixed assets which is allowed for Peruvian
GAAP but not under U.S. GAAP.

For comparability purposes, the merger of Doe Run Mining and Doe Run
Peru resulted in the following adjustments to amounts previously
reported for Doe Run Peru:

(a) Adjustment is primarily the result of additional interest
expense of $14,666 and $14,835 in 2000 and 1999,
respectively that was previously reported as an expense of
Doe Run Mining.
(b) Adjustment is primarily due to the elimination of an
intercompany receivable balance with Doe Run Mining of
$34,667.
(c) Adjustment is primarily due to the addition of the $125,000
bank loan that was previously maintained on the books of
Doe Run Mining, an increase of $3,887 in the balance due to
related parties, and an increase of $2,055 in accrued
liabilities reflecting the addition of accrued interest
expense on the $125,000 bank loan previously maintained on
the books of Doe Run Mining.
(d) Adjustment is comprised of reductions of $269,430 in common
stock and $42,047 in retained earning partially offset by
the elimination of the deficit balances in additional paid
in capital, due to parent, and accumulated other
comprehensive income of $16,234, $104,090 and $20,910,
respectively, reflecting the elimination of Doe Run
Mining's investment in Doe Run Peru.

The accompanying combined financial statements of the Company reflect
the historical cost basis of assets and liabilities and the results of
operations of Doe Run Mining for the periods before the merger, during
which Doe Run Peru and Doe Run Mining were under common control of Doe
Run Cayman. These financial statements have been prepared as if the
merger occurred October 31, 1998. Prior to the merger Doe Run Mining's
principal asset was its investment in Doe Run Peru and its principal
liabilities were the bank loan, see Note 11, and intercompany loan due
to Doe Run Peru.

3. BASIS OF PRESENTATION

The combined financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United
States of America (U.S. GAAP).

The combined financial statements include all the accounts of the
Company and its subsidiaries, after eliminating intercompany balances
and transactions, including gains and losses resulting from such
transactions. The minority interest is not significant.

USE OF ESTIMATES

The preparation of combined financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the combined
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from these
estimates.

RECLASSIFICATIONS

Certain balances have been reclassified from their previous
presentation in order to conform to their current presentation.

79

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

Inventories are stated at the lower of cost or market. The cost of
refined metals for sale, as well as metals and concentrates in process
are determined under the last-in, first-out method (LIFO). Materials,
supplies and spare parts are principally stated at average cost.

Inventory costs include concentrates purchased, labor, depreciation and
other production costs.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at the lower of cost or fair
value. Long-lived assets are reviewed for impairment when events or
circumstances indicate that the carrying amount of the assets may not
be recoverable. The impairment loss on such assets, as well as
long-lived assets and certain identifiable intangibles to be disposed
of, is measured as the amount by which the carrying value of the assets
exceeds the fair value of the assets.

Depreciation is calculated on a straight-line basis at the rates
indicated in Note 9. Major additions and improvements to property,
plant and equipment are capitalized, at cost, when they significantly
increase the productive capacity or the life of the assets. Routine or
unanticipated repair and maintenance expenditures, which do not extend
the useful life or increase the productive capacity of the asset, are
charged to operations as incurred. Major expenditures required to
maintain the originally anticipated productive capacity and life of the
assets are deferred and charged to operations over the period through
the next anticipated maintenance date.

DEFERRED FINANCING FEES

Deferred financing fees represent fees paid in conjunction with the
acquisition of revolving loans and are amortized using the interest
method over the term of the respective line of credit.

EXPLORATION AND DEVELOPMENT COSTS

Exploration costs are charged to operations as incurred. Development
costs incurred to maintain production at operating mines are charged to
operations as incurred. Development expenditures for mining properties
that are considered to be commercially feasible, but are not yet
producing, and major development expenditures at operating mines that
are expected to benefit future production are capitalized and amortized
using the units of production method over the estimated proven ore
reserves to be benefited.

COMMITMENTS AND CONTINGENCIES

The Company accrues for loss contingencies, including costs associated
with environmental remediation obligations, when such costs are
probable and reasonably estimable. Accruals are reviewed and adjusted
as circumstances change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value.

80

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

REVENUE RECOGNITION

Sales are recorded when title passes to the customer, which typically
occurs at the time of shipment. Sales are recorded based on estimated
weights, assays and prices using applicable customer agreements and
hedge contracts. Revenues with respect to such sales are adjusted to
reflect settlement when final weights, metal contents and prices are
determined.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued by the
Financial Accounting Standards Board in June 1998, and amended by
Statement No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND
CERTAIN HEDGING ACTIVITIES, AN AMENDMENT OF FASB STATEMENT NO. 133,
issued in June 2000 (collectively, FAS 133). Under FAS 133, entities
are required to carry all derivative instruments in the statement of
financial position at fair value. The accounting for changes in the
fair value (i.e. gains and losses) of a derivative instrument depends
on whether it has been designated and qualifies as part of a hedging
relationship, and if so, whether the derivative instrument is
designated as a hedge of exposures to changes in fair values, cash
flows or foreign currencies. If the hedged exposure is changes in fair
values, the gain (loss) is recognized in earnings in the period of
change, with an equal and offsetting (loss) gain recognized on the
change in value of the hedged item. If the hedged exposure is changes
in cash flows, the effective portion of the gain (loss) is reported as
a component of other comprehensive income (outside earnings) until the
forecasted hedged transaction affects earnings, when it is reclassified
into earnings.

