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SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A



Amendment No. 1



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE
ACT OF 1934



For the Quarter Ended June 30, 2001



Commission File Number 0-18858



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KAISER VENTURES INC.

(Exact name of registrant as specified in its charter)



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



3633 East Inland
Empire Blvd., Suite 480

Ontario, California 91764

(Address of principal executive offices and zip code)



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



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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 August 3, 2001, the Company had 6,559,487 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).



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KAISER VENTURES INC. AND SUBSIDIARIES



EXPLANATORY NOTE



Pursuant to this Report on Form 10-Q/A, Kaiser Ventures LLC, as the successor to Kaiser Ventures Inc. (the Company), amends Part I of the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, as filed by the Company on August 13, 2001 (the Original 10-Q) to reflect the changes described below.



Effective July 1, 2001, the Company changed its method of accounting for
premium costs and claims under a twelve-year insurance policy purchased June 30, 2001, to amortize the premium costs over the term of the underlying prospective insurance policy and record insurance recoveries on known claims liabilities when
recoveries are estimable and claims liabilities are accepted by the insurance carrier. Previously, the Company had capitalized the cost of the policy as prepaid insurance in other assets and reduced the prepaid insurance as claims were paid and
insurance recoveries were collected.



See Note 1 to the
Consolidated Financial Statements, Accounting Change, for more detail. Conforming changes reflecting the foregoing are made in Part I - Item 1. FINANCIAL STATEMENTS (and footnotes thereto) and Item 2. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.



In
addition, the Company made non-substantive edits to the Original 10-Q.



Except for the foregoing, no other information included in the Original 10-Q is amended in this Form 10-Q/A. All information in this Quarterly Report on Form 10-Q/A is as of June 30, 2001 or August 13, 2001, the date of the filing of the
Original 10-Q, as required, and does not reflect, unless otherwise explicitly noted, any subsequent information or events occurring after such dates, nor does it otherwise purport to modify or update the disclosure contained in the Original 10-Q.



(REMAINDER OF
THIS PAGE INTENTIONALLY LEFT BLANK)



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TABLE OF CONTENTS TO FORM 10-Q/A



|           |  |                            |  |                                                                                       |  |     
|---------- |  | -------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                            |  |                                                                                       |  | PAGE
|PART I     |  |                           
|           |  |                           
|           |  | FORWARD-LOOKING STATEMENTS |  | 1                                                                                    
|           |  |                            | 
|           |  | Item 1.                    |  | FINANCIAL STATEMENTS                                                                  |  | 2/15
|           |  |                            | 
|           |  | Item 2.                    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 2   
|           |  |                           
|           |  | FINANCIAL STATEMENTS       |  |                                                                                      
|           |  |                            | 
|           |  |                            |  | 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                                                                     |  | 24  
|           |  |                            | 
|           |  | Item 2.                    |  | CHANGES IN SECURITIES                                                                 |  | 25  
|           |  |                            | 
|           |  | Item 3.                    |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 25  
|           |  |                            | 
|           |  | Item 4.                    |  | SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS                                     |  | 25  
|           |  |                            | 
|           |  | Item 5.                    |  | OTHER INFORMATION                                                                     |  | 25  
|           |  |                            | 
|           |  | Item 6.                    |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 25  
|           | 
|SIGNATURES |  | 27                        



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, 2000, as filed with the Securities and Exchange 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 Executive Vice
President-Administration, at 3633 East Inland Empire Boulevard, Suite 480, Ontario, California 91764.



Readers are encouraged to read this Form 10-Q/A Report in conjunction with the Companys 10-K Report for the period ended December 31, 2000, and
the Companys 10-Q Report for the period ended March 31, 2001, since the information contained herein is often an update of the information contained in such reports.



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PART I



FORWARD-LOOKING STATEMENTS



Except for the historical statements and discussions contained herein, statements contained in this 10-Q/A 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 press release, 10-K, Annual Report to Stockholders, 10-Q or
8-K Report of the Company and any amendments thereof or our website, may include forward-looking statements. In addition, other written or oral statements, which constitute forward-looking statements, have been made and may be made by us in the
future. Forward-looking statements include, without limitation, any statement that forecast, indicate, anticipate or imply future results, performance, events or achievements. When used or incorporated by reference in this 10-Q/A Report or in other
written or oral statements, the words anticipate, believe, estimate, expect, project and similar expressions are intended to identify forward-looking statements. Such statements are subject
to certain risks, uncertainties and assumptions. We believe that our assumptions are reasonable. Nonetheless, it is likely that at least some of our assumptions will not come true. 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 activities; the failure of the bankruptcy discharge granted to us to address
claims and litigation that relate to the pre-bankruptcy activities of Kaiser Steel Corporation; the failure, in whole or in part, of our business plans to, develop, sell or otherwise deal with any major asset of the Company; the failure for any
reason of CCG Ontario, LLC to honor the terms of its agreements with us in connection with the sale of the Mill Site real estate to CCG Ontario, LLC, including its assumption of liability and responsibility for certain environmental obligations and
duties associated with the Mill Site; the success of any material litigation such as legal challenges to the completed federal land exchange for the proposed Eagle Mountain landfill project; insurance coverage disputes; the risks and contingencies
associated with the planned sale of the Eagle Mountain project to the Los Angeles County Sanitation District; and/or the challenge, reduction or loss of any claimed tax benefits. The risks included herein are not exhaustive. Other sections of this
10-Q/A Report include additional factors that could adversely impact the Company and its projects. Readers are cautioned not to put undue reliance on forward-looking statements as a prediction of future actual results. We disclaim any intention to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



ADDITIONAL INFORMATION

|
|



Readers of this 10-Q/A Report are encouraged to read the entire report, together with our 2000 10-K Report and First Quarter 10-Q Report for 2001 for background information and a complete understanding as to material
developments concerning the Company.



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Item 1. FINANCIAL STATEMENTS



The
Financial Statements are located at the end of Item 2., beginning on Page 15 of this Report and are incorporated herein by this reference.



