UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended April 30, 2005

or

o		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 333-66291

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

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

1801 Park 270 Drive, Suite 300 St. Louis, Missouri		63146
(Address of principal executive offices)		(Zip Code)

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

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.

o Yes ý No

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

o Yes ý No

Number of shares outstanding of each of the issuer’s classes of common stock, as of June 14, 2005:

Common stock, $.10 par value 1,000 shares

THE DOE RUN RESOURCES CORPORATION

INDEX TO FORM 10-Q

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

Item 4.	Controls and Procedures.

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3.	Defaults Upon Senior Securities.

Item 4.	Submission of Matters to a Vote of Security Holders.

Item 5.	Other Information.

Item 6.	Exhibits.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE DOE RUN RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share data)

	April 30,			October 31,
	2005			2004
	(unaudited)
ASSETS
Current assets:
Cash	$	11,626		$	20,318
Trade accounts receivable, net of allowance for doubtful accounts	74,349			64,219
Inventories	125,013			103,309
Prepaid expenses and other current assets	30,456			35,858
Total current assets	241,444			223,704
Property, plant and equipment, net	242,416			229,640
Other noncurrent assets, net	6,350			4,075
Total assets	$	490,210		$	457,419

LIABILITIES AND SHAREHOLDER’S DEFICIT
Current liabilities:
Current maturities of long-term debt	$	108,446		$	96,767
Accounts payable	85,091			65,855
Accrued liabilities	81,724			83,878
Total current liabilities	275,261			246,500

Long-term debt, less current maturities	299,485			320,561
Other noncurrent liabilities	77,835			75,765
Total liabilities	652,581			642,826

Series A redeemable preferred stock, $1,000 par value per share, 5,000 shares authorized; 2,533 shares issued and outstanding; liquidation and redemption value	26,912			25,329

Shareholder’s deficit:
Common stock, $.10 par value per share, 1,667 shares authorized; 1,000 shares issued and outstanding	—			—
Accumulated deficit	(147,381		)	(168,700		)
Accumulated other comprehensive losses	(41,902		)	(42,036		)
Total shareholder’s deficit	(189,283		)	(210,736		)
Total liabilities and shareholder’s deficit	$	490,210		$	457,419

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

THE DOE RUN RESOURCES CORPORATION

Condensed Consolidated Statements of Operations (unaudited)

(Dollars in thousands)

	Three Months Ended April 30,						Six Months Ended April 30,
	2005			2004			2005			2004

Net sales	$	247,380		$	215,641		$	483,039		$	405,645

Costs and expenses:
Cost of sales	219,328			194,952			417,331			373,363
Depreciation, depletion and amortization	5,764			6,207			11,901			12,672
Selling, general and administrative	11,613			7,357			22,441			16,483
Unrealized (gain) loss on derivative financial instruments	(463		)	(4,084		)	(1,261		)	940
Other	1,321			1,018			3,158			2,049
Total costs and expenses	237,563			205,450			453,570			405,507

Income from operations	9,817			10,191			29,469			138

Other income (expense):
Interest expense, net	(3,314		)	(3,410		)	(6,755		)	(6,587		)
Other, net	163			(462		)	639			(512		)
	(3,151		)	(3,872		)	(6,116		)	(7,099		)

Income (loss) before income tax expense	6,666			6,319			23,353			(6,961		)

Income tax expense	—			956			—			1,521

Net income (loss)	$	6,666		$	5,363		$	23,353		$	(8,482	)
Preferred stock dividends	(791		)	(782		)	(1,583		)	(1,407		)
Net income (loss) allocable to common shares	$	5,875		$	4,581		$	21,770		$	(9,889	)

Total comprehensive income (loss)	$	6,696		$	6,442		$	23,487		$	(6,848	)

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

THE DOE RUN RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows (unaudited)

(Dollars in thousands)

	Six Months Ended April 30,
	2005			2004

Cash flows from operating activities:
Net income (loss)	$	23,353		$	(8,482	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	11,901			12,672
Imputed interest and amortization of deferred financing costs	346			554
Unrealized (gain) loss on derivative financial instruments	(1,261		)	940
Losses from impairment and disposal of long-lived assets	1,989			1,241
Net decrease resulting from other changes in assets and liabilities	(9,126		)	(5,920		)
Net cash provided by operating activities	27,202			1,005

Cash flows from investing activities:
Purchases of property, plant and equipment	(26,614		)	(11,165		)
Proceeds from sale of investments	333			—
Net cash used in investing activities	(26,281		)	(11,165		)

Cash flows from financing activities:
Proceeds from revolving loans, net	5,335			596
Payments on long-term debt	(14,638		)	(2,353		)
Payments of dividends	(310		)	—
Net cash used in financing activities	(9,613		)	(1,757		)

Net decrease in cash	(8,692		)	(11,917		)

Cash at beginning of period	20,318			16,794
Cash at end of period	$	11,626		$	4,877

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

THE DOE RUN RESOURCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands)

(1) Summary of Significant Accounting Policies

Unaudited Interim Financial Statements

These interim consolidated financial statements include the accounts of The Doe Run Resources Corporation (Doe Run) and its subsidiaries (on a consolidated basis, the Company). Doe Run’s issued and outstanding common stock is owned by a subsidiary of The Renco Group, Inc. (Renco). In the opinion of management, the interim consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the consolidated financial position as of April 30, 2005 and the results of operations for the three and six-month periods ended April 30, 2005 and 2004. Interim periods are not necessarily indicative of results to be expected for the year.

(2) Financial Condition

For the year ended October 31, 2003 and for several years prior, the Company reported recurring losses, primarily the result of declining treatment charges and low metal prices, a condition exacerbated by the Company’s significant interest costs prior to a restructuring in October 2002. These conditions have caused the Company’s net capital deficiency.

The Company is highly leveraged and has significant commitments for environmental matters. In addition, Doe Run Peru has significant commitments for Environmental Remediation and Management Program (PAMA) expenditures. Consequently, a substantial portion of cash flows from operations is dedicated to the payment of these obligations, which will reduce funds available for other business purposes. See Note 8 for further discussion of these obligations. These factors also increase the Company’s vulnerability to general adverse conditions, limit the Company’s flexibility in planning for or reacting to changes in its business and industry, and limit the Company’s ability to obtain financing required to fund working capital and capital expenditures and for other general corporate purposes. An unfavorable outcome to certain contingencies discussed below, would have a further adverse effect on the Company’s ability to meet its obligations when due. The Company’s ability to meet these obligations is also 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.

Doe Run has substantial debt service requirements in the future, including the maturity in 2005 of $15,500 for the Term Note. In addition, Doe Run Peru has significant capital requirements under the PAMA. The Company’s revolving credit facilities also expire in the fourth quarter of 2005, and will require renegotiation to extend their terms. There can be no assurance that the renewal efforts will be successful, or if successful, that the renewal would be at terms that are favorable to the Company. Discussions have been held with Renco to extend the Term Note, but there can be no assurance that the term will be extended.

Management will continue to assess market and operating conditions at prevailing metal prices to maximize its operating profit or limit losses, while allowing the Company to fulfill its environmental obligations.

As discussed in Note 8, Doe Run Peru’s existing PAMA requires it to perform projects in 2005 and 2006 at a total cost of $121,200. Doe Run Peru expects that it will not be able to comply with the spending requirements of the PAMA investment schedule in 2005 and 2006 with respect to the construction of the sulfuric acid plants required by the PAMA and, as a result, could be subject to penalties. Failure to comply with the PAMA could result in the cessation of operations at the La Oroya smelter.

The Peruvian Government has issued a supreme decree (Supreme Decree), which recognized that exceptional circumstances may justify an extension of one or more projects within the scope of a PAMA. See Note 8 for discussion of current legislation that may affect the Supreme Decree. Doe Run Peru will submit an application for extension to modify the requirements of the existing PAMA and extend the term of the PAMA to complete the construction of the sulfuric acid plants contemplated by the original PAMA. Doe Run Peru will also perform additional environmental projects to reduce fugitive emissions, including heavy metal dust,

to address the health issues of the community. As of April 30, 2005, the remaining total cost of the current PAMA projects, including the sulfuric acid plants construction, and the additional projects is approximately $138,800. If the extension of the PAMA is approved, management expects to fund the PAMA projects with cash from Doe Run Peru’s operations.

Upon approval of a modified PAMA, Doe Run Peru would be required to create a trust account to administer the receipts and disbursements related to the extended PAMA projects. The Supreme Decree requires that receipts from Doe Run Peru’s sales be remitted monthly directly to the trust account, in an amount sufficient to fund the month’s cash requirements of the extended PAMA projects. Such an arrangement is prohibited by Doe Run Peru’s existing revolving credit facility (the Doe Run Peru Revolving Credit Facility), which expires on September 23, 2005. Accordingly, any new or amended credit facility must comply with the requirements established by the Supreme Decree, should Doe Run Peru’s PAMA be extended.

The Supreme Decree also requires that Doe Run Peru provide financial security within 30 days of the approval of the PAMA extension in an amount equal to 20% of the projected cost of the project or projects to be extended. The Company currently expects the overall investment required to build the sulfuric acid plants to be approximately $102,000.