The Company adopted FAS 133 beginning November 1, 2000, in the first
quarter in which it was required by the standard, as amended. The
adoption of FAS 133 resulted in a net transition loss of $1,125, net of
income tax benefit of $ 480.

DEFERRED INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled.

DEFERRED WORKERS' PROFIT SHARING

In accordance with government regulations in Peru, employees are
entitled to receive 8% of the Doe Run Peru's taxable income, 50% of
which is distributed to employees based on number of days worked, and
the remaining distributed in proportion to their salaries. Such profit
sharing, which is tax deductible, is limited to 18 times the annual
salary for each worker. Any excess is to be reserved and used for
training of the workers.

Because workers' profit sharing is calculated on taxable income, the
Company recognizes the effect of temporary differences between
financial reporting and tax bases of assets and liabilities related to
workers' profit sharing on a basis consistent with that used for income
taxes.

81

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

IMPACT OF ACCOUNTING STANDARDS NOT YET ADOPTED

In June 2001, the Financial Accounting Standards Board issued Statement
No. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, which addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs. The standard applies to legal obligations associated
with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) normal use of the
asset.

Statement No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The fair
value of the liability is added to the carrying amount of the
associated asset and this additional carrying amount is depreciated
over the life of the asset. The liability is accreted at the end of
each period through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, the
Company will recognize a gain or loss on settlement.

The Company is required and plans to adopt the provisions of Statement
No. 143 for the quarter ending January 31, 2003. To accomplish this,
the Company must identify all legal obligations for asset retirement
obligations, if any, and determine the fair value of these obligations
on the date of adoption. The determination of fair value is complex and
will require the Company to gather market information and develop cash
flow models. Additionally, the Company will be required to develop
processes to track and monitor these obligations. Because of the effort
necessary to comply with the adoption of Statement No. 143, it is not
practicable for management to estimate the impact of adopting this
Statement at the date of this report.

In August 2001, the Financial Accounting Standards Board issued
Statement No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS, which supersedes both FASB Statements No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF and the accounting and reporting provisions of
APB Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS - REPORTING THE
EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY,
UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the
disposal of a segment of a business. Statement 144 retains the
fundamental provisions in Statement 121 for recognizing and measuring
impairment losses on long-lived assets held for use and long-lived
assets to be disposed of by sale, while also resolving significant
implementation issues associated with Statement 121. Statement 144
retains the basic provisions of Opinion 30 on how to present
discontinued operations in the income statement but broadens that
presentation to include a component of an entity (rather than a segment
of a business.

The Company is required and plans to adopt the provisions of Statement
No. 144 for the quarter ending January 31, 2003. Management does not
expect the adoption of Statement 144 for long-lived assets held for use
to have a material impact on the Company's financial statements because
the impairment assessment under Statement 144 is largely unchanged from
Statement 121. The provisions of the Statement for assets held for sale
or other disposal generally are required to be applied prospectively
after the adoption date to newly initiated disposal activities.
Therefore, management cannot determine the potential effects that
adoption of Statement 144 will have on the Company's financial
statements.

5. REMEASUREMENT INTO U.S. DOLLARS

The functional currency of Doe Run Peru is the U.S. dollar. Until
December 31, 1999 the accounting records of Doe Run Peru and its
subsidiary were kept in Peruvian nuevos soles and remeasured into

82

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

U.S. dollars. Since January 1, 2000 the accounting records of Doe Run
Peru have been kept in U.S. dollars due to a modification of the
Contract of Guarantees and Measurement to Promote Investments described
in Note 13 (b). This change did not have an effect on the financial
position or results of operations of Doe Run Peru.

The methodology utilized for the re-measurement of nuevos soles into
U.S. dollars, as established by SFAS 52, is as follows:

(a) Non-monetary accounts have been re-measured at historical exchange
rates.

(b) Monetary accounts in Peruvian currency have been re-measured at
free market average exchange rates in effect at the respective
year-end, see Note 6.

(c) Income and expenses have been re-measured at the average monthly
exchange rates. Cost of sales was determined from its components
once re-measured. The net effect of foreign exchange differences
has been reflected in the accompanying combined statements of
operations.

6. FOREIGN CURRENCY TRANSACTION AND EXCHANGE RISK EXPOSURE

Under current law, foreign currency transactions are made through the
Peruvian financial banking system at free market exchange rates. The
exchange rates in effect were S/3.439, S/3.515 and S/3.489 per each $1
for assets at October 31, 2001, 2000 and 1999, respectively, and
S/3.443, S/3.510 and S/3.493 per each $1 for liabilities at October 31,
2001, 2000 and 1999, respectively.

Assets and liabilities denominated in Peruvian nuevos soles are as
follows (in thousands):

Net foreign currency transaction losses relating to transactions
denominated in Peruvian nuevos soles were $412, $281 and $2,529 for the
years ended October 31, 2001, 2000 and 1999, respectively, which have
been reflected in the combined statements of operations in other income
(expense), net.

83

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

7. INVENTORIES

Inventories consist of the following:

Materials, supplies and spare parts are stated net of reserves for
obsolescence of $826, $250 and $0 at October 31, 2001, 2000 and 1999,
respectively.