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



BUSINESS UPDATE



General



Kaiser Ventures Inc., including its wholly-owned subsidiaries, unless otherwise provided herein (collectively, Kaiser or the Company) has historically operated as an asset development company
based in Southern California. The Company is the reorganized successor to several of the assets of Kaiser Steel Corporation which was an integrated steel manufacturer that filed for bankruptcy in 1987. The Companys current emphasis is on its
remaining principal assets: (i) an 80% interest in Mine Reclamation, LLC (MRC), the developer of the Eagle Mountain Landfill Project (the Landfill Project), with the Landfill Project under contract to be sold to Los Angeles
County Sanitation District No. 2 (the District) for $41 million; (ii) the approximately 9,144 acre idle iron ore mine in the California desert (the Eagle Mountain Site), which includes the associated 1,100 acre town of Eagle
Mountain (Eagle Mountain Townsite) and approximately 4,6000 acres of land leased to MRC for the Landfill Project that is being sold to the District; and (iii) a 50% joint venture interest in the West Valley MRF (West Valley
MRF or WVMRF), a transfer station and recycling facility located on land acquired from the Company. In addition, the Company has a substantial cash position as a result of the sale of its interest in Fontana Union Water Company
(FUWC) on March 6, 2001, for $87.5 million. As of December 31, 2000, the Company had approximately $43 million in regular federal net operating loss (NOLs) carryforwards, however, due to the Companys sale of its FUWC
stock in March 2001, it is anticipated that all of the existing NOLs will be utilized in 2001.



Future Plans and Conversion Proposal



Since 1988, the Company has been developing the assets it received out of the Kaiser Steel Corporation bankruptcy and then selling them at such time as the Company believes that it can achieve maximum
stockholder value for a particular project or asset. During 2000, the Company: (i) sold the balance of all of the Companys real estate at the former Kaiser Steel Corporation mill site near Fontana, California, except for an approximate five
acre parcel; (ii) entered into an agreement to sell the Landfill Project to the District, with the Company and the District working toward a closing on such transaction; (iii) entered into an agreement for the sale of the Companys interest in
FUWC to Cucamonga County Water District (Cucamonga), which transaction was completed on March 6, 2001; and (iv) paid a $2.00 cash distribution to its stockholders.



With the sale of the assets as outlined above, the Companys management reevaluated the Companys future strategy
and business plan, as well as the timing and alternative means of distributing cash to its stockholders. In July 2001, the Companys Board of Directors approved a plan that would convert the Company into a limited liability company pursuant to
a merger between the Company and Kaiser Ventures LLC (Kaiser LLC). If the conversion proposal (the Conversion Proposal) is approved by



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the Companys stockholders, the Companys stockholders would receive $10.00 in cash plus one Class A membership unit (Class
A Units) in Kaiser LLC per share of common stock in the Company. By converting to a limited liability company, the Company believes it will be able to recognize a significant tax loss from MRC in 2001, distribute $10.00/share in cash to
stockholders on a tax advantaged basis, avoid the double taxation generally imposed on future income and deal more expeditiously with the Companys remaining assets. If effected, immediately after the conversion, the holders of the Class A
Units (on a fully diluted basis) would be the same as the holders of the common stock in the Company. The assets and liabilities of Kaiser LLC would be the same as those of the Company, except that the stockholders of the Company would receive
$10.00/share in cash, thereby reducing the cash position of Kaiser LLC. The Company filed draft documents for the Conversion Proposal with the Securities and Exchange Commission (SEC) on July 16, 2001. The SEC is reviewing those
documents and the Company expects to receive comments on them. This summary of the Conversion Proposal does not provide all of the important information with respect to the Conversion Proposal. Once the date of the stockholders meeting is set,
the Company will be mailing a proxy statement to the address of record of each of its stockholders. That proxy statement will contain important information about the Conversion Proposal, and the Companys stockholders should carefully review
the proxy statement, and the documents to which it refers, before voting with respect to the Conversion Proposal. The proxy statement and all documents filed as an annex to the proxy statement will also be available for free at the SECs
website http://www.sec.gov. It is currently anticipated that the stockholders meeting will be held this Fall.



At its July 16thboard meeting, the Companys Board of Directors also approved a stock repurchase program whereby the Company may, from time to time, purchase its stock in the open market. A committee appointed by the Board may implement this plan in its
discretion. As of the date of this report, the Company has made no open market stock purchases.



New Insurance Policy



One of the goals identified by the Companys Board of Directors in its cash maximization strategy, approved in September 2000, was to reduce the liabilities associated with existing and potential future environmental and other similar
types of claims. In furtherance of such goal, the Company purchased an insurance policy, effective June 30, 2001, that is designed to provide broad commercial general liability, pollution legal liability, and contractual indemnity coverage for
Kaisers ongoing and historical operations. The policy has a twelve (12) year term and limits of $50,000,000, in the aggregate for defense and indemnity, with no deductible or self-insured retention. The policy is designed to provide coverage
in excess of the Companys existing and historic insurance policies; however, to the extent that these other insurance policies are not responsive to a loss, the newly-purchased policy will provide first dollar coverage for a loss resulting
from property damage, personal injury, bodily injury, cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that are brought against the Company.



This policy supplements the Companys previously existing insurance by
providing additional policy limits and coverage for uninsured aspects of the Companys current insurance program, including, among others, uninsured gaps arising from insurance company insolvencies, deductibles, or self-insured retentions. The
policy is specifically intended to provide additional coverage for Kaisers known and/or potential liabilities arising from pollution conditions or asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled
indemnity obligations of Kaiser arising from, e.g., prior corporate transactions and real estate sales. The aggregate cost for this policy was approximately $5.8 million, of which KSC Recovery paid $2.0 million and the Company paid the balance of
approximately $3.8 million.



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Investment in Fontana Union Water Company



Effective March 6, 2001, after obtaining stockholder approval, the Company completed the sale of its approximately 53.71% ownership interest in the
capital stock of FUWC, a mutual water company, to Cucamonga for $87.5 million. In addition, the Company received approximately $2.5 million in payments under the lease of FUWC shares to Cucamonga. With the sale of the FUWC interest, the lease with
Cucamonga was effectively terminated and the rate dispute litigation between the Company and Cucamonga was settled.



