<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                   FORM 10-Q


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


For the Quarter Ended September 30, 1998        Commission File Number 0-18858



                              KAISER VENTURES INC.
                              --------------------
             (Exact name of registrant as specified in its charter)


             DELAWARE                                      94-0594733
   -------------------------------                     -------------------
   (State of other jurisdiction of                      (I.R.S. Employer
   incorporation or organization)                      Identification No.)


                    3633 East Inland Empire Blvd., Suite 850
                           Ontario, California  91764
             -----------------------------------------------------
             (Address of principal executive offices and zip code)


Registrant's telephone number, including area code: (909) 483-8500

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes X  No
                                   ---   ---
                      
Indicate by check mark whether registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.

                                Yes X  No 
                                   ---   ---   
On October 30, 1998, the Company had 10,685,257 shares of Common Stock, $.03 par
value, outstanding (including 136,919 shares deemed outstanding and held in
reserve by the Company for issuance to the former general unsecured creditors of
Kaiser Steel Corporation pursuant to its Plan of Reorganization).
<PAGE>
 
                        TABLE OF CONTENTS TO FORM 10-Q
                                        
 
                                                                      PAGE
                                                                      ----
INTRODUCTION
 
  BUSINESS UPDATE....................................................    1
 
PART I
 
  Item 1.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL         
            CONDITION AND RESULTS OF OPERATIONS......................    6
                                                                     
  ITEM 2.  FINANCIAL STATEMENTS......................................   16
                                                                     
           CONSOLIDATED BALANCE SHEETS...............................   16
                                                                     
           CONSOLIDATED STATEMENTS OF OPERATIONS.....................   18
                                                                     
           CONSOLIDATED STATEMENTS OF CASH FLOWS.....................   19
                                                                     
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY.   20
                                                                     
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................   21
                                                                     
PART II                                                              
                                                                     
  ITEM 1.  LEGAL PROCEEDINGS.........................................   23
                                                                     
  ITEM 2.  CHANGES IN SECURITIES.....................................   24
                                                                     
  ITEM 3.  DEFAULTS UPON SENIOR SECURITIES...........................   24
                                                                     
  ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.........   24
                                                                     
  ITEM 5.  OTHER INFORMATION.........................................   24
                                                                     
  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K..........................   24
 
SIGNATURES...........................................................   25


                        AVAILABILITY OF PREVIOUS REPORTS
                        --------------------------------
                                        
     THE COMPANY WILL FURNISH WITHOUT CHARGE, TO EACH STOCKHOLDER, UPON WRITTEN
REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997 (THE "10-K REPORT") AS FILED WITH THE
SECURITIES EXCHANGE AND COMMISSION, INCLUDING THE FINANCIAL STATEMENT SCHEDULES
THERETO.  THOSE REQUESTING A COPY OF THE 10-K REPORT THAT ARE NOT CURRENTLY
STOCKHOLDERS OF THE COMPANY MAY ALSO OBTAIN A COPY DIRECTLY FROM THE COMPANY.
REQUESTS FOR A COPY OF THE 10-K REPORT SHOULD BE DIRECTED TO VICE PRESIDENT-
CORPORATE RELATIONS, AT 3633 EAST INLAND EMPIRE BOULEVARD, SUITE 850, ONTARIO,
CALIFORNIA 91764.

     THE READER IS ENCOURAGED TO READ THIS FORM 10-Q REPORT IN CONJUNCTION WITH
THE 10-K REPORT AND THE 10-Q REPORTS FOR THE FIRST AND SECOND QUARTER FOR 1998
SINCE THE INFORMATION CONTAINED HEREIN IS OFTEN AN UPDATE OF THE INFORMATION IN
SUCH REPORTS.

                                       i
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                          FORWARD-LOOKING STATEMENTS

  Except for the historical statements and discussions contained herein,
statements contained in this 10-Q Report constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  Any 10-K,
Annual Report to Stockholders, 10-Q or 8-K Report of the Company may include
forward-looking statements.  In addition, other written or oral statements,
which constitute forward-looking statements, have been made and may be made in
the future by the Company.  When used or incorporated by reference in this 10-Q
Report or in other written or oral statements, the words "anticipate,"
"estimate," "project" and similar expressions are intended to identify forward-
looking statements.  Such statements are subject to certain risks, uncertainties
and assumptions.  Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, expected or projected.
For example, actual results could materially differ from those projected as a
result of factors such as, but not limited to, general economic conditions in
the United States and Southern California; the impact of federal, state, and
local laws and regulations on the Company's development activities; the impact
of weather on the Company's construction related activities; the discovery of
unanticipated environmental conditions on any of the Company's properties; the
failure of the bankruptcy discharge granted to the Company to address claims and
litigation that relate to the pre-bankruptcy activities of Kaiser Steel
Corporation; or the failure to obtain any required approval or permit for the
proposed Eagle Mountain landfill project or development of the Company's Mill
Site real estate.  Readers are cautioned not to put undue reliance on forward-
looking statements.  The Company disclaims any intention to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

                            ADDITIONAL INFORMATION

  A reader of this Form 10-Q Report is strongly encouraged to read the entire
report, together with the Company's 1997 Form 10-K Report and its Form 10-Q
Reports for the first and second quarter for 1998, for background information
and a complete understanding as to material developments concerning the Company.


                                 INTRODUCTION
                                        
BUSINESS UPDATE

General

  Kaiser Ventures Inc. ("Kaiser" or the "Company") is an asset development
company pursuing project opportunities and investments in water resources,
motorsports, property redevelopment and solid waste management.  The Company's
long-term emphasis is on the further development of its principal assets:  (i) a
50.88% interest in Fontana Union Water Company ("Fontana Union"), a mutual water
company; (ii) a 11.46% interest in Penske Motorsports, Inc. ("PMI"), a publicly-
traded professional motorsports company that has developed the California
Speedway ("TCS") on land acquired from the Company; (iii) approximately a 74%
interest in Mine Reclamation Corporation ("MRC"), the developer of the Eagle
Mountain Landfill Project (the "Landfill Project"); (iv) a 50% joint venture
interest in the West Valley MRF ("WVMRF"), a transfer station and recycling
facility located on land acquired from the Company; (v) approximately 629 acres
of the former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property"), a portion of which is currently being developed as the Kaiser
Commerce Center; and (vi) the 11,350 acre idle iron ore mine in the California
desert (the "Eagle Mountain Site"), which includes 

                                       1
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

the associated 460 acre town of Eagle Mountain ("Eagle Mountain Townsite") and
the land leased to MRC for the Landfill Project.

Investment in Fontana Union Water Company

  The Company, through a wholly-owned subsidiary, Fontana Water Resources, Inc.,
leases its 50.88% ownership of the capital stock of Fontana Union, a mutual
water company, to Cucamonga pursuant to a 102-year take-or-pay lease expiring in
2092 (the "Cucamonga Lease").  Currently, the Company's pro rata interest in
unclaimed water raises its effective interest in Fontana Union to 57.33%.  Under
the terms of the Cucamonga Lease, Cucamonga's payments to the Company are based
upon established fixed quantities of water for most of the applicable sources,
multiplied by a fixed percentage of a water rate from the Metropolitan Water
District of Southern California ("MWD") as available through the Chino Basin
Municipal Water District as it may change from time-to-time (the "Lease Rate").

  As a result of changed rates and a new rate structure implemented by MWD as of
July 1, 1995, the Company and Cucamonga became involved in a rate dispute under
the terms of the Cucamonga Lease.  After a trial held in March 1998, the Court
concluded that the rate on which the Cucamonga Lease had been based was
discontinued effective July 1, 1995.  The Court's written Statement of Decision
confirming its oral rulings announced from the bench in March was released on
June 16, 1998. The terms of the Cucamonga Lease require the parties to
negotiate, in good faith, a new substitute rate.  If the parties are unable to
agree on a substitute rate, the matter is referred to arbitration.  There is no
specified time period in which the new substitute rate must be established.
Cucamonga and the Company commenced negotiations in the third quarter.  However,
such negotiations, to date, have not resulted in a new substitute rate.  There
is no guarantee that any future negotiations will be successful and that the
matter will not ultimately need to be resolved in arbitration.