A default under the requirements of the PAMA could result in a default under the Doe Run Peru Revolving Credit facility. A default under the Doe Run Peru Revolving Credit Facility would result in a default under Doe Run’s current credit facility (Doe Run Revolving Credit Facility) and the Term Note. An acceleration of these obligations would result in a default of the 11.75% senior notes due 2008 (the 11.75% Notes).

These issues raise substantial doubt about the Company’s ability to continue as a going concern. Management believes that Doe Run Peru will obtain an approval of an extension to complete the sulfuric acid plants. There is no assurance, however, that Doe Run Peru will receive an extension, or, if it does, that the projects will be completed within the time limitation specified by the Supreme Decree. Doe Run Peru has developed a business plan that identifies several revenue generating and cost reduction activities. Management believes the plan will enhance liquidity, which is expected to improve Doe Run Peru’s ability to make the investments under the PAMA, assuming an extension is received. Revenue enhancement includes the processing of zinc ferrites and an effort to bring more recycled feed into the smelter. The zinc ferrite processing is expected to produce a product with a zinc and silver content totaling approximately 20,000 tons and 4.3 million ounces, respectfully, on an annual basis beginning in the fourth quarter of 2005. Planned cost reduction measures include manpower reductions through voluntary retirement and decreased power usage in the zinc circuit. Doe Run Peru ceased operations of its three New Jersey zinc roasters in the first quarter of 2005. The decision should result in a reduction of refined zinc production to 50,000 tons per year, down from the previous capacity of 88,200. This has reduced the power usage in the zinc circuit. Management will continue to analyze cost management opportunities in current operating conditions.

Doe Run Peru has received assessments of income tax, including penalties and interest, and Value Added Tax (VAT) totaling $104,100 and $41,600, respectively, as discussed in Note 5. In addition, the Company estimates that the effect of similar assessments for periods not yet assessed would be approximately $1,400 and $19,300 for the income tax and VAT matters, respectively. Furthermore, Doe Run Peru would also be required to make additional workers’ profit sharing payments equal to 8% of the increase in taxable income generated by the changes discussed above, or approximately $5,900 for tax years 1998 through 2004.

Management of the Company believes that in each case Doe Run Peru has followed the applicable Peruvian tax statutes and intends to pursue all available administrative and judicial appeals. Doe Run Peru is not required to make any payments pending the administrative appeal process. If Doe Run Peru is not successful in the administrative appeal processes and were to appeal in the judicial system, some type of financial assurance would be required, which would have a significant adverse effect on liquidity.

Net unused availability at April 30, 2005 and October 31, 2004 under the Doe Run Revolving Credit Facility was approximately $22,300 and $22,500, respectively, and under the Doe Run Peru Revolving Credit Facility were $5,800 and virtually none, respectively. In addition to the availability under their revolving credit

facilities, cash balances at Doe Run and Doe Run Peru were $7,400 and $4,200, respectively, at April 30, 2005 and $13,400 and $6,900, respectively, at October 31, 2004.

Management believes that high metal prices and other revenue enhancements, and the issuance of the Supreme Decree, by allowing an application to extend La Oroya’s PAMA requirement for the construction of the sulfuric acid plants, will enable the Company to continue as a going concern.

(3) Inventories

Inventories consist of the following:

	April 30, 2005		October 31, 2004

Finished metals and concentrates	$	21,189	$	16,646
Metals and concentrates in process	72,696		58,664
Materials, supplies and repair parts	31,128		27,999
	$	125,013	$	103,309

Materials, supplies and repair parts are stated net of reserves for obsolescence of approximately $4,507 and $5,146 at April 30, 2005 and October 31, 2004, respectively.

(4) Debt

The 11.75% Notes are accounted for in accordance with Statement of Financial Accounting Standards No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings (Statement No. 15). Interest on the 11.75% Notes is paid semi-annually in arrears on April 15 and October 15, except that on each payment date occurring on or prior to October 15, 2005, Doe Run, at its option, may pay interest by either a) a cash payment of accrued interest at an annual rate of 3% and issuance of additional notes with a principal amount equal to interest accrued since the last payment date at a rate of 11.5% (PIK option) or b) a cash payment of accrued interest at an annual rate of 8.5%.

The April 15, 2005 payment was paid in cash at the 8.5% rate totaling $9,300. Under Statement No. 15, a debtor may not change the carrying amount of the payable at the time of restructuring unless the total future cash payments, including interest, specified by the new terms are less than the carrying amount of the payable at the time of restructuring. All amounts contingently payable were assumed payable in determination of the effective interest rate used to record interest under Statement No. 15. As a result, interest was calculated assuming the PIK option was exercised for each payment date it was available. The effective interest rate changed as a result of the election to make the cash payment at 8.5% from 1.35% to 0.17%.

The credit agreement governing the Term Note was amended April 29, 2005 to change the amount of capital expenditures allowed for the year ending October 31, 2005.

(5) Income Taxes

Doe Run Peru has received income tax assessments from Peru’s tax authority, SUNAT for tax years 1998 through 2001. The assessments primarily relate to Doe Run Peru’s income tax treatment of the December 1997 merger of Doe Run Peru and Metaloroya S.A., which was purchased by Doe Run Peru in October 1997, and its effects on subsequent years’ taxable income. Under the assessment by SUNAT, the tax basis of Doe Run Peru’s fixed assets acquired would decrease, resulting in lower tax depreciation expense than originally claimed. The assessed amounts consisting of additional income taxes due, penalties and interest totals approximately $104,100.

The Company estimates that the effect of a similar assessment for tax years after 2001 would be approximately $1,400.

Furthermore, Doe Run Peru would also be required to make additional workers’ profit sharing payments equal to 8% of the increase in taxable income generated by the changes discussed above, or approximately $5,900 for tax years 1998 through 2004.

Doe Run Peru has also received Value-Added Tax (VAT) assessments for the tax years 1999 through 2001 and for the period from January through July 2004. The assessments primarily relate to Doe Run Peru’s exports with holding certificates and differences in a tax credit application. The total assessment for these periods was approximately $41,600. SUNAT offset the amount assessed for 2004 of approximately $2,300 against Doe Run Peru’s VAT receivable balance from July 2004. Future VAT reimbursements cannot be used to offset the assessment by SUNAT. The Company estimates expected additional assessments related to VAT for tax years 2002 and 2003 to total approximately $19,300 in regard to its exports with holding certificates.

Management of the Company believes that in each case Doe Run Peru has followed the applicable Peruvian tax statutes and intends to pursue all available administrative and judicial appeals. Doe Run Peru is not required to make any payments pending the administrative appeal process. If Doe Run Peru is not successful in the administrative appeal processes and were to appeal in the judicial system, some type of financial assurance would be required. No amounts have been accrued as liabilities related to these actions.

Pursuant to the Company’s tax sharing agreement with Renco, the Company paid Renco $310 in the second quarter of 2005, and had $141 owing as of April 30, 2005.

(6) Employee Benefits

Defined Benefit Plans

Net periodic benefit cost is comprised of the following:

	Three Months Ended April 30,						Six Months Ended April 30,
	2005			2004			2005			2004

Service cost	$	551		$	580		$	1,097		$	1,199
Interest cost on projected benefit obligation	1,670			1,764			3,325			3,644
Expected return on assets	(1,435		)	(1,274		)	(2,858		)	(2,633		)
Net amortization and deferral of unrecognized net losses	714			935			1,422			1,932
Net periodic benefit cost	$	1,500		$	2,005		$	2,986		$	4,142

The Company is required to make total contributions of $9,025 in 2005, of which $3,698 had been paid as of April 30, 2005.

On April 11, 2005 the Company’s Board of Directors adopted changes to the Company’s defined benefit plans. Effective July 1, 2005, no new employees will be eligible to participate in the plans and participants’ benefit accruals will cease. In addition to the net periodic benefit cost shown above, a curtailment loss of $690 was reflected in operating expenses in the three months ended April 30, 2005. Effective July 1, 2005, the Company’s 401(k) plan was also amended to change the definition of eligible compensation and change the Company’s mandatory match from 25% of the first 6% of a participant’s before-tax contribution to 50% of the first 5% of a participant’s before-tax contribution. In addition, the amendment provides for a fixed 1% profit sharing contribution.

(7) Segment Information

The Company’s operating segments are separately managed business units that are distinguished by products, location and production processes. The primary lead segment includes integrated mining, milling and

smelting operations located in Missouri. The recycling operation segment, located in Missouri, recycles lead-bearing materials, primarily spent batteries. The fabricated products segment, located in Casa Grande, Arizona and Vancouver, Washington, produces value-added lead products. Doe Run Peru produces an extensive product mix of non-ferrous and precious metals.