The FIFO cost of inventories valued under the LIFO cost method were
approximately $42,575 and $48,972 at October 31, 2001 and 2000,
respectively. If the FIFO cost method had been used to determine cost,
inventories would have been $4,415 lower and $1,185 higher at October
31, 2001 and 2000, respectively.

As a result of reducing certain inventory quantities valued on the LIFO
basis, lower (higher) inventory costs prevailing in previous years were
charged to cost of sales in 2001, 2000 and 1999. The Company calculates
the effect of LIFO liquidations on net income based on the current cost
method. The effect was an increase (decrease) in net income of $(35),
$27 and $400 in 2001, 2000 and 1999, respectively.

8. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

The value added tax (VAT) paid on purchases can be offset against the
VAT resulting from local sales, Peruvian income tax and other taxes
collected by the Peruvian Public Treasury. In addition, the Company may
apply for a refund in the form of cash or negotiable credit Notes from
the tax authorities.

The credits on Peruvian value added tax outstanding as of October 31,
2001 and 2000 were collected subsequent to year-end.

84

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The Company received a refund of income tax prepayments from the
Peruvian Government of approximately $ 12,700 on June 4, 2001. At the
same time, the Company paid $ 2,700 for certain tax liabilities.

9. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following:

10. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

85

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11. DEBT

Long-term debt consists of the following:

The revolving credit facility with a Peruvian bank allows Doe Run Peru
to borrow up to $40,000 and expires June 19, 2002. This revolving
credit facility provides for advances by the lender to a maximum of
$40,000 less outstanding letters of credit, guarantee letters and
customs bonds and is based upon specific percentages of eligible
receivables and inventories. In addition the lender provides a separate
line of $ 12,000 for the issuance of certain classes of guarantee
letters. The sum of the advances on both of these lines is limited to
$42,000. The Company is currently in negotiations with its lender to
extend the facility, but has not yet received any commitment.

The facility bears interest at LIBOR (1-month, 3-month or 6-month rate,
depending on the term of the loan) plus 2.0% per annum. The facility is
secured by accounts receivable and inventories. The average effective
rate was 6.59% at October 31, 2001. An unused line fee of 0.375% per
annum on the average unused portion of the line is payable quarterly,
in arrears. Individual loans must be greater than $1,000. Actual
availability was $9,692 at October 31, 2001.

The bank loan with a commercial bank matures in a single installment on
March 12, 2005. Interest on the principal amount of the loan is payable
semi-annually on each March 12 and September 12, commencing on
September 12, 1998. Interest on the outstanding principal amount of the
loan accrues at a rate of 11.50% per annum through September 11, 2004
and at a rate of 11.25% from September 12, 2004 to March 11, 2005.

The deferred purchase price obligation was payable to Empresa Minera
del Centro del Peru S.A. (Centromin) for the assets of the Cobriza mine
purchased in 1998. The last payment of three in the amount of $1,495
was paid August 31, 2001.

In January 1999, Doe Run Peru finalized an agreement for the sale and
leaseback of its oxygen plant at the La Oroya facility for $17,162. Doe
Run Peru has an option to repurchase the oxygen plant at the end of the
five-year lease term for $200. In April 1999, Doe Run Peru entered into
a three-year sale and leaseback of computer equipment for $761. In
January 2001 Doe Run Peru entered into a three-year leasing of an
additional computer equipment and equipment maintenance for $ 746.
These transactions have been accounted for as financing arrangements.
The interest rates applicable under the oxygen plant, computer
equipment and additional computer equipment leases are 12.35%, 8.50%
and 6.81%, respectively.

86

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The aggregate estimated amounts of long-term debt maturing after
October 31, 2001 are as follows:

Fiscal year ending October 31:
2002 $ 25,188
2003 4,410
2004 1,558
2005 125,000
--------
$156,156
========

The Doe Run Peru revolving credit facility contains certain covenants
that set a net worth requirement, limit indebtedness and investments
and restrict the payment of dividends in the event of default. An event
of default could result in the termination of the revolving credit
facility and/or the acceleration of all amounts due thereunder. The
Company was in compliance with the covenants as of October 31, 2001.

12. OTHER LONG-TERM LIABILITIES

Other long-term liabilities are principally comprised of estimated
closure cost of a zinc ferrite site of $7,200, as explained in Note 15.

13. TAXATION

(a) Doe Run Peru and its subsidiary are subject to Peruvian
taxation. The statutory income tax rate of 30% is applied
separately to the taxable income of each company and not to
the consolidated taxable income.

(b) Doe Run Peru is a party to a Tax Stabilization Agreement and a
Contract of Guarantees and Measures to Promote Investments
with the Peruvian Government as follows:

TAX STABILIZATION AGREEMENT

The Tax Stabilization Agreement expires as of December 31,
2006. Under this agreement, Doe Run Peru will utilize tax
statutes prevailing as of November 6, 1997. The principal
provisions of the agreement are as follows:

- Utilization of the tax statutes prevailing as of April 25,
1994. In exercise of the regulation permitted in the tenth
clause of the Tax Stabilization Agreement, Doe Run Peru
adopted the tax statutes prevailing as of November 6,
1997.

- Custom duties will be calculated at rates ranging from 15%
to 25%.

- Free trade of its products.

- No restrictions on the use of proceeds from export sales.

- Free conversion of foreign currency generated by local
sales.

- No discrimination in foreign currency transactions.