  During the first quarter of 1998, the Company, through its wholly-owned
subsidiary Fontana Water Resources, Inc., initiated litigation under the
California Environmental Quality Act ("CEQA") against San Bernardino County and
various land owners in connection with the proposed expansion of the Mid-Valley
Sanitary Landfill owned by San Bernardino County.  In summary, the Company is
primarily concerned about water quality and quantity issues pertaining to one
water source of Fontana Union.  San Bernardino County has acknowledged the
issues raised by the Company and others and has also publicly acknowledged that
the landfill is a source of contamination to groundwater.  On October 9, 1998,
the California Regional Water Quality Control Board - Santa Ana Region,
determined that the Mid-Valley Sanitary Landfill was contaminating groundwater
and it issued a clean-up and abatement order against San Bernardino County.
Despite the contamination to groundwater the Company has not, to date,
experienced any reduction in revenues pursuant to the Cucamonga Lease.
Settlement negotiations are ongoing, but there is no assurance that there will
be a satisfactory settlement of the litigation.  The case was scheduled to be
heard in San Bernardino County Superior Court in November 1998, but due to the
status of settlement negotiations, the trial has been indefinitely postponed.

Investment in Penske Motorsports, Inc.

  The Company owns 1,627,923 shares, or approximately 11.46% of the common stock
of PMI.  The Company's ownership interest in PMI was acquired as a result of:
(i) its contribution in November 1995, to PMI of approximately 480 acres, as
adjusted, of the Central Mill Site Property on which the California Speedway
("TCS") has been built; and (ii) the subsequent sale of the Speedway Business
Park, totaling approximately 54 acres to PMI in December 1996.  PMI is traded on
the NASDAQ National Market under the symbol "SPWY".

                                       2
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  PMI is a leading promoter and marketer of professional motorsports in the
United States as well as an owner and operator of speedway facilities. PMI
currently owns: (i) Michigan International Speedway, Inc. which owns and
operates the Michigan Speedway ("MIS"), in Brooklyn, Michigan; (ii) The
California Speedway Corporation, which owns and operates TCS near Los Angeles,
California; (iii) Pennsylvania International Raceway, Inc. which owns and
operates the Nazareth Motor Speedway ("Nazareth") in Nazareth, Pennsylvania;
(iv) North Carolina Motor Speedway, Inc. which owns and operates the North
Carolina Motor Speedway ("NCMS") in Rockingham, North Carolina; (v) a forty-five
percent (45%) interest in Homestead-Miami, LLC, the operator of the Metro-Dade
Homestead Motorsports Complex in Dade County, Florida; (vi) Motorsports
International Corp. ("MIC"), a motorsports apparel and memorabilia company; and
(vii) Competition Tire West, Inc. and Competition Tire South, Inc., distributors
of Goodyear racing tires in the mid-west and southern regions of the United
States.

  For the third quarter of 1998, PMI announced gross revenues of $35.2 million
and a net profit of $3.5 million or $0.25 per share.  For the first nine months
of the year, PMI announced net income of approximately $12.7 million or $.90 per
share.  Due to the seasonal nature of racing, losses are anticipated in the
first quarter of the year and profits in the second, third and fourth quarters.
As a result, the Company's reported share of PMI's net income/loss will reflect
the seasonal nature of PMI's business.  The Company began accounting for its
share of PMI's net income as of April 1, 1996.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

  The following table sets forth the range of the low and high reported bid
price of PMI's common stock for the first nine months of 1998, as reported on
the NASDAQ National Market System.
<TABLE>
<CAPTION>
              1998:                          Low         High
                                          ---------    --------
              <S>                         <C>          <C>
              First Quarter                 $24.75      $32.00
              Second Quarter                $28.75      $33.88
              Third Quarter                 $16.88      $32.50
</TABLE>

  On November 3, 1998, the reported closing price of PMI's common stock was
$23.125.

Property Redevelopment

  Mill Site Redevelopment Plan.  The Company currently is undertaking various
activities to redevelop portions of the Mill Site Property.  Depending upon the
final redevelopment plan and after taking into account slope loss, rail road
easements, the San Sevaine flood control channel, proposed streets and highway
improvements, the sewer treatment facility, and other similar items, the Company
anticipates having approximately 500 useable acres available for development.
Following is a summary of the progress of the Company's redevelopment plans
since the second quarter of 1998.

  In April 1997, the Company filed an application for a Specific Plan with San
Bernardino County for all of the Mill Site Property except for: (i)
approximately 26 acres within the City of Rancho Cucamonga; (ii) approximately
135 acres constituting the East Slag Pile property; (iii) the remaining NAPA Lot
of approximately 15 acres (already permitted); and (iv) the balance of the Mill
Site reserved for possible expansion of the West Valley MRF, approximately 5
acres (already permitted). The property being entitled and permitted which
totals, approximately 448 acres (net), is referred to as the "Kaiser Commerce
Center."

  The Specific Plan application identified a wide variety of potential uses for
the Kaiser Commerce Center.  Potential uses include a rail-served distribution
and commercial park, an inter-modal rail-truck 

                                       3
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

distribution center, warehousing, a commercial truck stop, as well as other
commercial and recreational uses.

  In the furtherance of the entitlement process for the Kaiser Commerce Center,
an environmental impact report ("EIR") (required pursuant to the CEQA) was
prepared and released to the public in early October 1998.  The public will have
until December 3, 1998, to submit comments on the draft EIR.  San Bernardino
County will subsequently prepare a final EIR that will include responses to the
comments received on the draft EIR.  After release of the Kaiser Commerce Center
final EIR, it is anticipated there will be public hearings before both the San
Bernardino County Planning Commission and by the San Bernardino Board of
Supervisors on the Kaiser Commerce Center Project.  It is currently anticipated
that the entitlement process should be completed by mid-1999.

  Separately, but in anticipation of the redevelopment of the Mill Site
Property, required environmental remediation continues to be undertaken.  In
addition, the Company continues to terminate leases with tenants at the Mill
Site Property in anticipation of the redevelopment of the property.  Only a few
tenants remained on the Mill Site Property as of September 30, 1998, and it is
anticipated that all tenants will be off the site by year-end.

  Separately, and in addition to the permitting and entitlement process with the
County, the Company continues to process approvals through the California
Transportation Department for an improved interchange at Etiwanda and the I-10
Freeway.  Such freeway improvements near the Mill Site Property would also
involve the realignment of at least one existing street and the construction of
other street improvements.

  As noted in previous reports, significant capital funds will be required to
implement the infrastructure and access improvements.  Consistent with the
Company's overall development strategy, the Company intends to minimize its
capital investments for these improvements by seeking public or private
financing sources; by land sales; by structuring joint ventures and leases; or
by contributing portions of the land for an ownership interest in operating
companies seeking to develop the land.  In this regard, Congress allocated
approximately $1.5 million in the Federal highway and transportation legislation
that became law in June 1998 toward the costs of the planned improvements to the
Etiwanda and I-10 Freeway interchange.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for additional
information.

Waste Management

West Valley Materials Recovery Facility

  The Company, through a wholly-owned subsidiary, and Burrtec Waste Industries,
Inc., also through a wholly-owned subsidiary, each own a fifty percent (50%)
interest in West Valley MRF, LLC, a limited liability Company that owns the West
Valley MRF.  Phase 1 of the West Valley MRF, which includes a 62,000 square foot
building, sorting equipment, and related facilities for waste transfer and
recycling services, was constructed and equipped, in the last half of 1997.  It
became fully operational in January 1998.  The West Valley MRF currently
receives and processes approximately 1,000 to 1,200 tons per day of non-
hazardous commercial and municipal solid waste.

  In February 1998, San Bernardino County asserted that the West Valley MRF's
current operations are in violation of the MRF's conditional use permit because
much of the waste processed at the West Valley MRF is deposited into landfills
outside San Bernardino County.  One of the purported conditions in the West
Valley MRF's conditional use permit states that the residue from the MRF is to
be deposited into San Bernardino County landfills until November 23, 1998.  West
Valley MRF, LLC believes that 

                                       4
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

this purported condition is invalid and not enforceable and, in February 1998,
communicated its position to San Bernardino County. San Bernardino County has
not responded to the West Valley MRF LLC's position, but did initiate
discussions with the West Valley MRF, LLC to determine if there can be a
mutually acceptable arrangement pursuant to which the West Valley MRF can be
integrated into the County's landfill system without adversely impacting the
economics of the West Valley MRF. Such discussions remain ongoing but sporadic.
Litigation could result if these negotiations do not reach a mutually acceptable
conclusion. In the unlikely event that San Bernardino pursues its assertion of
violation and their assertion is upheld, the violation could lead to the
revocation of the conditional use permit under which the West Valley MRF
operates.

Eagle Mountain Landfill Project

  In 1988, the Company entered into a 100-year lease agreement (the "MRC Lease")
with MRC.  MRC is seeking to develop the Company's former iron ore mine near
Eagle Mountain, California into a large, regional rail-haul, municipal solid
waste landfill.  MRC became a subsidiary of the Company when the Company's
subsidiary, Eagle Mountain Reclamation, Inc., acquired a 70% interest in MRC
during the first quarter of 1995 in exchange for the elimination of the minimum
monthly rent due the Company under the MRC Lease.  The elimination of the
minimum monthly rent did not change the future royalty payments due the Company
once the landfill commences operations.  As a result of a series of private
placements, the Company's interest in MRC is now approximately 74%.