Operating Segments – Revenues

	Three Months Ended April 30,						Six Months Ended April 30,
	2005			2004			2005			2004
Revenues from external customers:
Doe Run Peru	$	157,980		$	148,004		$	306,042		$	270,977
Primary lead	65,143			48,194			129,080			98,722
Recycling operation	22,432			21,693			40,998			37,762
Fabricated products	3,386			3,340			7,201			6,148
Total	248,941			221,231			483,321			413,609
Revenues from other operating segments: (1)
Doe Run Peru	—			109			2,724			109
Primary lead	209			252			711			516
Recycling operation	82			111			180			155
Fabricated products	—			—			—			—
Total	291			472			3,615			780
Total reportable segments	249,232			221,703			486,936			414,389
Metal sales not attributed to operating segments	(1		)	551			2,520			551
Realized losses on derivative contracts	(1,560		)	(6,141		)	(2,802		)	(8,515		)
Intersegment eliminations	(291		)	(472		)	(3,615		)	(780		)
Total revenues	$	247,380		$	215,641		$	483,039		$	405,645

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

The measure of segment profit and loss used by the Company is earnings of the segment before interest, taxes, depletion, depreciation, and amortization (EBITDA), as adjusted to exclude losses from impairment and disposal of long-lived assets and Doe Run Peru’s expenses related to hedging and agency fees under an agreement with Doe Run (Adjusted EBITDA). Consolidated Adjusted EBITDA also excludes accretion expense under Statement of Financial Accounting Standards No. 143, Asset Retirement Obligations (Statement No. 143), adopted November 1, 2002.

Operating Segments – Adjusted EBITDA

	Three Months Ended April 30,						Six Months Ended April 30,
	2005			2004			2005			2004

Doe Run Peru	$	7,238		$	9,029		$	15,714		$	10,443
Primary lead	18,989			10,193			42,071			19,059
Recycling operation	5,106			5,136			8,933			7,259
Fabricated products	733			166			1,242			414
Total reportable segments	32,066			24,524			67,960			37,175
Realized losses on derivatives	(1,560		)	(6,141		)	(2,802		)	(8,515		)
Other revenues and expenses (1)	(4,638		)	(1,162		)	(6,102		)	(3,169		)
Expenses to be allocated (2)	(2,473		)	—			(2,473		)	—
Corporate selling, general and administrative expenses	(6,856		)	(4,335		)	(13,111		)	(10,232		)
Intersegment eliminations	(12		)	5			13			25
Consolidated adjusted EBITDA	16,527			12,891			43,485			15,284
Depreciation, depletion and amortization	(5,764		)	(6,207		)	(11,901		)	(12,672		)
Interest expense, net	(3,314		)	(3,410		)	(6,755		)	(6,587		)
Unrealized gain (loss) on derivatives	463			4,084			1,261			(940		)
Losses from impairment and disposal of long-lived assets	(779		)	(533		)	(1,989		)	(1,241		)
Asset retirement obligation accretion expense	(374		)	(489		)	(748		)	(890		)
Other	(93		)	(17		)	—			85
Income (loss) before income taxes	$	6,666		$	6,319		$	23,353		$	(6,961	)

(1) Other revenues and expenses consists of the profit on metal sales not attributed to operating segments and operating expenses not allocated to operating segments, including adjustments to environmental liabilities relating to historic operations of $3,645 for the three and six months ended April 30, 2005, and $0 and $1,000 for the three and six months ended April 30, 2004, respectively; certain employee compensation expenses of $678 and $1,791 for the three and six months ended April 30, 2005 and $492 for the three and six months ended April 30, 2004, respectively; and adjustments necessary to state the primary lead and recycling operations’ inventories at LIFO cost of $750 for the three and six months ended April 30, 2005, and $600 and $1,200 for the three and six months ended April 30, 2004, respectively.

(2) Due to timing, certain operating costs will be allocated to segments in a different period than recorded in the consolidated financial statements.

(8) Asset Retirement and Environmental Obligations

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

Asset Retirement Obligations

Asset retirement obligations (AROs) are recognized as liabilities when incurred, with the initial measurement at fair value. These liabilities will be increased to full value over time through charges of accretion to operating expense. In addition, an asset retirement cost is capitalized as part of the related asset’s carrying value and will be depreciated over the asset’s useful life. Changes in the ARO liability resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows shall be recognized as an increase or a decrease in the carrying amount of the liability for an ARO and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset.

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

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

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

The Company’s total recorded liability for AROs was approximately $15,400 and $14,600 as of April 30, 2005 and October 31, 2004, respectively.

Environmental remediation - Domestic Operations

The Company had recorded liabilities of approximately $20,200 and $18,800 related to remediation obligations as of April 30, 2005 and October 31, 2004, respectively.

Doe Run is subject to an Administrative Order on Consent (AOC), effective May 29, 2001, to study and address issues related to the slag pile, plant property, community soils adjacent to the primary smelter in Herculaneum, elevated blood lead levels in the community and lead releases from the plant. Under this AOC, Doe Run completed additional soil testing in the area within a one-mile radius of the smelter and subsequently signed a second AOC with the U.S. EPA on December 21, 2001, which has essentially been completed. The May 29, 2001 AOC was modified effective on May 20, 2004. At April 30, 2005 the estimated remaining cost of remediating these properties is approximately $690, with approximately $430 to be spent during the remainder of calendar 2005.

Doe Run signed a settlement agreement with the State of Missouri on April 26, 2002, whereby it agreed to offer to purchase approximately 160 residential properties in an area close to the smelter if the owner requests such an offer. The homeowners have until June 30, 2005 to accept any offers made. The amount paid to the homeowners who accept an offer is based on an appraisal of the property’s value at August 31, 2001, plus, if a replacement property is purchased, an amount for owner-occupied residences representing the lesser of the difference between the appraisal amount and the cost of a similar property in another designated community or the difference between the appraisal amount and the replacement property.

As of May 31, 2005, a total of 149 homeowners had requested offers, and 125 of 148 delivered offers had been accepted. As of May 31, 2005, the Company had spent approximately $9,300 under the residential property purchase plan. Another $300 of accepted offers are awaiting a closing date and $1,800 in outstanding offers have not been accepted. Management cannot estimate how many of the remaining homeowners will accept offers. If Doe Run does not comply with the material property purchase provisions of the settlement agreement, Doe Run will be subject to a $1,000 penalty.

The Company’s statements of operations reflect losses from impairment or retirement of long-lived assets primarily related to the residential properties owned in Herculaneum, as it cannot be assured that the cost of the properties will be recovered through future cash flows. The Company’s recorded liability for remediation does not include the future purchase costs relating to the residential property purchase plan as these costs are capitalized.

Doe Run is subject to a plan with the Missouri Department of Natural Resources and the Missouri Air Conservation Commission to achieve and maintain compliance with the ambient air quality standard for lead promulgated under the federal Clean Air Act for the city of Herculaneum. The plan was included in a consent judgment entered into by Doe Run and has been approved at the state level and by the U.S. EPA. The air quality monitors reflected compliance for 10 of the last 11 quarters. If the air quality monitors reflect a second quarter of noncompliance, the permitted annual capacity of the Herculaneum Smelter would decrease from 250,000 to 200,000 tons, which would not affect results at current production levels. Future non-attainment could have a material adverse financial impact on the Company.

Doe Run has received notice that it is a potentially responsible party (PRP) subject to liability under The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), at the following sites: six sites in St. Francois County, Missouri, including the Big River Mine Tailings site, the Bonne Terre site, the Federal site, the National site, the Rivermines site and the Leadwood site; the Oronogo-Durenweg site in Jasper County, Missouri; the Cherokee County site in Cherokee County, Kansas; the Tar Creek site in Ottawa County, Oklahoma; the Block “P” site in Cascade County and Judith County, Montana; and the Missouri Electric Works site in Cape Girardeau, Missouri. There are two additional sites in St. Francois County for which the U.S. EPA has indicated it will issue notice. CERCLA provides for strict and, in certain circumstances, joint and several liability for response costs and natural resource damages. The Company’s estimate of the cost of the remediation of these sites, including the two additional sites in St. Francois County, is included in the total liability for remediation obligations, which the Company believes is adequate based on its investigations to date. However, depending upon the types of remediation required and certain other factors, additional costs at these sites, individually or collectively, could have a material adverse effect on the results of operations, financial condition and liquidity of the Company.

In February 2004 the U.S. Department of Agriculture issued a Unilateral Administrative Order (UAO) ordering certain remediation activities by Doe Run at the Block “P” millsite. Doe Run has requested that other parties be added to the order. Doe Run will seek reimbursement from the U.S. Government and these other parties.

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

Doe Run has completed an EE/CA for the Rivermines site and, while unable to accept certain financial assurance provisions of a proposed AOC, has agreed to conduct a removal action at the site under a UAO. Work will commence upon approval of a work plan.

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

Doe Run has also signed AOCs to perform an EE/CA on each of the National and Leadwood sites for remediation of mine waste areas. Doe Run’s National EE/CA was completed by the PRP’s and was

submitted to the U.S. EPA for approval. The U.S. EPA decided to conduct its own EE/CA and, although it is not yet finalized, the cost of their remedy is higher than the submitted EE/CA. The Leadwood EE/CA has been submitted to the U.S. EPA for approval. In addition, Doe Run has signed an AOC with the U.S. EPA to conduct a Remedial Investigation/Feasibility Study (RI/FS) to assess potential off-site impacts of these site operations on groundwater, residential soils, several creeks and a river and the need for related remediation. The initial draft of the RI/FS was submitted in early March 2002. Doe Run signed an order to conduct interim measures, which consisted of blood lead testing of young children, residential soil sampling and limited soil remediation as indicated by the testing and sampling results, which was terminated and replaced by an AOC to conduct certain additional soil remediation in the area and has included its best estimate of these efforts in its recorded liabilities. The Company believes the recorded liabilities related to these sites are adequate. However, should remediation goals or areas change, requiring substantially increased measures, there can be no assurance that the recorded liabilities would be adequate.