CONTRACT OF GUARANTEES AND MEASURES TO PROMOTE INVESTMENTS

On December 30, 1997, Doe Run Peru signed a Contract of
Guarantees and Measures to Promote Investments. This agreement
is effective beginning in the calendar year ended December 31,
2007, provided that Doe Run Peru complies with the committed
investments

87

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

related to the improvements of the facilities [see Note
15(b)], and provides tax stability through December 31, 2022.
The principal provisions are similar to those established in
the Tax Stabilization Agreement, except that Doe Run Peru will
utilize the tax statutes prevailing as of December 23, 1997.

The provision for Peruvian income tax is comprised of the following for
the years ended October 31, 2001, 2000 and 1999:

Peruvian income tax expense (benefit) differed from the amount computed
by applying the statutory income tax rate of 30% to income before
income tax expense (benefit) as a result of the following:

Current tax expense decreased as a result of the merger between Doe Run
Mining and Doe Run Peru, offsetting taxable income of Doe Run Mining
with losses of Doe Run Peru.

88

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:

The tax loss carryforwards in Peru are available for use for four years
beginning with the first year the Company obtains taxable income
against which it can take a credit.

Management believes that sufficient uncertainty exists regarding the
realization of certain deferred tax assets and that a valuation
allowance is required. Changes in the valuation allowance reflects a
change in management's assessment regarding the future realization of
deferred tax assets as a result of the current estimates of future
earnings and liquidity.

14. EMPLOYEE BENEFITS

SEVERANCE INDEMNITIES

Doe Run Peru is required to make semiannual deposits into a bank
account for severance indemnity benefits for Peruvian employees under
Peruvian government regulations. The balance in the account represents
the full benefit due to such employees upon termination. The Company
accrues for the additional amount that would be contributed to the
account since the last deposit date as if all such employees were to
terminate as of the balance sheet date. The Company's expense related
to severance indemnity benefits was $2,946, $2,951 and $2,786 for the
years ended October 31, 2001, 2000 and 1999, respectively.

WORKERS' PROFIT SHARING

In accordance with government regulations in Peru, employees are
entitled to receive 8% of the Doe Run Peru's taxable income, 50% of
which is distributed to employees based on number of days worked, and
the remaining distributed in proportion to their salaries. Such profit
sharing, which is tax

89

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

deductible, is limited to 18 times the annual salary for each worker.
Any excess is to be reserved and used for training of the workers. The
Company had no expense relating to workers' profit sharing payments
years ended October 31, 2001, 2000 and 1999, due to tax losses in those
years.

In addition, the Company recorded the deferred workers' profit sharing
asset of $0 and $2,094 at October 31, 2001 and 2000, respectively,
representing the amount the Company expects to recover through future
reduction of workers' profit sharing payments.

15. COMMITMENTS AND CONTINGENCIES

INVESTMENT COMMITMENTS

(a) According to the Contract described in Note 2, Doe Run Peru is
obligated to expend $120,000 through October 23, 2002 to expand
and modernize its operations, including certain expenditures to
comply with environmental regulations within Peru, as discussed
below. In the event that Doe Run Peru has not fulfilled its
obligations under the investment commitment by the end of October
23, 2002, it will be obligated to pay a penalty to Centromin equal
to 30% of any shortfall. Centromin has approved qualifying
expenditures through October 31, 2001 totaling approximately
$102,712. Although there can be no assurance, management
anticipates that capital and other qualifying expenditures during
2002 will enable Doe Run Peru to meet its investment commitment.
Management plans to fund these expenditures primarily from future
operating cash flows.

(b) According to the Contract of Guarantees and Measures to Promote
Investments mentioned in Note 13(b), (as modified in April, 2001)
Doe Run Peru has committed to performing certain economic
expansion projects by December 31, 2006, in order to provide tax
stability from January 1, 2007 through December 31, 2022. Doe Run
Peru expects to spend $105,587 to expand and modernize its
facilities, including environmental expenditures. To the extent
the related investments are made before October 23, 2002, they can
also be considered as part of the $120,000 investment discussed in
the above paragraph. Through October 31, 2001, Doe Run Peru has
invested approximately $37,357.

ENVIRONMENTAL MATTERS

Doe Run Peru submitted to and 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. 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 applicable 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). The required amount of annual investment must not be less
than one percent 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. Future changes in legal rules
and maximum permissible levels would not be applicable to Doe Run Peru
for the remaining period of the PAMA.

90

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Doe Run Peru has committed under its PAMA to implement the following
projects at its La Oroya smelter 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

Through October 31, 2001, the Company had spent approximately $25,000
on projects under the La Oroya PAMA.

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

93

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

SOLD / (PURCHASED) CALL OPTION CONTRACTS

SOLD / (PURCHASED) PUT OPTION CONTRACTS

At October 31, 2001, the Company had recorded an asset and a liability
of $520 and $1,345 related to the fair market values of these
instruments. To affect this balance, the Company recorded the
transition adjustment discussed in Note 4 and a gain of $1,198, net of
the effect of balances of deferred option premiums and options at fair
market value previously recorded on the balance sheet.

The Company's open hedging positions as of October 31, 2000 were:
(numbers not in thousands)

SOLD/(PURCHASED) FUTURES CONTRACTS

SOLD / (PURCHASED) CALL OPTION CONTRACTS

94

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

SOLD / (PURCHASED) PUT OPTION CONTRACTS

Sold put option contracts used by the Company to offset certain fixed
price sales to customers did not meet the definition of a hedge, and
the net mark to market adjustment prior to the adoption of FAS 133
related to these contracts was a loss of $242 for the year ended
October 31, 2000. No net mark to market adjustments was required in the
year ended October 31, 1999.