In connection with the sale of the Companys ownership interest in FUWC, the Company terminated its $30 million credit facility with Union Bank,
which was secured by FUWC stock and the Cucamonga Lease.



The Mill Site
Property



The only remaining mill site property owned by
the Company is an approximate five acre parcel referred to as the Tar Pits Parcel. CCG Ontario, LLC purchased approximately 588 acres of the mill site property from the Company in August 2000 and, in that transaction, assumed substantially all of
the Companys environmental liabilities associated with the purchased property and certain other environmental liabilities and risks associated with the former Kaiser Steel Corporation mill site, including the Tar Pits Parcel. Remediation of
the Tar Pits Parcel is expected to commence in the third quarter of this year.



Lake Tamarisk and Mining Properties



Lake Tamarisk is an incorporated community located two mile northwest of Desert Center, California and approximately 8 miles from the Eagle Mountain Project. The Company, through a wholly owned subsidiary, owns 77 improved lots
including one residential structure, and a 240 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk (the Lake Tamarisk Properties). The Company is marketing this property for sale.



Effective February 1, 2001, the Company sold approximately 190 acres near
Afton Canyon, California known as the Dunn Siding, the Silver Lake Mine west of Baker, California, which is a small producing iron ore mine, and some mining claims known as the Bessemer and Morris Lode properties. In this sale transaction, the
Company received a gross sales price of approximately $2 million, consisting of approximately $726,000 paid in cash at closing and the balance represented by a secured promissory note from the purchaser payable over five years accruing interest at a
rate of 8% per annum.



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. A materials recovery facility or MRF sorts through
source separated municipal solid waste to recover items that may sold into a commercial market such as paper, cardboard, glass and aluminum cans. Phase 1 of the West Valley MRF includes a 62,000 square foot building, sorting equipment, and related
facilities for waste transfer and recycling services capable of process approximately 2,000 tons per day of non-hazardous commercial and municipal solid waste.



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Given the level of demand for the services of the West Valley MRF, the Company and Burrtec decided in 2000 to expand the
West Valley MRF. Construction of Phase 2 of the West Valley MRF has now been completed and it is fully operational. Phase 2 expanded the processing capacity for waste transfer and recycling services of the West Valley MRF from approximately 2,000
tons per day to 3,500 tons per day. Phase 2 involved constructing an approximately 80,000 square foot addition to the existing facilities, the purchase and installation of certain related equipment, including rolling stock, and the rehabilitation
and relocation of certain existing equipment. The cost of the expansion was approximately $10 million.



Eagle Mountain Landfill Project



Background.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. The Company currently owns 80% of the Class B units and 100% of the Class A units of MRC. In December 1999, the Landfill Project received its last major permit necessary to construct
and operate a rail haul landfill. The Landfill Project is permitted to receive a maximum of 20,000 tons per day of municipal solid waste for up to 88 years.



Sale of Landfill Project. Effective August 9, 2000, MRC, entered into an agreement for the sale of the Eagle Mountain Landfill Project (the
Landfill Project Sale Agreement) with the District. Under this agreement, the Landfill Project (which includes the Companys royalty payments under the MRC Lease) would be sold for $41 million, with an initial closing currently
anticipated to occur in the third quarter of 2001. However, payment of the purchase price will be delayed as described in more detail below. The sale of the Landfill Project is subject to the results of the Districts due diligence and
satisfaction of numerous contingencies. The contingencies include, but are not limited to, obtaining the transfer of the Landfill Projects permits to the District and obtaining all necessary consents to the transaction. The Company agreed to
vote its interest in MRC in favor of the sale of the Landfill Project to the District on its current terms.



Upon closing, $39 million of the total purchase price will be deposited into an escrow account and will be released when federal litigation challenging
the completed federal land exchange is fully resolved, as reported in our previous filings with the SEC. Interest will accrue on this portion of the purchase price and will be paid out to MRC on a quarterly basis beginning with a successful outcome
of the federal litigation at the Federal District Court level. The remaining $2 million of the purchase price will also be placed into an escrow account upon closing and will be released upon the later of (1) the release of the $39 million as
described above, or (2) the permitting approvals of the Districts Puente Hills landfill for its remaining 10 years of capacity. Receipt of the purchase price, in whole or in part, if at all, could be delayed for a substantial period of time
pending satisfactory resolution of these contingencies.



The
District has undertaken extensive due diligence on the Landfill Project and is waiting to receive several items, including final land and right-of-way surveys. In addition, the parties continue to negotiate the terms of various ancillary agreements
such as joint use agreements for access, utilities, and the Eagle Mountain railroad and are waiting to receive of various third party consents to the transfer of various assets. With the sale of the Landfill Project, the Company will continue to own
more than 4,000 acres in the Eagle Mountain area, including the Eagle Mountain Townsite. As of the date of the 10-Q Report, the closing date is currently scheduled to occur in the third quarter of 2001. However, it is likely that the closing will be
delayed for several months. Interest began to accrue on $39 million of the purchase price



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on May 3, 2001. However, since the transaction has not closed and due to the risks associated with receipt of the ultimate purchase price,
the Company has not reflected the accrued interest in its financial statements.



The foregoing summary of the Landfill Purchase Agreement is qualified in its entirety by the Landfill Purchase Agreement filed as an exhibit to the Companys second quarter 2000 10-Q Report and by Exhibit 10.1 to
this 10-Q/A Report.



Landfill Project Litigation.Currently, the only pending litigation involving the Landfill Project concerns two lawsuits filed in Federal District Court located in Riverside County, both of which challenge the completed federal land exchange and requesting its reversal.
There were no material developments in the second quarter with respect to this litigation.



Risks.As is discussed in this 10-Q/A Report and in more detail in the Companys 2000 Form 10-K Report, there are numerous risks associated with MRC and the Landfill Project. There are also
numerous risks and contingencies associated with the pending sale of the Landfill Project to the District. There can be no assurance that the sale to the District will occur or that the current terms of the pending transaction may not be modified as
a result of future discussions with the District or as to the timing of the receipt of the purchase price. In addition, there are litigation risks associated with the current federal land exchange litigation, including reversal of the completed land
exchange which would materially and adversely affect MRCs ability to complete the sale of the Landfill Project.