In March 2004, Doe Run received notice that it is a PRP subject to liability under CERCLA for contamination along roads in Iron, Dent and Reynolds counties in Missouri, along with a number of mining companies involved in the transportation of concentrates. After a sampling of 573 houses by the U.S. EPA and the Missouri DNR, approximately 150 houses were identified as potentially requiring some level of remediation. Doe Run and four other mining companies have signed an AOC to conduct soil remediation at approximately 40 of these houses. Doe Run expects that its share of the potential remediation costs will not be significant, based on management’s estimates of the number of houses requiring remediation, remediation methods and Doe Run’s apportionment of the costs.

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

Doe Run’s recycling facility is subject to corrective action requirements under RCRA as a result of a storage permit for certain wastes issued in 1989. This will involve remediation of solid waste management units at the site. and it is expected that the plan for corrective action will be approved in fiscal 2005. The Company’s estimate of the cost of this corrective action is $2,000. The storage area is also covered under the permit, but management does not believe the cost of closure is significant. While management believes that recorded liabilities are adequate based on expectations of the closure plan requirements, regulators could require that additional measures be included in the finalized plan, which could change the estimate of the costs for corrective action.

On August 25, 2004, the U.S. EPA issued a Notice of Violation (NOV) to the Company alleging past violations of the recycling facility’s air permit conditions regarding production limits for its reverbatory furnace. Management believes the facility has operated in compliance with state and federal air requirements and has objected to the NOV. Consequently, management believes this issue will not cause a material adverse impact on the Company.

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

Foreign Operations

quality. The PAMA projects, which are more fully discussed below, have been designed to achieve compliance with these requirements. There can be no assurance that the Peruvian government will not, in the future, require compliance with additional environmental regulations that could adversely affect Doe Run Peru’s business, financial condition and results of operations.

Metaloroya S.A., the former owner of the La Oroya smelter, at the time a subsidiary of Empresa Minera del Centro del Peru S.A. (Centromin), received approval from the Peruvian government for a PAMA that consisted of an environmental impact analysis, monitoring plan and data, mitigation measures and closure plan. Doe Run Peru assumed the obligations under the PAMA. The PAMA also sets forth the actions and corresponding annual investments the concession holder agrees to undertake in order to achieve compliance with the maximum permissible limits prior to expiration of the PAMA (ten years for smelters, such as Doe Run Peru’s operations in La Oroya, and five years for any other type of mining or metallurgical operation like Cobriza). After expiration of the PAMA, the operator must comply with all applicable standards and requirements. Because these costs improve the property or prevent future environmental contamination, they are capitalized.

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

• New sulfuric acid plants;

• Treatment plant for the copper refinery effluent;

• Industrial wastewater treatment plant for the smelter and refinery;

• Improve the slag handling system;

• Improve Huanchan lead and copper slag deposits;

• Build an arsenic trioxide deposit;

• Improve the zinc ferrite disposal site;

• Domestic wastewater treatment and domestic waste disposal; and

• Monitoring station.

An investment schedule in the PAMA provides a specific plan for achieving the applicable MEM maximum permissible limits pertaining to air emissions and wastewater effluent quality. The PAMA may be modified and amended as to the actual design and timing of projects to be implemented, provided compliance with the applicable maximum permissible limits is achieved by December 31, 2006. The required estimated annual spending on a calendar year basis for the projects approved in the La Oroya PAMA, as amended, most recently on January 25, 2002, are as follows:

Year	Estimated Cost

2005	$	53,500
2006	67,700
	$	121,200

Doe Run Peru expects that it will not be able to comply with the spending requirements of La Oroya’s PAMA investment schedule in 2005 and 2006 with respect to the construction of the sulfuric acid plants required by the PAMA and, as a result, could be subject to penalties. Failure to comply with the PAMA could result in the cessation of operations at the La Oroya smelter.

On December 29, 2004 the Peruvian Government issued a Supreme Decree, which recognized that exceptional circumstances may justify an extension of one or more projects within the scope of a PAMA. The Supreme Decree specifies that companies have until December 31, 2005 to apply for an extension. The maximum extension is for three years and the MEM may authorize an additional year based upon the results of a health risk study.

The Peruvian Congress passed a law in April 2005 that included several provisions that could affect the administration’s ability to extend the PAMA, contrary to the Supreme Decree. The President of Peru objected to a provision prohibiting extensions to projects within a PAMA and returned the bill to the Congress, where 61 votes out of the full congressional body of 120 members could override the objection. Current provisions being reconsidered by Congress would require approval by CONAM, Peru’s environmental protection agency, before MEM may approve a request to extend the term of the PAMA. Management believes it is unlikely that the Congress will override the objection or that any provisions to which the President objected will remain in replacement legislation.

Pursuant to the Supreme Decree, the application for a PAMA extension must be supported by a health risk study performed by a third party. The application must contain an engineering description and funding plan of any project to be extended, a discussion of how and when environmental emission standards will be met, a plan to monitor emissions with the participation of the community, proof that at least three public workshops were held in various districts to provide information on Doe Run Peru’s financial situation and health programs, proof that two public hearings were held regarding the extension plans, and other financial information. In order to meet these requirements, Doe Run Peru does not expect to apply for the extension until October 2005.

Upon approval of a modified PAMA, Doe Run Peru would be required to create a trust account to administer the receipts and disbursements related to the extended PAMA. The Supreme Decree requires that receipts from sales be remitted monthly directly to the trust account, in an amount sufficient to fund the month’s cash requirements of the extended PAMA. Such an arrangement is prohibited by the Doe Run Peru Revolving Credit Facility, which expires on September 23, 2005. Accordingly, any new or amended Doe Run Peru credit facility must comply with the requirements established by the Supreme Decree, should Doe Run Peru’s PAMA be extended.

Doe Run Peru will perform other environmental projects to reduce fugitive emissions, including heavy metal dust, to address the health issues of the community. As of April 30, 2005, the remaining total cost of the current PAMA projects, including the sulfuric acid plants construction, and these projects is approximately $138,800.

Management believes that Doe Run Peru will obtain an approval of an extension to complete the sulfuric acid plants. There is no assurance, however, that Doe Run Peru will receive an extension, or, if it does, that the projects will be completed within the time limitation specified by the Supreme Decree.

The PAMA projects have been designed to achieve compliance with the maximum permissible limits of emission prior to the expiration of the PAMA. 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 and results of operations.

Under the purchase agreement related to the acquisition of the La Oroya assets in October 1997, Centromin, the prior owner of the La Oroya smelter and Cobriza mine, agreed to indemnify Doe Run Peru against environmental liability arising out of its prior operations and their apportioned share of any other complaint related to emissions. Performance of the indemnity has been guaranteed by the Peruvian government through the enactment of the Supreme Decree No. 042-97-PCM. However, there can be no assurance that Centromin will satisfy its environmental obligations and investment requirements, including those in its PAMA, or that the guarantee will be honored. Any failure by Centromin to satisfy its environmental obligations could adversely affect Doe Run Peru’s business, financial condition and results of operations.

The Cobriza mine has a separate PAMA in which Doe Run Peru committed to complete projects to manage tailings, mine drainage, sewage and garbage. As of June 2004, Doe Run Peru completed its PAMA requirements and ceased discharging mine waste into the Mantaro River and was in compliance with the emissions standards required by the PAMA.

Doe Run Peru is responsible for the remediation costs relating to a zinc ferrite disposal site. The current closure plan provides for encapsulating the ferrite residues in place at Huanchan, an area a short distance from the smelter where they are currently stored, for which an environmental liability of $1,600 has been recorded as of April 30, 2005 and October 31, 2004.

Consolidated

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

(9) Litigation

Doe Run is a defendant in nine lawsuits alleging certain damages stemming from the operations at the Herculaneum smelter. Three of these cases are class action lawsuits. In two cases, the plaintiffs seek to have certified a class of property owners in a certain section of Herculaneum, alleging that property values have been damaged due to the operations of the smelter. In another case, plaintiffs seek to have certified a class of children who lived in Herculaneum during a period of time when they were less than six years old and children born to mothers who lived in Herculaneum during their pregnancies. The remedy sought is medical monitoring for the class. Six of the cases are personal injury actions by 26 individuals who allege damages from the effects of lead due to operations at the smelter. Punitive damages also are being sought in each case.

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

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

Doe Run has been named in 17 suits filed by 116 railway employees against a railroad carrier and multiple lead mining companies alleging personal injury resulting from exposure to lead concentrates hauled by the railroad carrier. In addition, Doe Run has been named in an action by the spouses of four railway workers related to the exposure to lead from the hauling of lead concentrates by the railroad. Doe Run has settled all of these cases without any admissions of liability and the cases have been dismissed.

Doe Run is a defendant in a lawsuit by the BNSF Railway Company who has alleged that Doe Run and other companies associated with lead mining operations in Missouri are responsible for property damage at certain rail yards and for contribution and indemnity for costs incurred by BNSF associated with settlement by BNSF of lead exposure cases. The complaint against Doe Run indicates that material liability is reasonably possible, but, given the early stage of this case, the Company is unable at this time to estimate the expected outcome and any final costs of this action.