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of the Company's long-term debt were estimated using
discounted cash flow analysis, based on the estimates of incremental
borrowing rates for similar types of borrowing arrangements. At October
31, 2001 and 2000, the fair values of the Company's financial
instruments, except for the hedge positions described in Note 16, were
not materially different from their carrying amounts.

18. RELATED PARTY TRANSACTIONS

The Company through Doe Run Mining and Doe Run Peru, has signed the
following agreements with Doe Run Resources Corporation:

(a) Doe Run Mining was a party to a Technical, Managerial and
Professional Services Agreement, under which Doe Run Resources
committed to provided the necessary resources for managerial,
financial, communications, information technology and operating
services. Doe Run Mining paid $5,512 in the years ended October
31, 2000 and 1999, respectively. The contract was terminated
effective October 31, 2000.

Doe Run Mining was a party to a Technical Assistance Agreement,
under which Doe Run Resources committed to provide technological
assistance and technology transfer. Doe Run Mining paid $ 357 in
the years ended October 31, 2000 and 1999, respectively. In
conformity with the addendum to the original contract signed on
November 1, 2000. The contract was terminated effective October
31, 2000.

(b) Doe Run Peru was a party to a Foreign Sales Agency and Hedging
Services Agreement, under which Doe Run Resources agreed to
perform marketing and selling of metallurgical products and
trading and hedging services. The contract was terminated October
31, 2000 and replaced with an International Sales Agency Services
Contract and a Hedging Services Contract. The commission was 3% of
the foreign sales. The amounts expensed were $13,073 and $11,821
for the years ended October 31, 2000 and 1999, respectively.

Pursuant to the terms and conditions included in the International
Sales Agency Services Contract, Doe Run Resources agreed to
perform marketing and sales services for Doe Run Peru. The term of
this agreement is for two years after which it is automatically
renewed on an annual

95

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

basis unless either party gives notice of non-renewal. The
commission is 2.25% of the sales revenue. Doe Run Peru paid $8,818
for the year ended October 31, 2001.

Pursuant to the terms and conditions included in the Hedging
Services Contract, Doe Run Resources agreed to perform trading and
hedging services. The term of this agreement is for two years
after which it is automatically renewed on an annual

basis unless either party gives notice of non-renewal. The
commission is $42 per month. Doe Run Peru paid $504 for the year
ended October 31, 2001.

In addition to the above described, the following balances relating to
intercompany transactions were outstanding as of October 31, 2001 and
2000:

(a) As a result of these transactions, the Company had a due to
related parties of $ 8,873 and $10,917 at October 31, 2001 and
2000, respectively.

(b) Sales of refined metals to Doe Run Resources were $0, $1,573 and
$2,898 for the years ended October 31, 2001, 2000 and 1999,
respectively. There were no balances outstanding relating to these
sales as of October 31, 2001 and 2000, respectively.

Doe Run Cayman and its wholly-owned subsidiary, Doe Run Peru have
jointly and severally, fully, unconditionally guaranteed $200,000
11.25% senior Notes due 2005 and $55,000 floating interest rate senior
Notes due 2003, issued by Doe Run Resources (collectively, the
Unsecured Notes). Additionally, the above-referred companies together
with their subsidiaries have jointly and severally, fully,
unconditionally guaranteed $50,000 aggregate principal amount of 11.25%
senior Secured Notes due 2005, issued by Doe Run Resources (the Secured
Notes).

The guarantee of Doe Run Peru is contractually subordinated to the
indebtedness of Doe Run Peru under the Revolving Credit Facility
described in Note 11.

The Secured Notes and the Unsecured Notes contain certain covenants
that limit the ability of Doe Run Peru and its subsidiary to, among
other things, incur additional indebtedness, make certain restricted
payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur lines, impose restrictions on the
ability of a subsidiary to pay dividends or make certain payments to
Doe Run Resources and its subsidiaries, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets. The Company is in
compliance with these covenants as of October 31, 2001.

96

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

19. GEOGRAPHIC DATA

The following is an analysis of net sales by country of destination:

20. LIQUIDITY

Deteriorating market conditions 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 $23,720 reduction of tax receivables, the
Company reduced inventories by $6,212.

On March 12, 2002, Doe Run Peru, with the consent of its parent
company, The Doe Run Resources Corporation, (Doe Run) did not pay
$7,031 of interest due to Banco de Credito Overseas Limited (the Bank)
under a Contract for a Loan in Foreign Currency. Failure to pay such
interest was cured by instructing the Bank to offset the amount of such
payment against the amount otherwise payable by the Bank to Doe Run
under a Special Term Deposit Contract.

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 Doe Run could cure the
non-payment, the Company, as a guarantor is in default of its covenants
under the Notes indentures and its revolving credit facilities. No
actions have been taken by the lenders to accelerate the payment of
outstanding debt balances. Doe Run is in restructuring negotiations as
described below and in negotiations with the lenders of its revolving
credit facilities to execute amended revolving credit facilities.

97

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

Under the proposed restructuring transaction, Doe Run 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 Doe Run's future debt service and provide
sufficient liquidity to continue to operate all its facilities at
present levels and will not adversely affect Doe Run'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.