OPERATING RESULTS



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 FUWC to Cucamonga. However, the lease with Cucamonga terminated effective March 6, 2001, with the sale of the Companys interest in FUWC to Cucamonga. Income from equity method investments reflect Kaisers share
of income related to its investment in the West Valley MRF.



Interim
Activities (net)



Revenues from interim
activities are generated from various sources. Significant components of interim activities include water and waste water treatment revenues, 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 at the Mill Site; housing rental income, aggregate and rock sales and lease payments for the minimum security prison at the
Eagle Mountain Townsite; royalty revenues from iron ore shipments from the Companys iron ore mine in California (the Silver Lake Mine) 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. Due to the interim nature of these activities, the Company is presenting these revenues net of their related expenses.
No revenues and expenses associated with the Mill Site Property and only $39,000 of net revenues associated with the Silver Lake Mine were recorded during 2001 due to the closing of the sales of these properties.



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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 Part I, Item 1. BUSINESS for a discussion of recent material events affecting the Companys revenue sources.



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Results of Operations



Analysis of Results for the Quarters Ended June 30, 2001 and 2000



An analysis of the significant components of the Companys resource revenues for the quarters ended June 30, 2001 and 2000 follows:



|                                                             |  |      |         |   |      |   |           |              |  |      |   
|------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | --------- | ------------ |  | ---- | --
|                                                             |  | 2001 |         |   | 2000 |   |           | % Inc. (Dec) | 
|Ongoing Operations                                           |  |      |         |   |      |   |           |              |  |      |   
|Water Resource                                               |  | $    |        |   |      | $ | 1,155,000 |              |  | (100 | )%
|Deferred gain on Mill Site land sales                        |  |      | 26,000  |   |      |   |          |              |  | 100  | % 
|Income from equity method investment in West Valley MRF, LLC |  |      | 217,000 |   |      |   | 479,000   |              |  | (55  | )%
|                                                             |  |      |         |   |      |   |           |              |  |      |   
|Total ongoing operations                                     |  |      | 243,000 |   |      |   | 1,634,000 |              |  | (85  | )%
|                                                             |  |      |         |   |      |   |           |              |  |      |   
|Interim Activities (net)                                     |  |      |         |   |      |   |           |              |  |      |   
|Lease, service and other                                     |  |      | (75,000 | ) |      |   | (41,000   | )            |  | (83  | )%
|                                                             |  |      |         |   |      |   |           |              |  |      |   
|Total resource revenues                                      |  | $    | 168,000 |   |      | $ | 1,593,000 |              |  | (89  | )%
|                                                             |  |      |         |   |      |   |           |              |  |      |   



Resource
Revenues. Total resource revenues for the second quarter of 2001 were $168,000 compared to $1,593,000 for 2000. Revenues from ongoing operations decreased by 85% for the quarter to $243,000 from $1,634,000 in 2000, while the loss from interim
activities (net of related expenses) increased 83% to $75,000 from $41,000 in 2000.



Ongoing Operations. Water lease revenues under the Companys 102-year take-or-pay lease with Cucamonga were $0 during the second quarter of 2001 compared to $1,155,000 for 2000. The absence of water lease
revenues during for the second quarter reflects the sale of the Companys FUWC stock, which closed March 6, 2001.



The Company recognized deferred gain of $26,000 from the sales of certain Mill Site properties that closed in 1997 and 1999.



Income from equity method investments decreased by $262,000 to $217,000 due
to lower equity income from the WVMRF during the second quarter of 2001 compared to the same period 2000. This decrease in equity income in the WVMRF is mainly due to: (a) operating the facility at full capacity during the expansion of the facility
which lead to certain operational inefficiencies; (b) a 33% drop in commodity prices of recyclable products sold; and (c) higher operating and maintenance expenses. The expansion has been completed and the new equipment should be in full operation
during the third quarter of 2001.



Interim Activities
(net). Interim activities net of expenses for the second quarter of 2001 were a net expense of $75,000 compared to a net expense of $41,000 for the same period in 2000. The 83% increase in net interim expense in 2001 is primarily attributable to
lower net operating revenue at the California Mines which were sold in early February ($63,000) being partially offset by the termination of interim activities at the Mill Site Property due to the sale to CCG in August 2000 ($30,000).



Resource Operating Costs. Resource operating costs are those costs
directly related to the resource revenue. Total resource operating costs for the second quarter of 2001 decreased to $0 from $63,000 in 2000. This decrease was due to the sale of the Companys FUWC stock on March 6, 2001.



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Corporate General and Administrative Expenses.Corporate general and administrative expenses for the second quarter
of 2001 increased 38% to $1,085,000 from $785,000 for 2000. The increase is primarily due to higher legal, accounting and professional expenses relating to the proposed corporate restructuring ($176,000) and non-cash variable stock option accounting
($117,000).



Net Interest Income. Net interest income
for the second quarter of 2001 was $1,012,000 compared to $48,000 in 2000. The change was due primarily to: (a) an increase in interest income ($926,000) relating to the Companys higher cash and investment balances and a decrease in interest
expense ($38,000) associated with the Companys $30,000,000 revolving-to-term credit facility with Union Bank which was terminated prior to the Companys sale of its FUWC stock.



Pre-Tax Loss and Income Tax Provision. The Company recorded income before income tax provision of $95,000 for the
second quarter of 2001, versus $793,000 recorded in 2000. An income tax provision of $25,000 was recorded in the second quarter of 2001 compared to $317,000 for 2000.



Net Income.For second quarter of 2001, the Company reported a net income of $70,000, or $0.01 per share, versus
$476,000, or $.07 per share, reported for 2000.