  EIR Litigation, Appeal and Related Matters.  After the September 1997 approval
of the new environmental impact report for the Landfill Project, (the "Project
EIR"), the litigation with respect to the Project EIR resumed.  On February 17,
1998, Judge Judith McConnell of the San Diego County Superior Court issued her
final ruling with respect to the litigation before her on the new Project EIR.
Judge McConnell in her final ruling found that the new Project EIR remained
inadequate in evaluating the Landfill Project's impacts in two general areas:
(i) the threatened desert tortoise; and (ii) impacts to Joshua Tree National
Park.  Details of Judge McConnell's ruling are contained in previous reports.
MRC, the Company and Riverside County have appealed the Superior Court's
decision and their opening appeal brief was filed on September 3, 1998.  It is
anticipated that all briefs in the appeal will be filed by year-end.  The appeal
process is anticipated to extend throughout 1999.

  In connection with the Project EIR litigation, project opponents filed a
motion with the San Diego Superior Court seeking the award of approximately
$450,000 in attorneys' fees against MRC, the Company and Riverside County.  On
August 7, 1998, the Court awarded project opponents approximately $238,000 in
attorneys' fees.  In September 1998, the Court reconsidered its August 1998
ruling and awarded additional attorneys' fees and costs to project opponents.
The total fees and costs awarded to landfill opponents is now approximately
$300,000.  The award of attorneys' fees has been appealed.  Payment of the
awarded attorneys' fees will be held in abeyance pending a decision in the
appeal of the Superior Court's decision.

  In addition, landfill opponents sought to hold MRC and the Company in contempt
of court as a result of alleged violations of Judge McConnell's 1994 and 1998
orders.  In summary, the Company undertook maintenance activities in connection
with its private rail line, with such activities most recently being conducted
in anticipation of the then forecasted El Nino weather impacts.  These
maintenance activities involved such items as cleaning out culverts, placing
rip-rap around culverts to prevent washouts and weed abatement.  The opponents
sought the imposition of a fine of $1,000 for each item undertaken since the
issuance of Judge McConnell's order in 1994.  On September 3, 1998, Judge
McConnell ruled in favor of the Company and MRC and found that the activities
performed did not violate her orders or the California Environmental Quality
Act.

                                       5
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  MRC Private Placement.  In October 1998, MRC approved a private placement of
its common stock to its existing shareholders totaling $3,250,000.  The Company
has agreed to subscribe up to eighty percent (80%) of such amount.  Upon
completion of this private placement, the Company will have invested a total of
approximately $12.1 million through a series of private placements.  Even with
the anticipated successful completion this private placement, future funds will
be needed to continue MRC's operations.  MRC continues to evaluate and seek, as
appropriate, additional sources of funding which could include third party
investors, waste commitments and/or the sale of air space or other similar
transactions.

  Risks.  As is discussed in more detail in the Company's 1997 Form 10-K Report,
there are numerous risks associated with MRC and the Landfill Project which must
be overcome to achieve the financing, permitting, construction and operation of
the Landfill Project.  There have been and will continue to be opponents to the
Landfill Project.  Given the successful legal challenges that have occurred to
date and the controversies that generally surround landfill projects, future
legal challenges are likely.  There is no guarantee that the Landfill Project
will be successfully permitted and ultimately operational.


                                    PART I
                                        
Item 1.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

                         Section 1:  Operating Results

General

  Kaiser Ventures Inc. ("Kaiser" or the "Company") is an asset development
company pursuing project opportunities and investments in water resources,
motorsports, property redevelopment and solid waste management.  The Company's
long-term emphasis is on the further development of its principal assets:  (i) a
50.88% interest in Fontana Union Water Company ("Fontana Union"), a mutual water
company; (ii) a 11.46% interest in Penske Motorsports, Inc. ("PMI"), a publicly-
traded professional motorsports company that has developed the California
Speedway ("TCS") on land acquired from the Company; (iii) approximately a 74%
interest in Mine Reclamation Corporation ("MRC"), the developer of the Eagle
Mountain Landfill Project (the "Landfill Project"); (iv) a 50% joint venture
interest in the West Valley MRF ("WVMRF"), a transfer station and recycling
facility located on land acquired from the Company; (v) approximately 629 acres
of the former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property"), a portion of which is currently being developed as the Kaiser
Commerce Center; and (vi) the 11,350 acre idle iron ore mine in the California
desert (the "Eagle Mountain Site"), which includes the associated 460 acre town
of Eagle Mountain ("Eagle Mountain Townsite") and the land leased to MRC for the
Landfill Project.

Primary Revenue Sources

Ongoing Operations

  The Company's revenues from ongoing operations are generally derived from the
development of the Company's long-term projects.  Revenues from water resources
represent payments under the lease of the Company's interest in Fontana Union to
Cucamonga County Water District ("Cucamonga").  Property redevelopment revenues
primarily reflect revenues from long-term redevelopment activities at the Mill
Site property, including water and waste water treatment revenues; housing
rental income, aggregate and rock sales and lease payments for the minimum
security prison at the Eagle Mountain Townsite; and 

                                       6
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

royalty revenues from iron ore shipments from the Company's iron ore mine in
California (the "Silver Lake Mine"). Income from equity method investments
reflect Kaiser's share of income related to those equity investments (i.e., PMI)
and, starting in 1998, joint ventures (i.e., West Valley MRF) which the Company
accounts for under the equity method.

Interim Activities

  Revenues from interim activities are generated from various sources primarily
related to the Mill Site Property.  Significant components of interim activities
include rentals under short-term tenant lease arrangements, royalty revenues
from the sale of slag to outside contractors, royalty revenues from the sale of
recyclable revert materials and other miscellaneous short-term activities.  The
revenues from these activities will continue to decline as development of the
Company's long-term projects progress.

Summary of Revenue Sources

  Due to the developmental nature of certain Company projects and the Company's
recognition of revenues from bankruptcy-related and other non-recurring items,
historical period-to-period comparisons of total revenues may not be meaningful
for developing an overall understanding of the Company.  Therefore, the Company
believes it is important to evaluate the trends in the components of its
revenues as well as the recent developments regarding its long-term ongoing and
interim revenue sources.  See "Introduction. Business Update" for a discussion
of recent material events affecting the Company's revenue sources.

  In addition, due to the concentration of motorsport racing events between
April and November, PMI's operations have been, and will continue to be,
seasonal.  As a result, the Company's reported share of undistributed equity in
the earnings of PMI will likely be positive (income) in the second, third and
fourth quarters and negative (loss) in the first quarter.

Results of Operations

Analysis of Results for the Quarters Ended September 30, 1998 and 1997

  An analysis of the significant components of the Company's resource revenues
for the quarters ended September 30, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                             1998         1997      % Inc. (Dec)
                                          ----------   ----------   ------------
<S>                                       <C>          <C>          <C>
Ongoing Operations                     
 Water resource........................   $1,176,000   $1,165,000          1%
 Property redevelopment................      468,000      383,000         22%
 Income (loss) from equity method                      
   investments.........................      402,000    1,000,000        (60%)
                                          ----------   ---------- 
  Total ongoing operations.............    2,046,000    2,548,000        (20%)
                                                       
Interim Activities                                    
 Lease, service and other..............      370,000      429,000        (14%)
                                          ----------   ----------
  Total resource revenues..............   $2,416,000   $2,977,000        (19%)
                                          ==========   ==========
Revenues as a Percentage of Total         
Resource Revenues:                        
 Ongoing operations....................           85%          86%
 Interim activities....................           15%          14%
                                          ----------   ----------
  Total resource revenues..............          100%         100%
                                          ==========   ==========
</TABLE>

                                       7
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  Resource Revenues.  Total resource revenues for the third quarter of 1998 were
$2,416,000, compared to $2,977,000 for 1997.  Revenues from ongoing operations
decreased 20% during the quarter to $2,046,000 from $2,548,000 in 1997, and
revenues from interim activities decreased 14% to $370,000 from $429,000 in
1997.  Revenues from ongoing operations as a percentage of total revenues
decreased slightly to 85% from 86%.

  Ongoing Operations.  Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $1,176,000 during the third quarter of 1998
compared to $1,165,000 for 1997.  The slight increase in water revenues during
the quarter primarily reflects:  (a) an increase, as of July 1, 1998, in the
lease rate being paid by Cucamonga from $351.75 to $354.00 per acre foot; and
(b) an increase, effective January 1, 1998, in the Company's effective interest
in Fontana Union from 55.66% to 57.33%, due to a decline in the number of
Fontana Union shareholders taking water.