98

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding the
directors and executive officers of the Company:

Ira Leon Rennert has been Chairman, Chief Executive Officer and deemed
beneficial shareholder of the parent company, Renco (including predecessors),
since Renco's first acquisition in 1975, Chairman and Director of the Company
since April 1994, Chairman and Director of Doe Run Cayman since October 1997 and
Chairman and Director of FPI since August 1996. Renco holds controlling
interests in a number of mining and manufacturing concerns operating in
businesses not competing with the Company including Renco Steel Holdings, Inc.,
WCI Steel, Inc., Renco Metals, Inc., AM General Corporation, for all of which he
serves as Chairman of the Board of Directors. Mr. Rennert also serves as
Chairman of the Board of Directors of Lodestar Holdings, Inc. in which he holds
a controlling interest. Renco Metals, Inc. (effective August 2, 2001) and
Lodestar Holdings, Inc. (effective April 27, 2001) and their respective
subsidiaries are curently operating under Chapter 11 of the U.S. Bankruptcy
Code.

Jeffrey L. Zelms has served as Vice Chairman of the Company since
December 1998 and as President and Chief Executive Officer of the Company and
its predecessor since August 1984 and President of Doe Run Cayman since October
1997. Mr. Zelms has over 30 years of experience in the mining industry. Mr.
Zelms serves on the boards of directors of Homestake Mining Company and Phoenix
Textiles.

Marvin K. Kaiser has served as Executive Vice President and Chief
Financial and Administrative Officer since September 2001, as Vice President and
Chief Financial Officer of the Company and its predecessor since January 1994
and of FPI since April 1998, Vice President of Doe Run Cayman since October 1997
and Finance Manager of Doe Run Peru since October 1997. From June 1989 to
December 1993, Mr. Kaiser was the Chief Financial Officer of AMAX Gold, Inc., a
gold producing company. Mr. Kaiser is a Certified Public Accountant.

Richard L. Amistadi has served as Vice President of Sales and Marketing
of the Company and its predecessor since November 1986. Mr. Amistadi has over 30
years of experience in sales, marketing and product development of lead metal,
lead alloys, zinc metal, lead, zinc and copper concentrates and associated
by-products.

Kenneth R. Buckley has served as Vice President of the Company since
September 1996, General Manager of Doe Run Peru since October 1997 and General
Manager of Cobriza since August 31, 1998. From January 1996 until September
1996, Mr. Buckley was Vice President of Smelting for the Company. Mr. Buckley
served as General Manager of the Resource Recycling Division for the Company and
its predecessor from September 1988 until January 1996. Mr. Buckley has over 35
years of experience in managing metal milling and smelting operations in five
countries.

99

DOE RUN PERU S.R.L.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Jerry L. Pyatt has served as Vice President and Chief Operating Officer
Of the Company's U.S. operations since September 2001. Prior to that time Mr.
Pyatt served as Vice President Secondary Smelting of the Company, General
Manager of the Company's Resource recycling Division and he has been President
of FPI since October 1, 1998. Mr. Pyatt joined the Company in 1991 as a
Metallurgical Engineer.

Juan Carlos Huyhua, Ph. D., has been Operations Manager of Doe Run Peru
since October 1997. From January 1995 to June 1997, Dr. Huyhua was Chief
Operating Officer of Centromin. Dr. Huyhua has served in various capacities for
Centromin since 1978, including as Assistant General Manager--Metallurgical
Operations, General Superintendent--Smelting and Refining Department and
Manager--Metallurgical Operations. Dr. Huyhua received his doctorate in
Extractive Metallurgy from the New Mexico Institute of Mining and Technology in
1989.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain information concerning
compensation of the named executive officers by the Company for services
rendered to it in all capacities:

SUMMARY COMPENSATION TABLE

(a) Value of perquisites and other personal benefits did not exceed the
lesser of $50,000 or 10% of total salary and bonus for any named
executive officer.

(b) The amounts shown as "All Other Compensation" in the table for fiscal
2001 for each named executive officer, except Mr. Rennert, represent
payments to Messrs. Zelms, Kaiser, Amistadi, Buckley and and Pyatt
under the gainsharing and profit sharing plans of $42,715, $20,544,
$18,196, $12,728 and $22,641, respectively, auto allowance of $11,236
for Mr. Zelms and $4,800 of for Messrs. Kaiser, Amistadi and Pyatt,
$21,206 of life insurance premiums, tax services and medical expenses
for Mr. Zelms and $137,493 of expatriate compensation for Mr. Buckley.

(c) Mr. Rennert receives no compensation directly from the Company. He is
Chairman of the Board and the deemed beneficial shareholder of Renco
which receives a management fee from the Company pursuant to the
Management Consultant Agreement (as defined). The amount shown as all
other compensation to Mr. Rennert are the management fees paid by the
Company to Renco. See "Item 13. Certain Relationships and Related
Transactions."

100

NET WORTH APPRECIATION AGREEMENTS

Certain of the named executive officers (not including Mr. Rennert)
and five other current and former employees of the Company are each parties to
net worth appreciation agreements with the Company, pursuant to which, upon
termination of each person's employment with the Company, he is entitled to
receive a fixed percentage of the increase in the net worth of the Company, as
defined, from a base date until the end of the fiscal quarter preceding the date
of his termination. Such amount is payable without interest in 40 equal
quarterly installments, commencing three months after the termination of each
person's employment, and at three month intervals thereafter. In addition, Mr.
Buckley's agreement provides for a "Peru Credit" under which he is entitled to
receive a fixed percentage of the cumulative net income of Doe Run Peru S.R.L.
with provisions similar to those described above. Four other employees are
parties to net worth appreciation agreements providing for a Peru Credit.