Results of Operations



Analysis of Results for the Six Months Ended June 30, 2001 and 2000



An analysis of the significant components of the
Companys resource revenues for the six months ended June 30, 2001 and 2000 follows:



|                                                             |  |      |            |   |      |   |           |              |  |       |   
|------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- | ------------ |  | ----- | --
|                                                             |  | 2001 |            |   | 2000 |   |           | % Inc. (Dec) | 
|Ongoing Operations                                           |  |      |            |   |      |   |           |              |  |       |   
|Gain on Sale of FUWC Stock                                   |  | $    | 65,171,000 |   |      | $ |          |              |  | 100   | % 
|Water Resource                                               |  |      | 295,000    |   |      |   | 2,310,000 |              |  | (87   | )%
|Gain on sale of California Mines                             |  |      | 1,756,000  |   |      |   |          |              |  | 100   | % 
|Deferred gain on Mill Site land sales                        |  |      | 53,000     |   |      |   |          |              |  | 100   | % 
|Income from equity method investment in West Valley MRF, LLC |  |      | 474,000    |   |      |   | 808,000   |              |  | (41   | )%
|                                                             |  |      |            |   |      |   |           |              |  |       |   
|Total ongoing operations                                     |  |      | 67,749,000 |   |      |   | 3,118,000 |              |  | 2,073 | % 
|                                                             |  |      |            |   |      |   |           |              |  |       |   
|Interim Activities (net)                                     |  |      |            |   |      |   |           |              |  |       |   
|Lease, service and other                                     |  |      | (106,000   | ) |      |   | (117,000  | )            |  | 10    | % 
|                                                             |  |      |            |   |      |   |           |              |  |       |   
|Total resource revenues                                      |  | $    | 67,643,000 |   |      | $ | 3,001,000 |              |  | 2,154 | % 
|                                                             |  |      |            |   |      |   |           |              |  |       |   



Resource
Revenues. Total resource revenues for the first six months of 2001 were $67,643,000, compared to $3,001,000 for 2000. Revenues from ongoing operations increased 21 fold for the six months to $67,749,000 from $3,118,000 in 2000, while the loss
from interim activities (net of related expenses) declined 10% to $106,000 from $117,000 in 2000.



Ongoing Operations. During the first six months of 2001, the Company sold its investment in FUWC to Cucamonga (to whom the shares were leased under
a 102 year lease) for $87.5 million, resulting in a gain of $65.2 million. Included in the net gain of $65.2 million was the payment of $1.0 million to management pursuant to the Companys Long-Term Transaction Incentive Program. Water lease
revenues



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under the Companys 102-year take-or-pay lease with Cucamonga were $295,000 during the first six months of 2001 compared to $2,310,000
for 2000. The 87% decrease in water lease revenues during the first six months of 2001 reflects the sale of the Companys FUWC stock, which closed March 6, 2001.



During the first six months of 2001, the Company sold its California Mine properties for $2.0 million, resulting in a gain
of $1,756,000. The Company also recognized deferred gain of $53,000 from the sales of certain Mill Site properties that closed in 1997 and 1999.



Income from equity method investments decreased by $334,000 to $474,000 due to lower equity income from the WVMRF during the first six months of 2001
compared to the same period 2000. This decrease in equity income in the WVMRF is mainly due to: (a) operating the facility at full capacity during the expansion of the facility which lead to certain operational inefficiencies; (b) a 33% drop in
commodity prices of recyclable products sold; and (c) higher operating and maintenance expenses. The expansion has been completed and the new equipment should be in full operation during the third quarter of 2001.



Interim Activities (net). Interim activities net of expenses for the
first six months of 2001 were a net expense of $106,000 compared to a net expense of $117,000 for the same period in 2000. The 10% decrease in net interim expense in 2001 is primarily attributable to the termination of interim activities at the Mill
Site Property due to the sale to CCG in August 2000 ($97,000), and lower net interim expense at Eagle Mountain ($14,000) being partially offset by lower net operating revenue at the California Mines which were sold in early February ($100,000).



Resource Operating Costs. Resource operating costs are
those costs directly related to the resource revenue. Total resource operating costs for the first six months of 2001 decreased to $42,000 from $235,000 in 2000. This decrease was due to the sale of the Companys investment in its FUWC stock on
March 6, 2001.



Corporate General and Administrative
Expenses.Corporate general and administrative expenses for the first six months of 2001 increased 111% to $3,435,000 from $1,628,000 for 2000. The increase is primarily due to non-cash variable stock option accounting ($1,272,000), higher
legal, accounting and professional expenses relating to the proposed corporate restructuring ($321,000) and the exercise of nonqualified stock options ($195,000).



Net Interest Income. Net interest income for the first six months of 2001 was $1,399,000 compared to $156,000 in
2000. The change was due primarily to: (a) an increase in interest income ($1,192,000) relating to the Companys higher cash and investment balances and a decrease in interest expense ($51,000) associated with the Companys $30,000,000
revolving-to-term credit facility with Union Bank which was terminated prior to the Companys sale of its FUWC stock.



Pre-Tax Loss and Income Tax Provision. The Company recorded income before income tax provision of $65,565,000 for the first six months of 2001,
versus $1,294,000 recorded in 2000. An income tax provision of $17,486,000 was recorded in the first six months of 2001 compared to $518,000 for 2000.



Net Income.For the first six months of 2001, the Company reported a net income of $48,079,000, or $7.35 per share, versus $776,000, or $.12 per
share, reported for 2000.



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KAISER VENTURES INC. AND SUBSIDIARIES



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 increased $75,486,000 to $85,583,000 at June 30, 2001 from $10,097,000 at December 31, 2000. Included in cash and cash equivalents is $2,355,000 and $3,247,000 held
solely for the benefit of MRC at June 30, 2001 and December 31, 2000, respectively. The increase in cash and cash equivalents is primarily due to: (a) the sale of the Companys FUWC Stock ($81,783,000); (b) the sale of the California Mines for
$2.0 million, of which $726,000 was cash received at closing; (c) the issuance of common stock relating to the exercise of stock options of $131,000; and (d) cash distributions from the WVMRF ($500,000). These increases were partially offset by the:
(a) purchase of an insurance policy ($3,800,000); (b) capital expenditures ($579,000); and (c) environmental remediation expenditures ($126,000).