Doe Run is a defendant in three class action lawsuits and two personal injury lawsuits alleging certain damages from past mining operations in Ottawa County, Oklahoma. Two class action lawsuits are for property damage and medical monitoring in the cities of Picher and Quapaw, Oklahoma. The third class action lawsuit is for damages to natural resources and land owned by members of the Quapaw Tribe. One of the personal injury lawsuits, which was consolidated from five separate lawsuits, currently consists of claims against companies who mined lead and zinc in Ottawa County by seven child plaintiffs who allege personal injury from exposure to chat and tailings. A second personal injury case was consolidated from two separate cases and currently consists of claims against companies who mined lead and zinc in Ottawa County by 42 child plaintiffs who allege personal injury from exposure to chat and tailings. The Company is unable at this time to estimate the expected outcome and any final costs of these actions.

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

Doe Run has been named in an asbestos injury suit in the City of St. Louis by an individual against numerous companies and public entities, alleging that he was exposed to asbestos, including at the premises of the St. Joe Minerals Corporation (Doe Run’s predecessor). Doe Run was named in two similar suits filed in Madison County, Illinois, one alleging that a worker was exposed to asbestos at premises of the St. Joe Minerals Corporation, in which Doe Run has not been properly served, and the other filed by a person who did laundry for insulation workers in her family who were allegedly exposed to asbestos at Doe Run’s Herculaneum, Missouri facility. Doe Run was served a Writ of Summons in a fourth case filed in Pennsylvania in May 2003 but has not yet been served with a complaint.

Doe Run has been named as a party in various lawsuits relating to certain operations of its predecessor. Fluor Corporation, the owner of Doe Run’s predecessor, retained the obligation for any costs of defense or claims relating to these lawsuits. Should Fluor Corporation become unable to fulfill its contractual obligation, Doe Run could be liable for any costs or claims resulting from these lawsuits. There is no reason at this time to believe that Fluor Corporation could not fulfill its contractual obligations.

Doe Run Peru is a defendant in 134 lawsuits in the Lima, Peru labor courts whereby workers have alleged damages from industrial diseases. Doe Run Peru has made claims in most of the cases against Centromin and has also made claims against both governmental agencies and private companies that provide workers’ insurance. The average claim is $18. Of seven concluded cases in this category, six were dismissed and one resulted in a payment by Doe Run Peru of $9.

Doe Run Peru is also a defendant in 136 lawsuits by workers alleging that they are owed certain differences in salaries and benefits. The average claim is $24. Of 25 concluded cases in this category, 22 were dismissed and three resulted in a payment by Doe Run Peru of $3. Doe Run Peru is also a defendant in a lawsuit by the Yauli-La Oroya Employees Union concerning salaries and benefits. The claims of the 150 workers remaining in the lawsuit total approximately $660.

On January 19, 2005, Doe Run Peru was served with a lawsuit by an association of municipalities of the Junin Region of Peru against Doe Run Peru and two other mining companies. This lawsuit alleges environmental damages to the Mantaro River basin in the amount of $5.0 billion. Material liability to Doe Run Peru is believed to be remote because it is the opinion of management and outside counsel for Doe Run Peru that the probability under Peruvian law of this case proceeding to a conclusion at the favor of the plaintiffs is low. Any potential judgment would be subject to the indemnification obligations of Centromin, which are guaranteed by the Peruvian government.

Since most of the above cases are either in the pleading or discovery stages, the Company is unable at this time to estimate the expected outcome and the final costs, except as noted, of these actions. No amounts have been accrued as liabilities related to these actions. 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 such claims.

(10) Guarantor Subsidiaries

The Guarantor Subsidiaries (Fabricated Products, Inc. (FPI) and DR Land Holdings, LLC (together, the Domestic Guarantors), Buick Resource Recycling Facility, LLC, Doe Run Cayman Ltd. (Doe Run Cayman) and its subsidiary Doe Run Peru) have jointly and severally, fully, unconditionally and irrevocably guaranteed the 11.75% 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 Doe Run and Doe Run Peru and sales of metal to Doe Run by Doe Run Peru and to FPI by Doe Run.

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheet (unaudited)

As of April 30, 2005

	The Company Excluding Guarantor Subsidiaries			Buick Resource Recycling Facility, LLC			Other Domestic Guarantors			Doe Run Cayman and Subsidiary			Eliminations			The Company

ASSETS
Current assets:
Cash	$	7,444		$	—		$	1		$	4,181		$	—		$	11,626
Trade accounts receivable, net of allowance for doubtful accounts	53,933			—			2,441			19,277			(1,302		)	74,349
Inventories	43,804			—			1,550			79,702			(43		)	125,013
Prepaid expenses and other current assets	14,063			—			32			16,361			—			30,456
Due from subsidiaries/parent	151,812			1,579			—			—			(153,391		)	—
Total current assets	271,056			1,579			4,024			119,521			(154,736		)	241,444
Property, plant and equipment, net	74,253			14,037			1,210			152,916			—			242,416
Due from subsidiaries	15,435			—			—			—			(15,435		)	—
Other noncurrent assets, net	6,231			—			63			56			—			6,350
Investment in subsidiaries	(3,993		)	—			—			—			3,993			—
Total assets	$	362,982		$	15,616		$	5,297		$	272,493		$	(166,178	)	$	490,210

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt	$	74,227		$	—		$	—		$	34,219		$	—		$	108,446
Accounts payable	26,059			—			539			59,795			(1,302		)	85,091
Accrued liabilities	50,077			—			533			31,114			—			81,724
Due to parent/subsidiaries	1,579			—			8,749			143,063			(153,391		)	—
Total current liabilities	151,942			—			9,821			268,191			(154,693		)	275,261

Long-term debt, less current maturities	299,468			—			—			17			—			299,485
Due to parent	—			—			—			15,435			(15,435		)	—
Other noncurrent liabilities	73,943			—			432			3,460			—			77,835
Total liabilities	525,353			—			10,253			287,103			(170,128		)	652,581

Series A redeemable preferred stock	26,912			—			—			—			—			26,912

Shareholders’ equity (deficit):
Common stock, $.10 par value, 1,667 shares authorized, 1,000 shares issued and outstanding	—			—			—			—			—			—
Common stock, $1 par value, 1,000 shares authorized, issued and outstanding	—			—			1			—			(1		)	—
Common stock, $1 par value, 2,005,000 shares authorized, issued and outstanding	—			—			—			2,005			(2,005		)	—
Additional paid in capital	—			19,901			1,205			—			(21,106		)	—
Retained earnings (accumulated deficit) and accumulated other comprehensive losses	(189,283		)	(4,285		)	(6,162		)	(16,615		)	27,062			(189,283		)
Total shareholders’ equity (deficit)	(189,283		)	15,616			(4,956		)	(14,610		)	3,950			(189,283		)
Total liabilities and shareholders’ equity (deficit)	$	362,982		$	15,616		$	5,297		$	272,493		$	(166,178	)	$	490,210

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheet

As of October 31, 2004

	The Company Excluding Guarantor Subsidiaries			Buick Resource Recycling Facility, LLC			Other Domestic Guarantors			Doe Run Cayman and Subsidiary			Eliminations			The Company

ASSETS
Current assets:
Cash	$	13,412		$	—		$	1		$	6,905		$	—		$	20,318
Trade accounts receivable, net of allowance for doubtful accounts	42,269			—			1,942			22,217			(2,209		)	64,219
Inventories	36,359			—			1,130			65,876			(56		)	103,309
Prepaid expenses and other current assets	19,898			—			59			15,901			—			35,858
Due from subsidiaries/parent	11,998			1,162			—			—			(13,160		)	—
Total current assets	123,936			1,162			3,132			110,899			(15,425		)	223,704
Property, plant and equipment, net	72,716			14,739			1,442			140,743			—			229,640
Due from subsidiaries	156,495			—			—			—			(156,495		)	—
Other noncurrent assets, net	3,890			—			63			122			—			4,075
Investment in subsidiaries	(12,647		)	—			—			—			12,647			—
Total assets	$	344,390		$	15,901		$	4,637		$	251,764		$	(159,273	)	$	457,419

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt	$	57,367		$	—		$	—		$	39,400		$	—		$	96,767
Accounts payable	23,310			—			662			44,092			(2,209		)	65,855
Accrued liabilities	55,625			—			1,054			27,199			—			83,878
Due to parent/subsidiaries	1,162			—			7,998			143,063			(152,223		)	—
Total current liabilities	137,464			—			9,714			253,754			(154,432		)	246,500

Long-term debt, less current maturities	320,561			—			—			—			—			320,561
Due to parent	—			—			—			17,432			(17,432		)	—
Other noncurrent liabilities	71,772			—			533			3,460			—			75,765
Total liabilities	529,797			—			10,247			274,646			(171,864		)	642,826