The following table summarizes the net worth appreciation agreements
now held by the named executive officers and the amounts earned thereunder.

- -----------

(a) Represents the gross aggregate amount that each participant is entitled
to receive as of October 31, 2001 subject to the vesting terms of the
applicable agreement.

The net worth appreciation agreements also provide that, in the event
of payment of a dividend or a sale of the Company, the active participants will
be entitled to receive a percentage of the dividend or the net proceeds of the
sale equal to their maximum percentages under the agreements.

101

RETIREMENT PLANS

The following table shows the estimated amount of annual retirement
income (calculated as a straight life annuity benefit) payable to employees
under The Doe Run Resources Corporation Retirement Plan for Salaried
Employees(the Plan), supplemented by the Doe Run Resources Corporation
Supplemental Employee Retirement Plan (SERP). The SERP is a non-qualified plan
under which any benefits not payable from Plan assets by reason of the
limitations imposed by the Internal Revenue Code of 1986, as amended (the Code)
are paid by the Company. The benefits paid are not subject to any deduction for
Social Security or other offset amount.

Retirement benefits are based on a Member's monthly "Compensation" for
the highest 36 consecutive months out of the final 120 months. "Compensation"
covered by the Plan includes basic salary, overtime pay, cash bonuses, amounts
contributed through a salary reduction arrangement to a qualified plan which
meets the requirements of Section 401(k) of the Internal Revenue Code or to a
cafeteria plan which meets the requirements of Section 125 of the Internal
Revenue Code. "Compensation" covered by the plan does not include commissions,
income from the exercise of stock options or income from shadow stock, other
special pay or allowances, severance pay, payments in the nature of royalties,
and the cost to the Company of any public or private employee benefit plan.

As of December 31, 2001, the following officers had completed the
number of years of service indicated opposite their names: Jeffrey L. Zelms, 33
years; Marvin K. Kaiser, 8 years; Richard L. Amistadi, 33 years; Kenneth R.
Buckley, 24 years. Covered compensation under the Plan for the year ended
October 31, 2001 did not differ by more than 10% from the compensation disclosed
in the Summary Compensation Table.

EMPLOYMENT AGREEMENTS

The named executive officers are parties to employment agreements with
the Company which expire October 31, 2002, except for Mr. Buckley's, which
expires December 31, 2002. The agreements are automatically renewable for
additional one-year terms, unless either party gives written notice at least
three months of the respective renewal dates. Pursuant to the terms of these
agreements compensation is composed of: 1) a base annual salary, 2) certain
year-end bonuses and 3) such additional amounts, if any, as the sole Director
may determine from time to time in his discretion.

The agreements require that, during the term of their employment, the
officers shall not directly or indirectly, engage in any aspect of the business
of lead mining, milling, recycling or sale within the continental United States
as an officer, director, partner, proprietor, investor, associate, employee or
consultant except with the Company. In addition, each of the above executive
officers has agreed to maintain the confidentiality of information obtained
during employment with the Company.

102

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of the date
hereof with respect to beneficial ownership of the Company's common stock by
each beneficial owner of 5% or more of the common stock, each director and each
named executive officer of the Company during the last fiscal year, and by all
directors and executive officers of the Company as a group. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all shares or interests, as applicable, shown as
beneficially owned by them.

- -----------

(a) The address of this beneficial owner is c/o The Renco Group, Inc., 30
Rockefeller Plaza, Suite 4225, New York, New York 10112.

(b) Renco is deemed to beneficially own the shares owned by DRA due to
Renco's ownership of all of the outstanding capital stock of DR
Acquisition Corp.

(c) Mr. Rennert is deemed to beneficially own the interests and shares
owned by Renco due to the ownership by trusts established by him for
himself and members of his family of all of the outstanding common
stock of Renco.

By virtue of Renco's indirect ownership of all of the outstanding
common stock of the Company, and Mr. Rennert's ownership of the stock of Renco,
Mr. Rennert is in position to control actions that require the consent of a
majority of the holders of equity interests in the Company and its subsidiaries.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Under a management consultant agreement, dated as of April 7, 1994, as
amended (Management Consultant Agreement), between Renco and the Company, the
Company pays an annual fee of $2.4 million to Renco. The Management Consultant
Agreement provides that the Company shall not make any payment thereunder which
would violate any of its agreements with respect to any of its outstanding
indebtedness. The Management Consultant Agreement extends to October 31, 2003
and thereafter shall continue for additional terms of three years each unless
sooner terminated by either party by giving six months prior written notice.
Management believes that the agreement will continue beyond October 31, 2003. In
the year ended October 31, 2001, the Company recorded expense of $2.4 million
pursuant to the management consultant agreement and paid $0.8 million to Renco..
The Company believes that the cost of obtaining the type and quality of services
rendered by Renco under the Management Consultant Agreement was, and continues
to be, no less favorable than that at which the Company could obtain such
services from unaffiliated entities.