  During the first nine months in 1998, the Company continued its litigation
with Cucamonga in San Bernardino County Superior Court to resolve a dispute over
the interpretation of the Cucamonga Lease.  The dispute centers on the Company's
assertion that either the MWD Rate in the Cucamonga Lease was discontinued on
July 1, 1995, or that the Lease Rate should be interpreted to include all the
changed rates and items implemented by Metropolitan Water District of Southern
California ("MWD") since July 1, 1995.  A five-day trial on the matter was held
in March 1998.  After the trial, the Court ruled, in favor of the Company, that
the rate on which the Cucamonga Lease had been based was discontinued effective
July 1, 1995.  Therefore the terms of the Cucamonga Lease require the parties to
negotiate in good faith a new substitute rate.  If the parties are unable to
agree on a substitute rate, the matter in effect goes to arbitration.  There is
no specified time period in which the new substitute MWD rate must be
established.  Cucamonga continues to pay under the terms of the Cucamonga Lease,
but at a rate substantially less than the Lease Rate that the Company maintains
it is entitled to receive pursuant to the Cucamonga Lease.

  Property redevelopment revenues were $468,000 for the third quarter of 1998
compared to $383,000 for 1997.  The 22% increase from 1997 is primarily a result
of the reversal of an expense accrual from 1997 ($142,000) being partially
offset by lower tenant revenue at Eagle Mountain ($10,000) and decreases in iron
ore sales from the California Mines ($49,000).

  Income from equity method investments was $402,000 for the third quarter of
1998 compared to $1,000,000 for 1997.  The decrease of $598,000 reflects lower
equity income from PMI due to the shifting of race events (i.e., the CART Race
at the California Speedway) from the 3rd to the 4th quarter.

  Interim Activities.  Revenues from interim activities for the third quarter of
1998 were $370,000 compared to $429,000 for 1997.  The 14% decrease in revenues
from interim activities in 1998 is primarily attributable to:  (a) lower
revenues from tenant rental and services and scrap and metallics sales at the
Mill Site due to the continuing real estate re-development activities being
conducted there ($54,000); and (b) lower tenant service and miscellaneous
revenue at Eagle Mountain ($4,000).

  Resource Operating Costs.  Resource operating costs are those costs directly
related to the resource revenue sources.  Total resource operating costs for the
third quarter of 1998 decreased to $854,000 from $916,000 in 1997.  Operations
and maintenance costs for 1998 were $346,000 compared to $357,000 for 1997.  The
3% decrease in 1998 operations and maintenance costs was primarily due to lower
maintenance and supplies costs for buildings and equipment ($11,000).
Administrative support expenses for the third quarter of 1998 decreased 9% to
$508,000 from $559,000 for 1997.  This decrease was primarily due to lower
professional and outside consulting ($19,000) and lower insurance expense
($33,000).

                                       8
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  Corporate General and Administrative Expenses.  Corporate general and
administrative expenses for the third quarter of 1998 increased 7% to $976,000
from $912,000 for 1997.  The increase is primarily due to higher professional
and outside consulting expenses ($161,000) being partially offset by lower
salaries and benefits, insurance, board of director expenses, depreciation and
office expenses ($92,000).

  Net Interest Expense.  Net interest expense for the third quarter of 1998 was
$254,000 compared to $276,000 in 1997.  The $22,000 decrease was due primarily
to: a decrease in the amortization of deferred loan fees ($51,000) being
partially offset by higher interest expense ($30,000) associated with $2,650,000
in additional long term debt ($7,750,000 in additional borrowings under the
Company's Union Bank of California ("Union Bank") revolving-to-term credit
facility less the payoff of the Lusk loan ($5,102,000) which occurred in June
1998.

  Pre-Tax Loss and Income Tax Provision.  The Company recorded income before
income tax provision of $332,000 for the third quarter of 1998, a 62% decrease
from $873,000 recorded in 1997.  An income tax provision of $143,000 was
recorded in the third quarter of 1998 as compared with a $380,000 tax provision
in 1997.  Historically, over 90% of the tax provisions are not currently payable
due primarily to utilization of the Company's net operating loss carryforwards
("NOL's").  Consequently, pretax income is an important indicator of the
Company's performance.

  Net Income.  For third quarter of 1998, the Company reported net income of
$189,000, or $.02 per share, a 62% decrease from the net income of $493,000, or
$.05 per share, reported for 1997.

Analysis of Results for the Nine Months Ended September 30, 1998 and 1997

  An analysis of the significant components of the Company's resource revenues
for the first nine months ended September 30, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                            1998         1997      % Inc. (Dec)
                                         ----------   ----------   ------------
<S>                                      <C>          <C>          <C>
Ongoing Operations                    
 Water resource.......................   $3,514,000   $3,462,000          2%
 Property redevelopment...............    1,145,000    1,114,000          3%
 Income (loss) from equity method                     
   investments........................    1,515,000    2,227,000        (32%)
                                         ----------   ---------- 
  Total ongoing operations............    6,174,000    6,803,000         (9%)
                                                      
Interim Activities                                    
 Lease, service and other.............      981,000    1,232,000        (20%)
                                         ----------   ----------
  Total resource revenues.............   $7,155,000   $8,035,000        (11%)
                                         ==========   ==========
Revenues as a Percentage of Total                     
Resource Revenues:                                    
 Ongoing operations...................           86%          85%
 Interim activities...................           14%          15%
                                         ----------   ----------
  Total resource revenues.............          100%         100%
                                         ==========   ==========
</TABLE>

  Resource Revenues.  Total resource revenues for the first nine months of 1998
were $7,155,000, compared to $8,035,000 for 1997.  Revenues from ongoing
operations decreased 9% during the nine months to $6,174,000 from $6,803,000 in
1997, and revenues from interim activities decreased 20% to $981,000 from
$1,232,000 in 1997.  Revenues from ongoing operations as a percentage of total
revenues increased slightly to 86% in 1998 from 85% in 1997.

                                       9
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  Ongoing Operations.  Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $3,514,000 during the first nine months of 1998
compared to $3,462,000 for 1997.  The 2% increase in water revenues during the
quarter primarily reflects:  (a) an increase, as of July 1, 1998, in the lease
rate being paid by Cucamonga from $351.75 to $354.00 per acre foot; and (b) an
increase, effective January 1, 1998, in the Company's effective interest in
Fontana Union from 55.66% to 57.33%, due to a decline in the number of Fontana
Union shareholders taking water.

  During the first nine months in 1998, the Company continued its litigation
with Cucamonga in San Bernardino County Superior Court to resolve a dispute over
the interpretation of the Cucamonga Lease.  The dispute centers on the Company's
assertion that either the MWD Rate in the Cucamonga Lease was discontinued on
July 1, 1995, or that the Lease Rate should be interpreted to include all the
changed rates and items implemented by Metropolitan Water District of Southern
California ("MWD") since July 1, 1995.  A five-day trial on the matter was held
in March 1998.  After the trial, the Court ruled, in favor of the Company, that
the rate on which the Cucamonga Lease had been based was discontinued effective
July 1, 1995.  Therefore the terms of the Cucamonga Lease require the parties to
negotiate in good faith a new substitute rate.  If the parties are unable to
agree on a substitute rate, the matter in effect goes to arbitration.  There is
no specified time period in which the new substitute MWD rate must be
established.  Cucamonga continues to pay under the terms of the Cucamonga Lease,
but at a rate substantially less than the Lease Rate that the Company maintains
it is entitled to receive pursuant to the Cucamonga Lease.

  Property redevelopment revenues were $1,145,000 for the first nine months of
1998 compared to $1,114,000 for 1997.  The 3% increase from 1997 is primarily
the result of the reversal of an expense accrual from 1997 ($142,000) and an
increase in revenue from the sewer treatment plant ($22,000) being partially
offset by lower aggregate sales and tenant revenue at Eagle Mountain ($55,000)
and decreases in iron ore sales from the California Mines ($76,000).

  Income from equity method investments was $1,515,000 for the first nine months
of 1998 compared to $2,227,000 for 1997.  The $712,000 decrease reflects lower
equity income from PMI due to the shifting of race events (i.e., the CART Race
at the California Speedway) from the 3rd to the 4th quarter ($510,000) plus the
elimination of the management fee which the Company received from PMI through
March 31, 1997, ($162,000) being partially offset by equity income from the
WVMRF which opened in January of this year ($40,000).

  Interim Activities.  Revenues from interim activities for the first nine
months of 1998 were $981,000 compared to $1,232,000 for 1997.  The 20% decrease
in revenues from interim activities in 1998 is primarily attributable to:  (a)
lower revenues from tenant rental and services, and scrap and metallics sales at
the Mill Site due to the continuing real estate re-development activities being
conducted there ($211,000); and (b) lower tenant service and miscellaneous
revenue at Eagle Mountain ($40,000).