Series A redeemable preferred stock	25,329			—			—			—			—			25,329

Shareholders’ equity (deficit):
Common stock, $.10 par value, 1,667 shares authorized, 1,000 shares issued and outstanding	—			—			—			—			—			—
Common stock, $1 par value, 1,000 shares authorized, issued and outstanding	—			—			1			—			(1		)	—
Common stock, $1 par value, 2,005,000 shares authorized, issued and outstanding	—			—			—			2,005			(2,005		)	—
Additional paid in capital	—			19,348			1,205			—			(20,553		)	—
Retained earnings (accumulated deficit) and accumulated other comprehensive losses	(210,736		)	(3,447		)	(6,816		)	(24,887		)	35,150			(210,736		)
Total shareholders’ equity (deficit)	(210,736		)	15,901			(5,610		)	(22,882		)	12,591			(210,736		)
Total liabilities and shareholders’ equity (deficit)	$	344,390		$	15,901		$	4,637		$	251,764		$	(159,273	)	$	457,419

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Statement of Operations (unaudited)

Six Months Ended April 30, 2005

	The Company Excluding Guarantor Subsidiaries			Buick Resource Recycling Facility, LLC			Domestic Guarantors			Doe Run Cayman and Subsidiary			Eliminations			The Company

Net sales	$	170,687		$	—		$	7,201		$	308,766		$	(3,615	)	$	483,039

Costs and expenses:
Cost of sales	130,709			—			5,240			285,010			(3,628		)	417,331
Depletion, depreciation and amortization	4,533			1,256			209			5,903			—			11,901
Selling, general and administrative	12,631			—			1,202			8,608			—			22,441
Unrealized (gain) loss on derivatives	(1,492		)	—			—			231			—			(1,261		)
Other	2,840			29			152			137			—			3,158
Total costs and expenses	149,221			1,285			6,803			299,889			(3,628		)	453,570

Income (loss) from operations	21,466			(1,285		)	398			8,877			13			29,469

Other income (expense):
Interest expense, net	(5,207		)	—			(314		)	(1,234		)	—			(6,755		)
Other, net	(438		)	446			2			629			—			639
Equity in earnings of subsidiaries	7,532			—			—			—			(7,532		)	—
	1,887			446			(312		)	(605		)	(7,532		)	(6,116		)

Income (loss) before income tax expense	23,353			(839		)	86			8,272			(7,519		)	23,353

Income tax expense	—			—			—			—			—			—
Net income (loss)	23,353			(839		)	86			8,272			(7,519		)	23,353
Preferred stock dividends	(1,583		)	—			—			—			—			(1,583		)
Net income (loss) allocable to common shares	$	21,770		$	(839	)	$	86		$	8,272		$	(7,519	)	$	21,770

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Statement of Operations (unaudited)

Three Months Ended April 30, 2005

	The Company Excluding Guarantor Subsidiaries			Buick Resource Recycling Facility, LLC			Domestic Guarantors			Doe Run Cayman and Subsidiary			Eliminations			The Company

Net sales	$	86,305		$	—		$	3,386		$	157,980		$	(291	)	$	247,380

Costs and expenses:
Cost of sales	70,671			—			2,290			146,646			(279		)	219,328
Depletion, depreciation and amortization	2,274			633			109			2,748			—			5,764
Selling, general and administrative	6,605			—			615			4,393			—			11,613
Unrealized gain on derivatives	(383		)	—			—			(80		)	—			(463		)
Other	1,319			—			(1		)	3			—			1,321
Total costs and expenses	80,486			633			3,013			153,710			(279		)	237,563

Income (loss) from operations	5,819			(633		)	373			4,270			(12		)	9,817

Other income (expense):
Interest expense, net	(2,528		)	—			(158		)	(628		)	—			(3,314		)
Other, net	(359		)	222			—			300			—			163
Equity in earnings of subsidiaries	3,734			—			—			—			(3,734		)	—
	847			222			(158		)	(328		)	(3,734		)	(3,151		)

Income (loss) before income tax expense	6,666			(411		)	215			3,942			(3,746		)	6,666

Income tax expense	—			—			—			—			—			—
Net income (loss)	6,666			(411		)	215			3,942			(3,746		)	6,666
Preferred stock dividends	(791		)	—			—			—			—			(791		)
Net income (loss) allocable to common shares	$	5,875		$	(411	)	$	215		$	3,942		$	(3,746	)	$	5,875

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Statement of Operations (unaudited)

Six Months Ended April 30, 2004

	The Company			Buick
	Excluding			Resource						Doe Run
	Guarantor			Recycling			Domestic			Cayman and						The
	Subsidiaries			Facility, LLC			Guarantors			Subsidiary			Eliminations			Company

Net sales	$	134,966		$	—		$	6,148		$	271,086		$	(6,555	)	$	405,645

Costs and expenses:
Cost of sales	114,419			—			5,007			254,734			(797		)	373,363
Depletion, depreciation and amortization	4,842			1,619			422			5,789			—			12,672
Selling, general and administrative	9,858			—			1,102			11,298			(5,775		)	16,483
Unrealized (gain) loss on derivatives	1,255			—			—			(315		)	—			940
Other	2,017			29			(1		)	4			—			2,049
Total costs and expenses	132,391			1,648			6,530			271,510			(6,572		)	405,507

Income (loss) from operations	2,575			(1,648		)	(382		)	(424		)	17			138

Other income (expense):
Interest expense, net	(5,110		)	—			(357		)	(1,120		)	—			(6,587		)
Other, net	(446		)	419			1			(486		)	—			(512		)
Equity in earnings of subsidiaries	(3,980		)	—			—			—			3,980			—
	(9,536		)	419			(356		)	(1,606		)	3,980			(7,099		)

Income (loss) before income tax expense	(6,961		)	(1,229		)	(738		)	(2,030		)	3,997			(6,961		)

Income tax expense	1,521			—			—			—			—			1,521
Net income (loss)	(8,482		)	(1,229		)	(738		)	(2,030		)	3,997			(8,482		)
Preferred stock dividends	(1,407		)	—			—			—			—			(1,407		)
Net income (loss) allocable to common shares	$	(9,889	)	$	(1,229	)	$	(738	)	$	(2,030	)	$	3,997		$	(9,889	)

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Statement of Operations (unaudited)

Three Months Ended April 30, 2004

	The Company			Buick
	Excluding			Resource						Doe Run
	Guarantor			Recycling			Domestic			Cayman and						The
	Subsidiaries			Facility, LLC			Guarantors			Subsidiary			Eliminations			Company

Net sales	$	67,779		$	—		$	3,340		$	148,113		$	(3,591	)	$	215,641

Costs and expenses:
Cost of sales	56,435			—			2,840			136,146			(469		)	194,952
Depletion, depreciation and amortization	2,359			765			211			2,872			—			6,207
Selling, general and administrative	4,177			—			496			5,803			(3,119		)	7,357
Unrealized gain on derivatives	(3,135		)	—			—			(949		)	—			(4,084		)
Other	1,015			—			—			3			—			1,018
Total costs and expenses	60,851			765			3,547			143,875			(3,588		)	205,450

Income (loss) from operations	6,928			(765		)	(207		)	4,238			(3		)	10,191

Other income (expense):
Interest expense, net	(2,586		)	—			(182		)	(642		)	—			(3,410		)
Other, net	(334		)	224			3			(355		)	—			(462		)
Equity in earnings of subsidiaries	2,311			—			—			—			(2,311		)	—
	(609		)	224			(179		)	(997		)	(2,311		)	(3,872		)

Income (loss) before income tax expense	6,319			(541		)	(386		)	3,241			(2,314		)	6,319

Income tax expense	956			—			—			—			—			956
Net income (loss)	5,363			(541		)	(386		)	3,241			(2,314		)	5,363
Preferred stock dividends	(782		)	—			—			—			—			(782		)
Net income (loss) allocable to common shares	$	4,581		$	(541	)	$	(386	)	$	3,241		$	(2,314	)	$	4,581

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Statement of Cash Flows (unaudited)

Six Months Ended April 30, 2005

	The Company			Buick
	Excluding			Resource						Doe Run
	Guarantor			Recycling			Domestic			Cayman and						The
	Subsidiaries			Facility, LLC			Guarantors			Subsidiary			Eliminations			Company

Net cash provided by (used in) operating activities	$	13,758		$	417		$	(709	)	$	22,587		$	(8,851	)	$	27,202

Cash flows from investing activities:
Purchases of property, plant and equipment	(8,387		)	—			(130		)	(18,097		)	—			(26,614		)
Net proceeds from sales of investments	333			—			—			—			—			333
Investment in subsidiaries	(8,851		)	—			—			—			8,851			—
Net cash provided by (used in) investing activities	(16,905		)	—			(130		)	(18,097		)	8,851			(26,281		)

Cash flows from financing activities:
Proceeds from (payments on) revolving loans, net	10,535			—			—			(5,200		)	—			5,335
Payments on long-term debt	(14,621		)	—			—			(17		)	—			(14,638		)
Payments of dividends	(310		)	—			—			—			—			(310		)
Due to/due from parent/subsdiaries	1,575			(417		)	839			(1,997		)	—			—
Net cash provided by (used in) financing activities	(2,821		)	(417		)	839			(7,214		)	—			(9,613		)

Net decrease in cash	(5,968		)	—			—			(2,724		)	—			(8,692		)