To obtain the advantages of volume, Renco purchases certain insurance
coverages for its subsidiaries, including the Company, and the cost of such
insurance, without markup, is reimbursed by the covered subsidiaries. Currently,
the major areas of insurance coverage obtained under the Renco programs for the
Company's U.S. operations are property, business interruption and fidelity and
for its Peruvian operations foreign general liability and fidelity. The premiums
for property, business interruption, fidelity and foreign general liability (as
applicable) are allocated by Renco to its covered subsidiaries, substantially as
indicated in the underlying policies. Renco also purchases and administers
certain insurance policies exclusively for the Company's U.S. operations,
including fiduciary, general and product liability, workers' compensation,
political risk, automobile liability, and casualty umbrella, and for its
Peruvian operations, including property, business interruption, general and
product liability, automobile liability, hospital liability and casualty
umbrella. The cost of such insurance, without markup, is reimbursed by the
Company as incurred. The total insurance cost

103

reimbursed under the Renco insurance programs in fiscal 2001 was approximately
$5.3 million, of which Doe Run financed $.9 million directly with insurance
premium finance companies.

Pursuant to a tax sharing agreement between the Company and Renco, the
Company pays to Renco an amount equal to the amount the Company would have been
required to pay for taxes on a stand-alone basis to the Internal Revenue Service
and the applicable state taxing authority, as the case may be, except that the
Company will not have the benefit of any of its tax loss carryforwards unless
such tax losses were a result of timing differences between the Company's
accounting for tax and financial reporting purposes. This agreement also
provides that transactions between the Company and Renco and its other
subsidiaries are accounted for on a cash basis and not on an accrual basis.

Effective with the beginning of fiscal 1999, Renco, formerly a C
corporation, elected to be treated as an S corporation pursuant to a change in
the Federal tax laws allowing corporations with subsidiaries to elect such
Subchapter S status. In connection with that election, Renco is permitted to
designate its subsidiaries as qualified S corporation subsidiaries, and the
Company has been so designated. As a result, the Company's taxable income will
be included in Renco's shareholders' income tax returns. Generally, no provision
for federal income taxes will be included in the Company's statements of income
for periods beginning after October 31, 1998. The Company will continue to
provide for foreign, state and local income taxes for those taxing jurisdictions
that do not recognize qualified S corporation subsidiary status. However, under
the "build-in gains" provisions of the tax law, federal and state taxes may
become payable and will be charged to the Company's statement of income. Such
taxes are measured by the excess of the fair market value of assets over their
tax bases on the effective date of the S corporation election if the appreciated
assets are disposed of within the ten-year post-conversion period. It is not
management's present intent to trigger any taxes under the built-in gains
provisions of the tax laws. Deferred tax assets of $8.0 million and deferred tax
liabilities of $1.8 million were reflected as a charge and credit to income,
respectively, in the first quarter of the Company's consolidated statement of
income in fiscal 1999.

The Company may from time to time in the future sell zinc and other
alloys to WCI Steel, Inc., an indirect subsidiary of Renco. The Company believes
that such sales are on an arm's length basis at a price no less favorable than
that at which the Company could sell to unaffiliated entities.

104

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A. Documents filed as part of this Form 10-K:

1. FINANCIAL STATEMENTS (included in Part II, Item 8):

105

SCHEDULE II

THE DOE RUN RESOURCES CORPORATION

Valuation and Qualifying Accounts

Years ended October 31, 2001, 2000 and 1999

(dollars in thousands)

106

(b) REPORTS ON FORM 8-K.

None

S I G N A T U R E S

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

THE DOE RUN RESOURCES CORPORATION
(Registrant)

By: /s/ Jeffrey L. Zelms
-------------------------------------
Jeffrey L. Zelms
Vice Chairman, President and
Chief Executive Officer

May 16, 2002
-------------------------------------
(Date)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Ira Leon Rennert
Chairman of the Board and Director /s/ Ira Leon Rennert May 16, 2002
----------------------------------- --------------------
Signature Date

Jeffrey L. Zelms
Vice Chairman, President and Chief Executive Officer
(principal executive officer) /s/ Jeffrey L. Zelms May 16, 2002
----------------------------------- --------------------
Signature Date

Marvin K. Kaiser
Executive Vice President and Chief Financial and
Administrative Officer
(principal financial and accounting officer) /s/ Marvin K. Kaiser May 16, 2002
----------------------------------- --------------------
Signature Date

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

No annual report to security holders covering the registrant's last
fiscal year and no proxy statement, form of proxy or other proxy soliciting
material with respect to any annual or other meeting of security holders has
been or will be sent to security holders.

107

EXHIBIT INDEX

- ----------------------------
(1) Incorporated by reference to the same numbered exhibit filed with the
Registration Statement on Form S-4, as amended, (File No. 333-52285)
originally filed May 11, 1998

(2) Incorporated by reference to Form 8-K (File No. 333-52285) filed
September 16, 1998.

(3) Incorporated by reference to the same numbered exhibit filed with the
Registration Statement on Form S-4, as amended, (File No. 333-66291),
originally filed October 29, 1998.

(4) Incorporated by reference to the exhibit number in Form 10Q filed
June 11, 1999.

(5) Incorporated by reference to the exhibit number in Form 10Q filed
September 13, 1999.

(6) Incorporated by reference to the exhibit number in Form 10K filed
January 26, 2000.

(7) Incorporated by reference to the exhibit number in Form 10Q filed June 8,
2000.

(8) Incorporated by reference to the exhibit number in Form 10K filed
January 29, 2001.

(9) Filed with this Form 10K.

111