  Resource Operating Costs.  Resource operating costs are those costs directly
related to the resource revenue sources.  Total resource operating costs for the
first nine months of 1998 increased to $2,738,000 from $2,623,000 in 1997.
Operations and maintenance costs for 1998 were $997,000 compared to $988,000 for
1997.  The 1% increase in 1998 operations and maintenance costs was primarily
due to higher maintenance and supplies costs for buildings and equipment
($9,000).  Administrative support expenses for the first nine months of 1998
increased 6% to $1,741,000 from $1,635,000 for 1997.  This increase was
primarily due to higher outside legal costs ($190,000) principally associated
with the Cucamonga Lease and the Mill Site, plus higher depreciation expense
mainly related to the recently completed sewer plant improvements at the Mill
Site ($54,000) being partially offset by lower insurance expense ($96,000) and
lower employee compensation expenses ($34,000).

                                       10
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  Corporate General and Administrative Expenses.  Corporate general and
administrative expenses for the first nine months of 1998 increased less than 1%
to $3,089,000 from $3,087,000 for 1997.  The slight increase is primarily due to
higher professional and outside consulting expenses ($152,000) being partially
offset by lower payroll and related expenses due to the retirement, at the end
of 1997, of the Company's president and the distribution of his duties amongst
the remaining officers ($89,000) plus lower insurance, depreciation and office
expenses ($61,000).

  Net Interest Expense.  Net interest expense for the first nine months of 1998
was $728,000 compared to $696,000 in 1997.  The increase was due primarily to:
higher interest expense ($100,000) associated with the $2,650,000 in additional
long term debt ($7,750,000 in additional borrowings under the Company's Union
Bank revolving-to-term credit facility less the payoff of the Lusk note
($5,102,000) which occurred in June 1998; and lower capitalized interest expense
relating to the development of the Mill Site ($180,000) being partially offset
by a decrease in the amortization of deferred loan fees ($249,000).

  Pre-Tax Loss and Income Tax Provision.  The Company recorded income before
income tax provision of $600,000 for the first nine months of 1998, a 63%
decrease from the $1,629,000 recorded in 1997.  An income tax provision of
$259,000 was recorded in the first nine months of 1998 as compared with the
$706,000 recorded in 1997.

  Net Income.  For first nine months of 1998, the Company reported net income of
$341,000, or $.03 per share, a 63% decrease from the net income of $923,000, or
$.09 per share, reported for 1997.

                         Section 2:  Financial Position
                                        
  Cash, Cash Equivalents and Short-Term Investments.  The Company defines cash
equivalents as highly liquid debt instruments with original maturities of 90
days or less.  Cash and cash equivalents decreased $2,058,000 to $2,272,000 at
September 30, 1998 from $4,330,000 at December 31, 1997.  Included in cash and
cash equivalents is $1,746,000 and $1,984,000 held solely for the benefit of MRC
at September 30, 1998 and December 31, 1997, respectively.  The decrease in cash
and cash equivalents is primarily due to:  (a) capital expenditures
($3,507,000); (b) environmental remediation costs ($1,855,000); (c) payoff of
the Lusk note ($5,102,000); and (d) cash used by operations ($343,000) being
mostly offset by:  (a) collections on notes receivable ($406,000); (b)
borrowings under the Company's Union Bank revolving-to-term credit facility
($7,750,000); (c) equity funding by the MRC minority partners ($510,000); (d)
the issuance of common stock relating to the exercise of stock options
($133,000).

  Working Capital.  During the first nine months of 1998, current assets
decreased $2,686,000 to $4,593,000 while current liabilities decreased $562,000
to $11,402,000.  The decrease in current assets resulted from the $2,058,000
decrease in cash and cash equivalents plus a $318,000 decline in accounts
receivable, and the $310,000 reduction in the current portion of the note
receivable.  The decrease in current liabilities resulted primarily from the
payment of accruals.  Included in current liabilities as of September 30, 1998
is $925,000 in accounts payable and accrued liabilities relating to MRC.  As a
result, working capital decreased during the first nine months of 1998 by
$2,124,000 to a negative $6,809,000 at September 30, 1998.

  Real Estate.  Real Estate increased $451,000 during 1998 due to continue
redevelopment of the Mill Site properties.

  Investments.  There was a $1,515,000 increase in the Company's investments in
PMI and WVMRF during the first nine months of 1998.  The increase is due to the
Company's recording of its equity share 

                                       11
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

of PMI's and WVMRF's income of the first nine months of 1998 of $1,475,000 and
$40,000, respectively.

  Other Assets.  The increase in other assets ($2,401,000) is primarily related
to:  (a) capitalized landfill permitting and development costs incurred by MRC
($2,546,000) partially offset by an increase in accumulated depreciation as of
September 30, 1998 ($327,000).

  Environmental Remediation.  As is discussed extensively in Part I, "Property
Redevelopment, Mill Site Environmental", the Company estimates, based upon
current information, that its future remediation and other environmental costs
for the balance of its land and related matters, including groundwater and other
possible third party claims, will be between approximately $18 million and $29
million, depending both upon the ultimate extent of the environmental
remediation and clean-up effort involved and which approved remediation
alternatives are eventually selected.  In order to provide better information
regarding these future remediation and other environmental costs, the Company
elected to restate its balance sheets to show as a separate liability rather
than, as previously, an offset to land, the amount of future environmental
related costs reflected in its financial statements.  The restatement reflects
the original $34.7 million remediation adjustment to land; the $6.6 million
groundwater remediation reserve recorded in 1988 when the Company emerged from
bankruptcy as the reorganized successor of KSC; and the net $12.5 million in
environmental insurance litigation settlement proceeds received in 1995 being
offset by approximately $25.1 million in remediation and other environmental
costs expended through September 30, 1998.  The Company's decision to restate
its balance sheet is based upon, among other things, the more extensive
investigation and remediation activities that have been pursued over the past
three years and the Company's ability to better estimate the probable range of
future remediation and other environmental costs.

  As of September 30, 1998, the total short-term and long-term environmental
liabilities including remediation reflected on the Company's balance sheet were
approximately $28.7 million, the high end of the probable range of future
remediation and other environmental costs, which declined from the $30.7 million
as of December 31, 1997.  The decrease is a result of the $1,990,000 in
remediation and other environmental costs incurred in the first nine months of
1998 on the Mill Site property.

  Although ongoing environmental investigations are being conducted on the Mill
Site Property and management believes it is currently in a position to estimate
with some reasonable certainty future investigation and remediation costs, there
can be no assurance that the actual amount of environmental remediation
expenditures to be incurred will not substantially exceed those currently
anticipated or that additional areas of contamination may not be identified.
Accordingly, future facts and circumstances could cause these estimates to
change significantly.

  Long-term Debt.  As of September 30, 1998, the Company had $11,750,000 in
long-term debt solely comprised of borrowings under the Company's $30,000,000
revolving-to-term credit facility with Union Bank.  The Lusk note, associated
with the purchase of West End and Valley Blvd properties ($5.1 million as of
December 31, 1997), was paid-off in June 1998 with borrowings under the Union
Bank revolving-to-term credit facility.

  Other Long-term Liabilities.  The $1,911,000 decrease in other long-term
liabilities is primarily due to the reduction of the environmental remediation
liability as a result of $1,990,000 in environmental remediation undertaken
during the first nine months of 1998 being partially offset by an increase of
$78,000 in other long term liabilities.

                                       12
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  Minority Interest and Other Liabilities.  As of September 30, 1998, the
Company has recorded $3,388,000 of minority interest relating to MRC in which
the Company had approximately a 74% equity interest.

  Contingent Liabilities.  The Company has contingent liabilities more fully
described in the notes to the financial statements.

  Impact of the Year 2000 Issue.  The Year 2000 Issue is the result of computer
programs being written using two digits rather than four to define the
applicable year.  Any computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.  This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

  Based on a recent assessment, the Company determined that all of the software
currently in use on its computer system will properly utilize dates beyond
December 31, 1999.  The Company has determined that it has no exposure to
contingencies related to the Year 2000 Issue for the services it has sold.

  The Company has initiated informal communications with all of its significant
business associates and vendors to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
Issue.  The Company believes that the failure of its customers to convert their
computer systems to be compliant with the Year 2000 Issue will not have a
material effect on the Company.

                         Section 3:  Business Outlook
                                        
  The statements contained in this Business Outlook are based upon current
operations and expectations.  In addition to the forward-looking statements and
information contained elsewhere in this 10-Q Report, these statements are
forward-looking and, therefore, actual results may differ materially.