Cash at beginning of period	13,412			—			1			6,905			—			20,318
Cash at end of period	$	7,444		$	—		$	1		$	4,181		$	—		$	11,626

(10) Guarantor Subsidiaries (Continued)

Condensed Consolidating Statement of Cash Flows (unaudited)

Six Months Ended April 30, 2004

	The Company			Buick
	Excluding			Resource						Doe Run
	Guarantor			Recycling			Domestic			Cayman and						The
	Subsidiaries			Facility, LLC			Guarantors			Subsidiary			Eliminations			Company

Net cash provided by (used in) operating activities	$	4,737		$	390		$	(897	)	$	(6,741	)	$	3,516		$	1,005

Cash flows from investing activities:
Purchases of property, plant and equipment	(5,092		)	—			—			(6,073		)	—			(11,165		)
Investment in subsidiaries	3,516			—			—			—			(3,516		)	—
Net cash used in investing activities	(1,576		)	—			—			(6,073		)	(3,516		)	(11,165		)

Cash flows from financing activities:
Proceeds from (payments on) revolving loans, net	2,196			—			—			(1,600		)	—			596
Payments on long-term debt	(794		)	—			—			(1,559		)	—			(2,353		)
Due to/due from parent/subsdiaries	(4,563		)	(390		)	897			4,056			—			—
Net cash provided by (used in) financing activities	(3,161		)	(390		)	897			897			—			(1,757		)

Net decrease in cash	—			—			—			(11,917		)	—			(11,917		)

Cash at beginning of period	—			—			—			16,794			—			16,794
Cash at end of period	$	—		$	—		$	—		$	4,877		$	—		$	4,877

DOE RUN PERU S.R.L.

Condensed Balance Sheets

(U.S. dollars in thousands, except share data)

	April 30,			October 31,
	2005			2004
	(unaudited)
ASSETS
Current assets:
Cash	$	4,181		$	6,905
Trade accounts receivable, net of allowance for doubtful accounts	19,277			22,217
Inventories	79,702			65,876
Prepaid expenses and other current assets	16,361			15,901
Total current assets	119,521			110,899

Property, plant and equipment, net	152,916			140,743
Other noncurrent assets, net	56			122
Total assets	$	272,493		$	251,764

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt	$	34,219		$	39,400
Accounts payable	59,795			44,092
Accrued liabilities	31,114			27,199
Due to related parties	143,063			143,063
Total current liabilities	268,191			253,754

Long-term debt, less current maturities	17			—
Due to parent company and related parties	15,435			17,432
Other noncurrent liabilities	3,460			3,460
Total liabilities	287,103			274,646

Shareholders’ deficit:
Capital stock, $0.01 par value, 15,912,083,739 shares, fully paid	2,005			2,005
Accumulated deficit and other comprehensive loss	(16,615		)	(24,887		)
Total shareholders’ deficit	(14,610		)	(22,882		)
Total liabilities and shareholders’ deficit	$	272,493		$	251,764

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

DOE RUN PERU S.R.L.

Condensed Statements of Operations (unaudited)

(U.S. dollars in thousands)

	Three Months Ended April 30,						Six Months Ended April 30,
	2005			2004			2005			2004

Net sales	$	157,980		$	148,113		$	308,766		$	271,086

Costs and expenses:
Cost of sales	146,646			136,146			285,010			254,734
Depletion, depreciation and amortization	2,748			2,872			5,903			5,789
Fees and commissions to related parties	—			3,119			—			5,775
Selling, general and administrative	4,393			2,684			8,608			5,523
Unrealized (gain) loss on derivatives	(80		)	(949		)	231			(315		)
Other	3			3			137			4
Total costs and expenses	153,710			143,875			299,889			271,510

Income (loss) from operations	4,270			4,238			8,877			(424		)

Other income (expense):
Interest expense, net	(628		)	(642		)	(1,234		)	(1,120		)
Other, net	300			(355		)	629			(486		)
	(328		)	(997		)	(605		)	(1,606		)
Income (loss) before income tax expense	3,942			3,241			8,272			(2,030		)

Income tax expense	—			—			—			—

Net income (loss)	$	3,942		$	3,241		$	8,272		$	(2,030	)

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

DOE RUN PERU S.R.L.

Condensed Statements of Cash Flows (unaudited)

(U.S. dollars in thousands)

	Six Months Ended April 30,
	2005			2004

Net cash provided by (used in) operating activities	$	22,587		$	(6,741	)

Cash flows from investing activities:
Purchases of property, plant and equipment	(18,097		)	(6,073		)
Net cash used in investing activities	(18,097		)	(6,073		)

Cash flows from financing activities:
Payments on revolving loans, net	(5,200		)	(1,600		)
Payments on long-term debt	(17		)	(1,559		)
Increase (decrease) in amount due to related parties	(1,997		)	4,056
Net cash provided by (used in) financing activities	(7,214		)	897

Net decrease in cash	(2,724		)	(11,917		)

Cash at beginning of period	6,905			16,794
Cash at end of period	$	4,181		$	4,877

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

DOE RUN PERU S.R.L.

Notes to Financial Statements

(U.S. dollars in thousands)

(1) Summary of Significant Accounting Policies

Unaudited Interim Financial Statements

These interim financial statements include the accounts of Doe Run Peru S.R.L. (Doe Run Peru or the Company). In the opinion of management, the interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position as of April 30, 2005 and results of operations for the three and six-month periods ended April 30, 2005 and 2004. Interim periods are not necessarily indicative of results to be expected for the year.

(2) Inventories

Inventories consist of the following:

	April 30,		October 31,
	2005		2004

Finished metals and concentrates	$	15,013	$	8,356
Metals and concentrates in process	50,272		44,523
Materials, supplies and repair parts	14,417		12,997
	$	79,702	$	65,876

Materials, supplies and repair parts are stated net of reserves for obsolescence of approximately $787 and $1,436 at April 30, 2005 and October 31, 2004, respectively.

(3) Income Taxes

The Company estimates that the effect of a similar assessment for tax years after 2001 would be approximately $1,400.

Management of the Company believes that in each case Doe Run Peru has followed the applicable Peruvian tax statutes and intends to pursue all available administrative and judicial appeals. Doe Run Peru is not required to make any payments pending the administrative appeal process. If Doe Run Peru is not successful in the administrative appeal processes and were to appeal in the judicial system, some type of financial assurance would be required. No amounts have been accrued as liabilities related to these actions.

(4) Asset Retirement and Environmental Obligations

Asset Retirement Obligations

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

The Company’s total recorded liability for AROs was approximately $1,900 as of April 30, 2005 and October 31, 2004.

Environmental Remediation

Doe Run Peru’s La Oroya operations historically and currently exceed some of the applicable Ministry of Energy and Mines (MEM) maximum permissible limits pertaining to air emissions and wastewater effluent quality. The PAMA projects, which are more fully discussed below, have been designed to achieve compliance with these requirements. There can be no assurance that the Peruvian government will not, in the future, require compliance with additional environmental regulations that could adversely affect Doe Run Peru’s business, financial condition and results of operations.

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

• New sulfuric acid plants;

• Treatment plant for the copper refinery effluent;

• Industrial wastewater treatment plant for the smelter and refinery;

• Improve the slag handling system;

• Improve Huanchan lead and copper slag deposits;

• Build an arsenic trioxide deposit;

• Improve the zinc ferrite disposal site;

• Domestic wastewater treatment and domestic waste disposal; and

• Monitoring station.

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

Year	Estimated Cost

2005	$	53,500
2006	67,700
	$	121,200

On December 29, 2004 the Peruvian Government issued a supreme decree (Supreme Decree), which recognized that exceptional circumstances may justify an extension of one or more projects within the scope of a PAMA. The Supreme Decree specifies that companies have until December 31, 2005 to apply for an extension. The maximum extension is for three years and the MEM may authorize an additional year based upon the results of a health risk study.

Upon approval of a modified PAMA, Doe Run Peru would be required to create a trust account to administer the receipts and disbursements related to the extended PAMA. The Supreme Decree requires that receipts from sales be remitted monthly directly to the trust account, in an amount sufficient to fund the month’s cash requirements of the extended PAMA. Such an arrangement is prohibited by the Doe Run Peru’s revolving credit facility (Doe Run Peru Revolving Credit Facility), which expires on September 23, 2005. Accordingly, any new or amended Doe Run Peru credit facility must comply with the requirements established by the Supreme Decree, should Doe Run Peru’s PAMA be extended.

Management believes that Doe Run Peru will obtain an approval of an extension to complete the sulfuric acid plants. There is no assurance, however, that Doe Run Peru will receive an extension, or, if it does, that the project will be completed within the time limitation specified by the Supreme Decree.

(5) Litigation

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 such claims.

(6) Financial Condition

For the year ended October 31, 2003 and for several years prior, Doe Run Peru reported recurring losses, primarily due to the decline of treatment charges Doe Run Peru received for processing raw materials over the prior five years, which had severely impacted Doe Run Peru’s liquidity. The Company has substantial environmental commitments that will affect the Company’s liquidity. These issues raise substantial doubt about the Company’s ability to continue as a going concern.