Working Capital. During the first six months of 2001, current assets increased $63.2 million to $86.6 million, while current liabilities increased
$458,000 to $4.6 million. The increase in current assets resulted primarily from the $75.5 million increase in cash and cash equivalents and a $10.7 million decline in current deferred tax assets. The increase in current liabilities resulted
primarily from the recording of $1.1 million income taxes payable and an increase in accounts payable ($300,000) being partially offset by the payment of year-end accruals ($900,000). Included in current liabilities as of June 30, 2001 is $225,000
in accounts payable and accrued liabilities relating to MRC. As a result, working capital increased during the first six months of 2001 by $62.7 million to $82 million at June 30, 2001.



Real Estate. Real Estate decreased $240,000 during the first quarter of 2001 due to the sale of the Companys
California Mine properties.



Investments. There was a
$26,000 decrease in the Companys investment in the WVMRF during the first six months of 2001 due to the receipt of $500,000 in cash distributions being mostly offset by the Companys recording of its equity share of income of $474,000
during the period. The $16,612,000 decrease in the Companys investment in FUWC is due to the sale of that investment during the first quarter of 2001.



Other Assets. The increase in other assets ($2,476,000) is primarily related to the Companys purchase of a environmental insurance policy
($3.8 million) and an increase in notes receivable due to the sale of the California Mine Property ($939,000 long term portion) being partially offset by Companys utilization of its long-term deferred tax assets ($2.2 million) and an increase
in accumulated depreciation as of June 30, 2001 ($126,000).



Environmental Remediation. As of June 30, 2001, the Company estimates, based upon current information, that its future environmental liability related to certain matters not assumed by CCG Ontario, LLC, a subsidiary of Catellus
Development Corporation, a New York Stock Exchange company, in its purchase of the Mill Site Property (August 2000), including a certain groundwater matter as well as potential matters at Eagle Mountain and other historical locations and other
possible third party claims, would be approximately $4.0 million. In the event a claim for damages is filed against the Company that relates to the remaining $4.0 million reserve, management believes that the claim may be covered by insurance
depending upon the nature and timing of the claim.



The Company
purchased, effective June 30, 2001, a 12 year $50 million insurance policy at a cost of $3.8 million. This policy is expected to cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical
operations of the Company.



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KAISER VENTURES INC. AND SUBSIDIARIES



Long-term Liabilities. The decrease in other long-term liabilities is primarily due to a decrease in accrued
liabilities and environmental reserves ($490,000) and the recognition of deferred gains on real estate sales ($53,000).



Minority Interest and Other Liabilities. As of June 30, 2001, the Company has recorded $5,280,000 of minority interest relating to the
approximately 19% ownership interest in MRC the Company does not own.



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



BUSINESS OUTLOOK



The statements contained in this Business Outlook, as well as in the Business Update, are based upon current operations and expectations. In addition to
the forward-looking statements and information contained elsewhere in this 10-Q/A Report, these statements are forward-looking and, therefore, actual results may differ materially. See the Companys disclosure regarding forward-looking
statements in the section entitled Forward-Looking Statements above.



Ongoing Operations.As noted above, the Companys revenues from ongoing operations have, in the past, been 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 water lease with Cucamonga, and the 50% equity ownership of the West Valley MRF, have been completed and the Company has been recognizing
significant revenues and income from these investments. However, the revenues from ongoing operations will be significantly reduced in 2001 as a result of the Companys sale of its ownership interest in FUWC to Cucamonga in the first quarter of
2001. In addition, the Company continues to evaluate its remaining assets and investments in light of how to best provide maximum value to its stockholders.



In regard to the West Valley MRF, the most significant factor affecting the Companys future equity income from the West Valley MRF is the recently
completed expansion of the facilitys capacity from 2,000 to 3,500 tons per day. This expansion, which cost approximately $10 million, increased the processing facility by an additional 80,000 square feet and provides for additional materials
recovery sorting capacity. The ultimate success of this expansion will continue to depend on the ability of the West Valley MRF to attract new customers and waste volumes from the closure of local landfills, such as the Spadra Landfill which closed
in April 2000, and on the future construction of any competing facilities.



Pending Sale of Eagle Mountain Landfill Project.In August 2000 MRC entered into an agreement to sell the Landfill Project to the District for $41 million. Upon any the initial closing, $39 million of the total
purchase price would be deposited into an escrow account. This money would be released upon the resolution of certain litigation contingencies relating to the litigation challenging the completed federal land exchange. Interest began to accrue on
this portion of the purchase price commencing on May 3, 2001 and would be paid out to MRC on a quarterly basis beginning with a successful outcome of the federal litigation at the Federal District Court level, which outcome would be subject to
appeal. The remaining $2 million of the purchase price would also be placed into an escrow account upon closing and would be released upon the later of (1) the release of the $39 million as described above or (2) the permitting approvals of the
Districts Puente Hills landfill for its remaining 10 years of capacity. The Company expects that its receipt of the purchase price, in whole or in part, if at all, will be delayed for years pending satisfactory resolution of these
contingencies.



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KAISER VENTURES INC. AND SUBSIDIARIES



The sale of the Landfill Project is subject to the results of the Districts due diligence and satisfaction of numerous
contingencies. In addition to a satisfactory resolution of the pending federal litigation challenges, the contingencies include, but are not limited to, obtaining the transfer of the Landfill Projects permits to the District and obtaining all
necessary consents to the transaction. The Company expects the initial closing to occur in the third quarter of 2001, assuming that all conditions to closing are met or waived. However, the actual closing date might be extended for several months.
Kaiser has agreed to vote its interest in MRC in favor of the sale of the Landfill Project to the District on its current terms. For additional information see Part I, Item 1. BUSINESS - Waste Management - Eagle Mountain Landfill Project -
Landfill Project Litigation.



Mill Site
Property. The only remaining mill site property owned by the Company is an approximate five acre parcel referred to as the Tar Pits Parcel. CCG Ontario, LLC purchased approximately 588 acres of the mill site property from the Company in August
2000 and, in that transaction, assumed substantially all of the Companys environmental liabilities associated with the purchased property and certain other environmental liabilities and risks associated with the former Kaiser Steel Corporation
mill site, including the land referred to as the Tar Pits Parcel. Remediation of the Tar Pits Parcel is expected to commence in the third quarter of this year.