  On-Going Operations.  As noted above, the Company's revenues from ongoing
operations are generally derived from the development of the Company's major
long-term projects and investments.  The development of a number of these
projects and investments, such as the 102-year take-or-pay lease with Cucamonga
and the 11.46% equity ownership in PMI, are essentially complete and the Company
is recognizing significant revenues and income from these investments.  The
Company generally expects revenues from these projects and investments to
increase moderately over time as certain key economic factors impacting these
projects and investments increase.  However, recent and continuing economic
turmoil and uncertainty in the United States may adversely impact the
development of long term projects and revenues from projects and investments.
In addition, the Company continues to evaluate these completed projects and
investments in light of how to best provide maximum value to its shareholders.

  In regard to the lease with Cucamonga, the most significant economic factor
affecting future water lease revenues is likely to be adjustments in the Lease
Rate upon which the lease payments under the Cucamonga Lease are calculated.
The Lease Rate had been based upon the MWD rate for untreated, non-interruptible
water which was impacted by on a number of factors, including MWD's need for
funds to finance capital improvements and to cover large fixed overhead costs.
After increasing at an average of nearly 8.6% per year during the past 25 years,
MWD projects that it's effective rate for untreated, non-interruptible water,
including all of the changed rates and charges implemented by MWD since July 1,
1995, will likely increase at significantly less than 5.0% per year for the next
5-10 years.  This reduction is due to a reduced capital budget, lower overhead,
lower borrowing costs and reduced levels of inflation.  Also affecting the
Company's future water lease revenues is the dispute with Cucamonga regarding
the 

                                       13
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

calculation of the Lease Rate.  As a result of the Court's favorable ruling
discussed above, the Company and CCWD must negotiate a new substitute rate which
will then become the basis of the Lease Rate.  Any new substitute rate should be
higher than the current rate that CCWD is paying and, therefore, should result
in the receipt of a portion of the lease payments in dispute as of September 30,
1998, which the Company has fully reserved.

  In regard to the Company's 11.46% investment in PMI, the most significant
factors affecting the Company's future equity income from PMI will be the
increased revenues and net income generated by PMI from the expansion of its
professional motorsports operations.  The continued success of PMI's motor
speedways and PMI's other motorsports related operations will determine the
amount of income from equity method investments the Company reports in the
future.

  The Company is also spending a significant amount of capital in the continued
development of its two other major project and investment opportunities: the
redevelopment of approximately 448 acres (net) of the Company's Mill Site
Property and the re-permitting of the Eagle Mountain Landfill by MRC, the
Company's 74% owned subsidiary.  If it is successful in completing the
development of these two projects as planned, the Company expects to generate
significant future revenues and net income from them.  However, as is noted
elsewhere in this Report, there are also numerous risks associated with
completing the re-permitting of the Eagle Mountain Landfill and the approvals
for the redevelopment of the remaining Mill Site Property that could materially
impact the Company's future revenues and net income from these projects.

  Although neither the Company nor any subsidiary of the Company has any
obligation to invest funds in MRC, the Company has continued to make investments
in MRC.  Through a series of private placements with existing MRC shareholders,
from July 1995 through September 30, 1998, a total of $13.1 million has been
raised by MRC, with Kaiser contributing approximately $9.7 million of that
amount.  The Company's 1998 advances to date approximated $1.6 million out of a
total funding of $2.1 million.  During the fourth quarter of 1998 the Company
will advance $1.2 million out of a total funding of $1.6 million.  The Company
has also approved advances to MRC totaling $1.2 million for 1999.

  In regard to the redevelopment of approximately 448 acres (net) of the Mill
Site Property, the Company is currently undertaking efforts to obtain the
entitlements and permits necessary for a variety of possible commercial and
industrial uses.  These efforts, which will continue into mid-1999, include the
approval of substantial infrastructure and freeway improvements that would
improve the existing access to portions of the Mill Site Property.  In support
of these efforts, the Company expects to spend, in 1998, up to approximately
$6.1 million for required environmental remediation and approximately $1.5
million for real estate entitlement and improvement expenditures.  The $6.1
million to be spent in 1998 for required environmental remediation is a
component of the $18-29 million estimate to complete all remaining required
remediation for the Mill Site Property.  In addition, substantial capital
expenditures beyond the $1.5 million projected for 1998 will be required to
complete the necessary on-site and off-site improvements for the redevelopment
of remaining Mill Site property.

  Capital Resources.  The Company expects that its current cash balances and
short-term investments together with:  (a) cash provided from operating
activities; (b) amounts available under its $30,000,000 revolving-to-term credit
facility (less $4,850,000 reserved for financial assurances required by the DTSC
and relating to environmental remediation on the Mill Site Property) will be
sufficient to satisfy both the Company's near-term operating cash requirements
and to enable the Company to continue to fund the development of its long-term
projects and investments.  As was discussed in more detail above, the Company
expects to commit, in 1998, a total of approximately $8 million for capital
projects and investments.  To the extent that additional capital resources are
required, such capital will be raised 

                                       14
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

through bank borrowings, partnerships, joint venture arrangements, additional
equity or the sale or monetization of assets.

  Improved Cash Flow from use of Net Operating Loss Tax Carryforwards.  Due to
the Company's status as successor to KSC and its use of KSC-related NOLs, income
taxes actually paid by the Company are substantially less than the income tax
provision reported in its financial statements.  The tax benefit associated with
the utilization of these NOLs is reflected as an increase to stockholders'
equity rather than as an increase to net income.  The Company expects that its
use of these NOLs will substantially reduce the cash paid for income taxes until
these NOLs are fully utilized.  The total NOLs at September 30, 1998, are
estimated to be approximately $113 million for federal purposes and $2.4 million
for California purposes.  The federal NOLs expire in varying amounts over a
period from year 2000 to 2010 while the California NOLs expire from 2000 through
2002.

  If within a three-year period, 50% or more of the stock of the Company changes
ownership, the future annual use of NOLs may be limited.  The annual limitation
would be calculated as the product of:  (i) the highest long-term tax-exempt
rate for a designated period prior to the ownership change; and (ii) the market
value of the Company at such time.



                     (This Page Intentionally Left Blank)

                                       15
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                     as of
                                        
<TABLE>
<CAPTION>
                                                         September 30,   December 31,
                                                             1998            1997
                                                         -------------   ------------
                                                          (Unaudited)
<S>                                                      <C>             <C>
ASSETS                                                 
                                                       
Current Assets                                         
   Cash and cash equivalents...........................  $  2,272,000    $  4,330,000
   Accounts receivable and other, net of allowance for                   
    doubtful accounts of $296,000 and $299,000,                          
    respectively.......................................     2,221,000       2,539,000
   Note receivable.....................................       100,000         410,000
                                                         ------------    ------------
                                                            4,593,000       7,279,000
                                                         ------------    ------------
Investment in common stock of Penske Motorsports, Inc..    45,356,000      43,881,000
                                                         ------------    ------------
Investment in Fontana Union Water Company..............    16,108,000      16,108,000
                                                         ------------    ------------
Investment in West Valley MRF..........................     2,549,000       2,509,000
                                                         ------------    ------------
Real Estate                                                              
   Land and improvements...............................    15,621,000      15,621,000
   Real estate in development..........................    40,545,000      40,094,000
                                                         ------------    ------------
                                                           56,166,000      55,715,000
                                                         ------------    ------------
Other Assets                                                             
   Note Receivable.....................................       764,000         860,000
   Landfill permitting and development.................    12,153,000       9,607,000
   Buildings and equipment (net).......................     3,049,000       3,064,000
   Other assets........................................       208,000         242,000
                                                         ------------    ------------
                                                           16,174,000      13,773,000
                                                         ------------    ------------
Total Assets...........................................  $140,946,000    $139,265,000
                                                         ============    ============
</TABLE>

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

                                       16
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                     as of
                                        
<TABLE>
<CAPTION>
                                                       September 30,   December 31,
                                                           1998            1997
                                                       -------------   ------------
                                                        (Unaudited)
<S>                                                    <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY                 
                                                     
Current Liabilities                                  
   Accounts payable..................................  $  1,490,000    $  1,479,000
   Accrued liabilities...............................     3,858,000       4,311,000
   Current portion of long-term debt.................           ---         120,000
   Environmental remediation.........................     6,054,000       6,054,000
                                                       ------------    ------------
                                                         11,402,000      11,964,000
                                                       ------------    ------------
Long-term Liabilities                                                  
   Deferred gain on sale of real estate..............       656,000         656,000
   Accrued liabilities...............................     1,763,000       1,685,000
   Deferred tax liabilities..........................     2,223,000       2,223,000
   Long-term debt....................................    11,750,000       8,982,000
   Environmental remediation.........................    22,684,000      24,673,000
                                                       ------------    ------------
                                                         39,076,000      38,219,000
                                                       ------------    ------------
Total Liabilities....................................    50,478,000      50,183,000
                                                       ------------    ------------
Minority Interest....................................     3,388,000       2,878,000
                                                       ------------    ------------
Commitments and Contingencies                                          
                                                                       