Net unused availability at April 30, 2005 and October 31, 2004 under the Doe Run Peru Revolving Credit Facility was $5,800 and virtually none, respectively. In addition to the availability under the revolving credit facility, cash balances at Doe Run Peru were $4.2 million and $6.9 million, respectively, at April 30, 2005 and at October 31, 2004. Continued high metal prices have resulted in outlays for concentrate purchases and VAT payments being funded by cash from operations, as Doe Run Peru has remained near its maximum borrowing level under the Doe Run Peru Revolving Credit Facility. The improvement in availability resulted from a receipt of overdue reimbursements of VAT deposits by Doe Run Peru. The balance of VAT receipts receivable decreased by $15.6 million in the 2005 period.

As discussed in Note 4, Doe Run Peru’s existing PAMA requires it to perform projects in 2005 and 2006 at a total cost of $121,200. Doe Run Peru expects that it will not be able to comply with the spending requirements of the PAMA investment schedule in 2005 and 2006 with respect to the construction of the sulfuric acid plants required by the PAMA and, as a result, could be subject to penalties. Failure to comply with the PAMA could result in the cessation of operations at the La Oroya smelter.

The Peruvian Government has issued a Supreme Decree, which recognized that exceptional circumstances may justify an extension of one or more projects within the scope of a PAMA. See Note 4 for discussion of current legislation that may affect the Supreme Decree. Doe Run Peru will submit an application for extension to modify the requirements of the existing PAMA and extend the term of the PAMA to complete the construction of the sulfuric acid plants contemplated by the original PAMA. Doe Run Peru will also perform additional environmental projects to reduce fugitive emissions, including heavy metal dust, to address the health issues of the community. As of April 30, 2005, the remaining total cost of the current PAMA projects, including the sulfuric acid plants construction, and the additional projects is approximately $138,800. If the extension of the PAMA is approved, management expects to fund the PAMA projects with cash from Doe Run Peru’s operations.

Upon approval of a modified PAMA, Doe Run Peru would be required to create a trust account to administer the receipts and disbursements related to the extended PAMA project. The Supreme Decree requires that receipts from Doe Run Peru’s sales be remitted monthly directly to the trust account, in an amount sufficient to fund the month’s cash requirements of the extended PAMA projects. Such an arrangement is prohibited by the Doe Run Peru Revolving Credit Facility, which expires on September 23, 2005. Accordingly, any new or amended credit facility must comply with the requirements established by the Supreme Decree, should Doe Run Peru’s PAMA be extended.

A default under the requirements of the PAMA could result in a default under the Doe Run Peru Revolving Credit facility. An acceleration of this obligation would result in a default of the 11.75% senior notes due 2008 (the 11.75% Notes), of which Doe Run Peru is a guarantor.

These issues raise substantial doubt about Doe Run Peru’s ability to continue as a going concern. Management believes that Doe Run Peru will obtain an approval of an extension to complete the sulfuric acid plant. There is no assurance, however, that Doe Run Peru will receive an extension, or, if it does, that the project will be completed

within the time limitation specified by the Supreme Decree. Doe Run Peru has implemented a business plan that identifies several revenue generating and cost reduction activities. Management believes the plan will enhance liquidity, which would improve Doe Run Peru’s ability to make the investments under the proposed modifications to the PAMA. Revenue enhancement projects include the processing of zinc ferrites and an effort to bring more recycled feed into the smelter. The zinc ferrite processing is expected to produce a product with a zinc and silver content of approximately 20,000 tons and 4.3 million ounces, respectfully, on an annual basis beginning in the fourth quarter of 2005. Planned cost reduction measures include manpower reductions through voluntary retirement and decreased power usage in the zinc circuit. Doe Run Peru ceased operations of its three New Jersey zinc roasters in the first quarter of 2005. The decision should result in a reduction of refined zinc production to 50,000 tons per year, down from the previous capacity of 88,200. This has reduced the power usage in the zinc circuit. Management will continue to analyze cost management opportunities in current operating conditions.

Doe Run Peru has received assessments of income tax, including penalties and interest, and VAT totaling $104,100 and $41,600, respectively, as discussed in Note 3. In addition, the Company estimates that the effect of similar assessments for periods not yet assessed would be approximately $1,400 and $19,300 for the income tax and VAT matters, respectively. Furthermore, Doe Run Peru would also be required to make additional workers’ profit sharing payments equal to 8% of the increase in taxable income generated by the changes discussed above, or approximately $5,900 for tax years 1998 through 2004.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the three months (the 2005 quarter) and the six months (the 2005 period) ended April 30, 2005 compared to the three months (the 2004 quarter) and the six months (the 2004 period) ended April 30, 2004 should be read in conjunction with the condensed consolidated financial statements of The Doe Run Resources Corporation (Doe Run and together with its subsidiaries, the Company) and the notes thereto, and other financial information included herein.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. The Company makes forward-looking statements in this Quarterly Report on Form 10-Q, which represent the Company’s expectations or beliefs about future events and financial performance. When used in this report, the words “expect,” “believe,” “anticipate,” “goal,” “plan,” “intend,” “estimate,” “may,” “will” or similar words are intended to identify forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to in this Quarterly Report on Form 10-Q and otherwise described in the Company’s periodic filings.

All predictions as to future results contain a measure of uncertainty, and accordingly, actual results could differ materially. Among the factors that could cause actual results to differ from those contemplated, projected or implied by the forward-looking statements (the order of which does not necessarily reflect their relative significance) are: general economic and business conditions; increasing industry capacity and levels of imports of non-ferrous metals or non-ferrous metals products; industry trends, including the price of metals and product pricing; competition; currency fluctuations; the loss of any significant customer or supplier; availability of raw materials; availability of qualified personnel; effects of future collective bargaining agreements; outcome of litigation; changing environmental requirements and costs, including the capital requirements in Peru; political uncertainty and terrorism; major equipment failures; changes in accounting principles or new accounting standards; compliance with laws and regulations; and other unforeseen circumstances.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. In addition, actual results could differ materially from those suggested by the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on the forward-looking statements. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by the Company from time to time in its periodic filings with the Securities and Exchange Commission.

This Quarterly Report on Form 10-Q should be read completely and with the understanding that the Company’s actual future results may be materially different from what the Company expects. All forward-looking statements made by the Company in this Quarterly Report on Form 10-Q and in the Company’s other filings with the Securities and Exchange Commission are qualified by these cautionary statements.

Significant Issues

Doe Run Peru

Doe Run Peru expects that it will not be able to comply with the spending requirements of La Oroya’s Environmental Remediation and Management Program (PAMA) investment schedule in 2005 and 2006 with respect to the construction of the sulfuric acid plants required by the PAMA and, as a result, could be subject to penalties. Failure to comply with the PAMA could result in the cessation of operations at the La Oroya smelter.

On December 29, 2004 the Peruvian Government issued Supreme Decree No. 046-2004-EM (Supreme Decree), which recognized that exceptional circumstances may justify an extension of one or more projects within the scope of a PAMA. The Supreme Decree specifies that companies have until December 31, 2005 to apply for an extension. The maximum extension is for three years and the Ministry of Energy and Mines (MEM) may authorize an additional year based upon the results of a health risk study.

Doe Run Peru will also perform other additional environmental projects to reduce fugitive emissions, including heavy metal dust, to address the health issues of the community. As of April 30, 2005, the remaining total cost of the current PAMA projects, including the sulfuric acid plants construction, and these projects is approximately $138.8 million. Doe Run Peru spent $9,400 in the 2005 period on PAMA projects.

Doe Run Peru has implemented a business plan that identifies several revenue generating and cost reduction activities. Management believes the plan will enhance liquidity, which would improve Doe Run Peru’s ability to make the investments under the proposed modifications to the PAMA. Revenue enhancement projects include the processing of zinc ferrites and an effort to bring more recycled feed into the smelter. Planned cost reduction measures include manpower reductions through voluntary retirement and decreased power usage in the zinc circuit. The zinc ferrite processing is expected to produce a product with a zinc and silver content of approximately 20,000 tons and 4.3 million ounces, respectfully, on an annual basis beginning in the fourth quarter of 2005. The cessation of operations of its three New Jersey zinc roasters in the first quarter of 2005 has reduced the power usage in the zinc circuit. Management will continue to analyze cost management opportunities in current operating conditions.

Doe Run Peru has received assessments of income tax, including penalties and interest, and value added tax (VAT) totaling $104.1 million and $41.6 million, respectively. The income tax assessments primarily relate to Doe Run Peru’s income tax treatment of the December 1997 merger of Doe Run Peru and Metaloroya S.A., which was purchased by Doe Run Peru in October 1997, and its effects on subsequent years’ taxable income. Under the assessment by SUNAT, the tax basis of Doe Run Peru’s fixed assets acquired would decrease, resulting in lower tax

depreciation expense than originally claimed. The VAT assessments primarily relate to Doe Run Peru’s exports with holding certificates and differences in a tax credit application. See further discussion in “Liquidity.” No amounts have been accrued as liabilities related to these assessments.

Results of Operations

Metals Pricing

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:

Three Months Ended
April 30,

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

The Doe Run Resources Corporation

Asset Retirement Obligations

Environmental remediation - Domestic Operations

Foreign Operations

Asset Retirement Obligations

Environmental Remediation

DOE RUN RESOURCES CORP 10-Q