Sale of Miscellaneous Properties. Effective February 1, 2001, the Company sold approximately 190 acres near Afton Canyon, California known as
the Dunn Siding, the Silver Lake Mine west of Baker, California, which is a small producing iron ore mine, and some mining claims known as the Bessemer and Morris Lode properties. In this sale transaction, the Company received a gross sales price of
approximately $2 million, consisting of approximately $726,000 paid in cash at closing and the balance represented by a secured promissory note from the purchaser payable over five years and accruing interest at a rate of 8% per annum.



Cash Maximization Strategy



In September 2000, the Companys Board of Directors approved a strategy
to maximize the cash distributions to stockholders. Under this strategy, the Company has been seeking:



| |  | To complete the sale of the Landfill Project to the District and to resolve favorably the related outstanding federal land exchange litigation. Although the closing is currently
scheduled to occur in the third quarter of 2001, this sale is subject to the satisfaction of numerous conditions, and, as a result, we cannot be sure that this sale will ultimately close. Also, due to the status of the Districts due diligence
and negotiations regarding joint use matters, we currently anticipate that the closing date will be delayed for several months. If the sale transaction is completed, we do not expect to receive any substantial cash from the sale until the related
litigation matters are resolved, which may be several years. See Eagle Mountain Landfill Project Sale of Landfill Project;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | To reduce the risk to Kaiser from outstanding environmental and other similar types of liabilities;
| | - | ---------------------------------------------------------------------------------------------------



| |  | To continue to hold its 50% interest in West Valley MRF, which pays cash distributions to Kaiser, until we believe we can maximize stockholder value through a sale or other
alternative transaction;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | To sell miscellaneous assets such as surplus property and mineral interests in Southern California; and
| | - | -------------------------------------------------------------------------------------------------------



| |  | To further reduce the Companys general and administrative expenses.
| | - | --------------------------------------------------------------------



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KAISER VENTURES INC. AND SUBSIDIARIES



Conversion Proposal. The Company has been evaluating its future strategy and business plan, as well as the timing and
alternative means of making its excess cash available to stockholders. In July 2001, the Companys Board of Directors approved a plan that would convert the Company into a limited liability company pursuant to a merger between the Company and
Kaiser LLC. If the Conversion Proposal is approved by the Companys stockholders, the Companys stockholders would receive $10.00 in cash plus one Class A Unit for each share of common stock in the Company. By converting to a limited
liability company, the Company believes it will be able to recognize a tax loss from MRC in 2001, distribute significant cash to stockholders on a tax advantaged basis, avoid the double taxation generally imposed on corporate income and to deal more
expeditiously with the Companys remaining assets. Immediately after the completion of the conversion, the holders of the Class A Units (on a fully diluted basis) would be the same as the holders of the common stock in the Company. The assets
and liabilities of Kaiser LLC would be the same as those of the Company, except that the stockholders of the Company would receive $10.00 in cash, thereby reducing the cash position of Kaiser LLC. It is currently anticipated that the
stockholders meeting to consider the approval of the Conversion Proposal will be held this Fall.



In addition, the Companys Board of Directors approved a plan whereby the Company may repurchase, from time to time, Company stock in the open
market. A committee appointed by the Board was formed to implement this plan in its discretion. The Company has not, as of the date of this 10-Q Report, purchased any of its stock in the open market.



Insurance. In furtherance of one of the goals of the Cash Maximization
Strategy, the Company purchased an insurance policy effective June 30, 2001, that is designed to provide broad commercial general liability, pollution legal liability, and contractual indemnity coverage for Kaisers ongoing and historical
operations. The policy has a twelve (12) year term and limits of $50,000,000, in the aggregate, for defense and indemnity, with no deductible or self-insured retention. With respect to the Company, the policy is designed to provide coverage for
future claims in excess of the Companys existing and historic insurance policies; however, to the extent that these other insurance policies are not responsive to a claim, the newly-purchased policy will provide first dollar coverage for a
claim resulting from property damage, personal injury, bodily injury, cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that may be brought against the Company. The policy is specifically
intended to supplement the Companys previously existing coverage for its known and/or potential liabilities arising from pollution conditions or asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled
indemnity obligations of Kaiser arising from, e.g., prior corporate transactions and real estate sales. The aggregate cost for this policy was approximately $5.8 million, of which KSC Recovery paid $2.0 million and the Company paid the balance of
$3.8 million.



Capital Resources. The Company expects
that its current cash balances and short-term investments together with: (a) cash provided from operating activities; and (b) reserves set aside from the Companys sale of its investment in FUWC will be sufficient to satisfy the Companys
operating cash requirements.



Improved Cash Flow from Use of
Net Operating Loss Tax Carryforwards. Due to the Companys status as successor to KSC for tax purposes 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 NOLs, if any, has historically been 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 as of December 31, 2000, are estimated to be approximately $43 million for federal purposes and $1 million for state purposes.
Due to the sale of the FUWC stock in March, the



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KAISER VENTURES INC. AND SUBSIDIARIES



Company anticipates utilizing all of these NOLs in 2001. If not used, these federal NOLs would expire in varying amounts over a period from
2006 to 2013. In addition, the Company expects that, if the sale of the Landfill Project closes in 2001, that sale would result in a significant tax loss to the Company in 2001.



If the Company does not utilize all of its NOLs in 2001, then if 50% or more of the stock of the Company changes ownership
within a three-year period, the future annual use of NOLs may be limited. If this should occur, 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.