Stockholders' Equity                                                   
   Common stock, par value $.03 per share, authorized                  
    13,333,333 shares; issued and outstanding                          
    10,685,257 and 10,591,240, respectively..........       321,000         318,000
   Capital in excess of par value....................    74,874,000      74,342,000
   Retained earnings since November 15, 1988.........    11,885,000      11,544,000
                                                       ------------    ------------
Total Stockholders' Equity...........................    87,080,000      86,204,000
                                                       ------------    ------------
Total Liabilities and Stockholders' Equity...........  $140,946,000    $139,265,000
                                                       ============    ============
</TABLE>

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

                                       17
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                for the Three and Nine Months Ended September 30
                                  (Unaudited)
                                        
<TABLE>
<CAPTION>
                                                  Three Months Ended       Nine Months Ended
                                                     September 30             September 30
                                                 ----------------------  ----------------------
                                                    1998        1997        1998        1997
                                                 ----------  ----------  ----------  ----------
<S>                                              <C>         <C>         <C>         <C>
Resource Revenues                                                                                         
 Ongoing Operations                                                                                       
  Water resource...............................  $1,176,000  $1,165,000  $3,514,000  $3,462,000
  Property redevelopment.......................     468,000     383,000   1,145,000   1,114,000
  Income from equity method investments........     402,000   1,000,000   1,515,000   2,227,000
                                                 ----------  ----------  ----------  ----------
   Total ongoing operations....................   2,046,000   2,548,000   6,174,000   6,803,000
                                                 ----------  ----------  ----------  ----------
 Interim Activities                                                                  
  Lease, service and other.....................     370,000     429,000     981,000   1,232,000
                                                 ----------  ----------  ----------  ----------
   Total resource revenues.....................   2,416,000   2,977,000   7,155,000   8,035,000
                                                 ----------  ----------  ----------  ----------
Resource Operating Costs                                                             
 Operations and maintenance....................     346,000     357,000     997,000     988,000
 Administrative support expenses...............     508,000     559,000   1,741,000   1,635,000
                                                 ----------  ----------  ----------  ----------
   Total resource operating costs..............     854,000     916,000   2,738,000   2,623,000
                                                 ----------  ----------  ----------  ----------
Income from Resources..........................   1,562,000   2,061,000   4,417,000   5,412,000
                                                                                     
 Corporate general and administrative expenses.     976,000     912,000   3,089,000   3,087,000
                                                 ----------  ----------  ----------  ----------
Income from Operations.........................     586,000   1,149,000   1,328,000   2,325,000
                                                                                     
 Net Interest expense..........................     254,000     276,000     728,000     696,000
                                                 ----------  ----------  ----------  ----------
Income before Income Tax Provision.............     332,000     873,000     600,000   1,629,000
                                                                                     
 Income tax provision                                                                
  Currently payable............................       7,000      28,000      21,000      51,000
  Deferred tax expense credited to equity......     136,000     352,000     238,000     655,000
                                                 ----------  ----------  ----------  ----------
Net Income.....................................  $  189,000  $  493,000  $  341,000  $  923,000
                                                 ==========  ==========  ==========  ==========
Basic Earnings Per Share.......................  $      .02  $      .05  $      .03  $      .09
                                                 ==========  ==========  ==========  ==========
Diluted Earnings Per Share.....................  $      .02  $      .05  $      .03  $      .09
                                                 ==========  ==========  ==========  ==========
Basic Weighted Average Number of Shares                                              
 Outstanding...................................  10,685,000  10,538,000  10,657,000  10,520,000
                                                                                     
Diluted Weighted Average Number of Shares                                            
 Outstanding...................................  10,858,000  10,711,000  10,836,000  10,723,000
</TABLE>

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

                                       18
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     for the Nine Months Ended September 30
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                         1998          1997
                                                     ------------  ------------
<S>                                                  <C>           <C>
Cash Flows from Operating Activities               
 Net income........................................  $   341,000   $   923,000
 Equity income in Penske Motorsports, Inc and                      
  West Valley MRF, LLC.............................   (1,515,000)   (2,065,000)
 Deferred tax expense..............................      238,000       655,000
 Depreciation and amortization.....................      327,000       542,000
 Allowance for doubtful accounts...................       (3,000)       28,000
 Changes in assets:                                                
   Receivables and other...........................      321,000     1,296,000
 Changes in liabilities:                                           
   Current liabilities.............................     (152,000)      516,000
   Long-term accrued liabilities...................      100,000           ---
                                                     -----------   -----------
 Net cash flows from operating activities..........     (343,000)    1,895,000
                                                     -----------   -----------
Cash Flows from Investing Activities                               
 Minority interest and other liabilities...........      510,000     1,260,000
 Proceeds from Mill Site land sale.................          ---     1,500,000
 Note receivable collections.......................      406,000           ---
 Capital expenditures..............................   (3,507,000)   (5,387,000)
 Environmental remediation expenditures............   (1,855,000)   (1,494,000)
 Other investments.................................          ---      (762,000)
                                                     -----------   -----------
 Net cash flows from investing activities..........   (4,446,000)   (4,883,000)
                                                     -----------   -----------
Cash Flows from Financing Activities                               
 Issuance of common stock..........................      133,000       147,000
 Principal payments on note payable................   (5,102,000)   (1,180,000)
 Borrowings under revolver-to-term credit facility.    7,750,000     2,000,000
 Payment of loan fees..............................      (50,000)     (175,000)
                                                     -----------   -----------
 Net cash flows from financing activities..........    2,731,000       792,000
                                                     -----------   -----------
Net Changes in Cash and Cash Equivalents...........   (2,058,000)   (2,196,000)
                                                                   
Cash and Cash Equivalents at Beginning of Year.....    4,330,000     8,482,000
                                                     -----------   -----------
Cash and Cash Equivalents at End of Quarter........  $ 2,272,000   $ 6,286,000
                                                     ===========   ===========
</TABLE>

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

                                       19
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  for the Nine Months Ended September 30, 1998
                                  (Unaudited)
                                        
<TABLE>
<CAPTION>
                                      Common Stock      Capital In
                                  --------------------   Excess of     Retained 
                                    Shares     Amount    Par Value     Earnings      Total
                                  -----------------------------------------------------------

<S>                               <C>         <C>       <C>          <C>          <C>
Balance at December 31, 1997....  10,591,240  $318,000  $74,342,000  $11,544,000  $86,204,000
                                                                                  
   Issuance of shares of                                                          
       Common stock.............      94,017     3,000      294,000          ---      297,000
                                                                                  
   Provision for income tax                                                       
       Credited to equity.......         ---       ---      238,000          ---      238,000
                                                                                  
   Net Income...................         ---       ---          ---      341,000      341,000
                                  ----------  --------  -----------  -----------  -----------
Balance at September 30, 1998...  10,685,257  $321,000  $74,874,000  $11,885,000  $87,080,000
                                  ==========  ========  ===========  ===========  ===========
</TABLE>

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

                                       20
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


Note 1.  BASIS OF PRESENTATION

  The unaudited, consolidated financial statements as of September 30, 1998 and
for the three and nine month periods ended September 30, 1998 and 1997, as well
as related notes should be read in conjunction with the audited consolidated
financial statements and related notes as of and for the year ended December 31,
1997.  In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary (all of which are normal and/or
recurring in nature) to present fairly the Company's financial position at
September 30, 1998, and results of operations and cash flows for the three and
nine month periods ended September 30, 1998 and 1997.

  The Company has reclassified certain 1997 information to conform to the 1998
presentation.


Note 2.  CUCAMONGA LEASE

  The Company, through a wholly-owned subsidiary, Fontana Water Resources, Inc.,
leases its 50.88% ownership of the capital stock of Fontana Union, a mutual
water company, to Cucamonga County Water District ("Cucamonga") pursuant to a
take-or-pay lease (the "Cucamonga Lease") that terminates in the year 2092.  The
Company continued its litigation with Cucamonga in San Bernardino County
Superior Court to resolve a dispute over the interpretation of the Cucamonga
Lease.  The dispute centers on the Company's assertion that either the MWD Rate
in the Cucamonga Lease was discontinued on July 1, 1995, or that the Lease Rate
should be interpreted to include all the changed rates and items implemented by
Metropolitan Water District of Southern California ("MWD") since July 1, 1995.
A five-day trial on the matter was held in March 1998.  After the trial, the
Court ruled, in favor of the Company, that the rate on which the Cucamonga Lease
had been based was discontinued effective July 1, 1995.  Therefore the terms of
the Cucamonga Lease require the parties to negotiate in good faith a new
substitute MWD rate.  If the parties are unable to agree on a substitute MWD
rate, the matter in effect goes to arbitration.  There is no specified time
period in which the new MWD rate must be established.  Cucamonga continues to
pay under the terms of the Cucamonga Lease, but at a rate substantially less
than the Lease Rate that the Company maintains it is entitled to receive
pursuant to the Cucamonga Lease.  The total amount of lease payments in dispute
as of September 30, 1998 is approximately $1,560,000.


Note 3.  SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION

  During the nine months ended September 30, 1998 and 1997 the Company issued
$142,000 and $305,000 of common stock, respectively, for the payment of bonuses
and compensation.

  During the nine months ended September 30, 1997, the Company carried back a
note receivable for $1,443,000 from McLeod Properties, Fontana LLC from the sale
of 15.7 acres of Mill Site real estate.

                                       21
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  During the quarter and nine months ended September 30, 1998 and 1997, Penske
Motorsports Inc. reported the following consolidated earnings:

<TABLE>
<CAPTION>
                                                         Three Months Ended                    Nine Months Ended
                                                            September 30                          September 30
                                                    -----------------------------       -------------------------------
                                                       1998              1997              1998                1997
                                                    -----------       -----------       -----------         -----------
<S>                                                 <C>               <C>               <C>                 <C>
  Total Revenues................................    $35,218,000       $43,974,000       $91,442,000         $95,645,000
 
  Net Income....................................    $ 3,510,000       $ 8,845,000       $12,754,000         $18,263,000
 
  Basic Net Income Per Share....................    $       .25       $       .63       $       .90         $      1.33
 
  Diluted Net Income Per Share..................    $       .25       $       .62       $       .90         $      1.33
 
  Basic Weighted Average Number of Outstanding
   Shares.......................................     14,183,000        14,148,000        14,200,000          13,690,000
 
  Diluted Weighted Average Number of
   Outstanding Shares...........................     14,183,000        14,190,000        14,230,000          13,718,000
</TABLE>

Note 4.  LONG TERM DEBT

  In June 1998, the Company paid off the remaining $5,000,000 of Lusk Note,
utilizing $5,000,000 in additional borrowings under the Company's $30,000,000
revolving-to-term credit facility with Union Bank.  As of September 30, 1988,
the Company has $11,750,000 of long term debt, all of which is under its
$30,000,000 revolving-to-term credit facility with Union Bank.


Note 5.  COMMITMENTS AND CONTINGENCIES

Environmental Contingencies

  The Company estimates, based upon current information, that its future
remediation and other environmental costs, including groundwater and other
possible third party claims, will be between approximately $18 million and $29
million, depending upon which approved remediation alternatives are eventually
selected.

  Although ongoing environmental investigations are being conducted on the
Company's property, and management believes it is currently in a position to
estimate with some reasonable certainty future investigation and remediation
costs, there can be no assurance that the actual amount of environmental
remediation expenditures and incurred will not substantially exceed those
currently anticipated or that additional areas of contamination may not be
identified.  Accordingly, future facts and circumstances could cause these
estimates to change significantly.  The Company anticipates recovery of the
remediation costs incurred through redevelopment of the property, primarily in
connection with specific redevelopment projects or joint ventures.  Further, the
Company has provided certain financial assurances to the DTSC in connection with
anticipated remediation activities, the primary one being the dedication of
approximately $4.8 million of Kaiser's Union Bank Credit facility.

  While the Company has monitored certain groundwater wells in the past, the
DTSC requested and the Company will implement a supplemental groundwater
monitoring system.  The Company previously settled obligations of groundwater
contamination with the California Regional Water Quality Control 

                                       22
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

Board. The settlement required a $1,500,000 cash payment by the Company, which
was made in February 1994, and the contribution of 1,000 acre feet of water
annually for 25 years to a water quality project. These water rights are
unrelated to those leased to Cucamonga. In 1995, the Company contributed 18,000
acre feet of its water in storage thus satisfying the first 18 years of its
obligation. The Company remains contingently liable for any impacts the
groundwater plume may have on water wells owned by third parties. The City of
Ontario, California has commenced litigation against the Company alleging that
the Company has contaminated one of its municipal wells.


                                    PART II

                                        
Item 1.  LEGAL PROCEEDINGS

  As discussed in the Company's Form 10-K Report for 1997 and previous 10-Q
Reports for 1998, the Company is engaged in certain claims and litigation. There
were no material developments in any legal proceeding in the third quarter of
1998 except as noted below:

  Eagle Mountain Landfill Project EIR Litigation, Appeal and Related Matters.
In February 1998, the San Diego County Superior Court ruled adverse to the
Company and MRC in finding that the new environmental impact report for the
Landfill Project continued to be deficient in two major areas:  (i) the analysis
of the impacts to the protected desert tortoise; and (ii) the impacts to Joshua
Tree National Park.  An appeal to Judge McConnell's decision has been filed,
with briefing anticipated to be completed by year-end.  Related to the Landfill
Project EIR litigation, opponents to the landfill commenced action to seek the
award of up to approximately $450,000 in attorneys' fees and to seek to hold MRC
and the Company in contempt of Court for railroad maintenance activities that
are alleged to be in violation of the San Diego Superior Court's orders in the
case.  On August 7, 1998, the Court awarded approximately $238,000 in attorneys'
fees and costs to project opponents.  On September 3, 1998, the San Diego
Superior Court reconsidered the previous award of attorneys' fees and costs, and
increased the award to approximately $300,000.  This award of attorneys' fees
and costs has been appealed.  Payment of these fees will be held in abeyance
until a final decision in the current appeal.  Although the final resolution of
this decision is uncertain due to the current appeal, management believes the
ultimate outcome will not be a material financial adverse impact to the Company.
In addition, on September 3, 1998, the San Diego Superior Court ruled that the
Company's and MRC's maintenance activities in connection with the railroad did
not violate previous orders in the case.  For additional information on this
litigation, see "Introduction - Business Update - Waste Management - Eagle
Mountain" of this 10-Q Report, as well as the Company's 1997 10-K Report and
previous 1998 10-Q Reports.

  Completion of Settlement with Regional Water Quality Control Board. In 1993
the Company reached a settlement with the California Regional Water Quality
Control Board - Santa Ana Region with regard to the former Kaiser Steel
Corporation's responsibility for contribution to a dissolved solids plume in the
groundwater. Under the terms of the settlement agreement, the Company was to pay
$1.5 million and contribute 25,000 acre feet of water to a regional de-salter
project over 25 years. In 1994, the Company timely paid its required cash
payment and in 1995 the Company contributed 18,000 acre feet of water in storage
which satisfied the Company's obligation under the settlement agreement for the
first 18 years. In September 1998, the Company contributed an additional 7,000
acre of water in storage to the de-salter project. With this contribution of
water, the Company has fully satisfied all of its obligations to the Regional
Water Quality Control Board under the terms of the settlement agreement.

                                       23
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

  Mushegain Litigation.  The Company was recently named as a defendant in
Federal court litigation alleging the improper deposit of materials on property
owned by plaintiffs.  [Mary Mushegain, as Trustee of the Mushegain 1988 Family
Trust dated February 7, 1989, as Trustee of the Mushegain Survivor's Trust dated
January 9, 1996, as Trustee of the Mushegain Grandchildren's Trust dated January
9, 1996, and as Trustee of the Mushegain Marital Trust dated January 9, 1996 -
Plaintiffs, vs. The California Speedway Corporation; a Delaware corporation, et
al; United States District Court, Central District of California; Case No. 98-
6786 ER (Mex)].  In summary, the site in question was leased to a company that
has ceased business operations.  This bankrupt company, pursuant to a contract
with The California Speedway Corporation, performed wood recycling work in
connection with the demolition of the structures on the property acquired by The
California Speedway Corporation.  It is alleged that wood and other materials,
including some hazardous materials such as the constituents of rail road ties,
were eventually placed into trenches on the property.  The Company vigorously
denies that it may have any responsibility for any work performed by a
contractor of The California Speedway Corporation and is vigorously defending
the litigation.


Item 2.  CHANGES IN SECURITIES

         None.


Item 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.


Item 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         None.


Item 5.  OTHER INFORMATION

         A.  See the "Introduction" section of this Form 10-Q Report.

         B.  During the third quarter, the Company's Special Committee continued
             its work, assisted by Merrill Lynch and other advisors, in
             evaluating strategic alternatives for the Company and its assets.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         A.  Exhibits
             --------

             Exhibit 27 - Financial Data Schedule for third quarter 10-Q.

         B.  Reports on Form 8-K.
             --------------------
 
             None.

                                       24
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES

                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             KAISER VENTURES INC.
                                       
                                       
Dated:  November 12, 1998                    /s/ James F. Verhey
                                             ----------------------------
                                             James F. Verhey
                                             Principal Financial Officer

                                       25