FINANCIAL
STATEMENTS



(REMAINDER OF
THIS PAGE INTENTIONALLY LEFT BLANK)



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

as of



|                                                                                 |  |               |             |                   |   |           
|-------------------------------------------------------------------------------- |  | ------------- | ----------- | ----------------- | - | ----------
|                                                                                 |  | June 30, 2001 |             | December 31, 2000
|                                                                                 |  | (Unaudited)   |             |                  
|ASSETS                                                                           |  |               |             |                   |   |           
|                                                                                 |  |              
|Current Assets                                                                   |  |               |             |                   |   |           
|Cash and cash equivalents                                                        |  | $             | 85,583,000  |                   | $ | 10,097,000
|Accounts receivable and other, net of allowance for doubtful accounts of $83,000 |  |               | 671,000     |                   |   | 2,497,000 
|Deferred tax assets                                                              |  |               |            |                   |   | 10,699,000
|Note receivable                                                                  |  |               | 323,000     |                   |   | 107,000   
|                                                                                 |  |               |             |                   |   |           
|                                                                                 |  |               | 86,577,000  |                   |   | 23,400,000
|                                                                                 |  |               |             |                   |   |           
|Eagle Mountain Landfill Investment                                               |  |               | 24,706,000  |                   |   | 24,154,000
|                                                                                 |  |               |             |                   |   |           
|Investment in West Valley MRF                                                    |  |               | 3,634,000   |                   |   | 3,660,000 
|                                                                                 |  |               |             |                   |   |           
|Land and improvements                                                            |  |               | 2,503,000   |                   |   | 2,743,000 
|                                                                                 |  |               |             |                   |   |           
|Investment in Fontana Union Water Company                                        |  |               |            |                   |   | 16,612,000
|                                                                                 |  |               |             |                   |   |           
|Other Assets                                                                     |  |               |             |                   |   |           
|Note receivable                                                                  |  |               | 1,528,000   |                   |   | 589,000   
|Deferred tax assets                                                              |  |               |            |                   |   | 2,161,000 
|Unamortized environmental insurance premium (See Note 3)                         |  |               | 3,800,000   |                   |   |          
|Buildings and equipment (net)                                                    |  |               | 1,367,000   |                   |   | 1,463,000 
|Other assets                                                                     |  |               |            |                   |   | 6,000     
|                                                                                 |  |               |             |                   |   |           
|                                                                                 |  |               | 6,695,000   |                   |   | 4,219,000 
|                                                                                 |  |               |             |                   |   |           
|Total Assets                                                                     |  | $             | 124,115,000 |                   | $ | 74,788,000
|                                                                                 |  |               |             |                   |   |           



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



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

as of



|                                                                                                                                  |  |               |             |                   |   |           
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | ----------------- | - | ----------
|                                                                                                                                  |  | June 30, 2001 |             | December 31, 2000
|                                                                                                                                  |  | (Unaudited)   |             |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                              |  |               |             |                   |   |           
|                                                                                                                                  |  |              
|Current Liabilities                                                                                                               |  |               |             |                   |   |           
|Accounts payable                                                                                                                  |  | $             | 619,000     |                   | $ | 302,000   
|Income taxes payable                                                                                                              |  |               | 1,054,000   |                   |   |          
|Accrued liabilities                                                                                                               |  |               | 2,911,000   |                   |   | 3,824,000 
|                                                                                                                                  |  |               |             |                   |   |           
|                                                                                                                                  |  |               | 4,584,000   |                   |   | 4,126,000 
|                                                                                                                                  |  |               |             |                   |   |           
|Long-term Liabilities                                                                                                             |  |               |             |                   |   |           
|Deferred gain on sale of real estate                                                                                              |  |               | 643,000     |                   |   | 696,000   
|Accrued liabilities                                                                                                               |  |               | 493,000     |                   |   | 722,000   
|Environmental remediation (See Note 3)                                                                                            |  |               | 4,000,000   |                   |   | 4,490,000 
|                                                                                                                                  |  |               |             |                   |   |           
|                                                                                                                                  |  |               | 5,136,000   |                   |   | 5,908,000 
|                                                                                                                                  |  |               |             |                   |   |           
|Total Liabilities                                                                                                                 |  |               | 9,720,000   |                   |   | 10,034,000
|                                                                                                                                  |  |               |             |                   |   |           
|Minority Interest                                                                                                                 |  |               | 5,280,000   |                   |   | 5,280,000 
|                                                                                                                                  |  |               |             |                   |   |           
|Commitments and Contingencies                                                                                                     |  |               |             |                   |   |           
|                                                                                                                                  |  |              
|Stockholders Equity                                                                                                              |  |               |             |                   |   |           
|Common stock, par value $.03 per share, authorized 13,333,333 shares; issued and outstanding 6,553,187 and 6,522,700
respectively |  |               | 196,000     |                   |   | 195,000   
|Capital in excess of par value                                                                                                    |  |               | 53,237,000  |                   |   | 51,676,000
|Retained earnings                                                                                                                 |  |               | 55,682,000  |                   |   | 7,603,000 
|                                                                                                                                  |  |               |             |                   |   |           
|Total Stockholders Equity                                                                                                        |  |               | 109,115,000 |                   |   | 59,474,000
|                                                                                                                                  |  |               |             |                   |   |           
|Total Liabilities and Stockholders Equity                                                                                        |  | $             | 124,115,000 |                   | $ | 74,788,000
|                                                                                                                                  |  |               |             |                   |   |           



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



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

for the Three and Six Months Ended June 30

(Unaudited)



|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|--------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------ | - | --------- | ---- |  | - | ---------- | - |  | - | --------- | -
|                                                                                                    |  | Three Months Ended June 30 |            |   | Six Months Ended June 30 |  
|                                                                                                    |  | 2001                       |            |   | 2000                     |   |           | 2001 |  |   | 2000       |  
|Resource Revenues                                                                                   |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Ongoing operations                                                                                  |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Gain on sale of FUWC                                                                                |  | $                          |           |   |                          | $ |          |      |  | $ | 65,171,000 |   |  | $ |          |  
|Water resource                                                                                      |  |                            |           |   |                          |   | 1,155,000 |      |  |   | 295,000    |   |  |   | 2,310,000 |  
|Gain on sale of California mines                                                                    |  |                            |           |   |                          |   |          |      |  |   | 1,756,000  |   |  |   |          |  
|Deferred gain on Mill Site land sales                                                               |  |                            | 26,000     |   |                          |   |          |      |  |   | 53,000     |   |  |   |          |  
|Income from equity method                                                                           |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|investments West Valley MRF, LLC                                                                    |  |                            | 217,000    |   |                          |   | 479,000   |      |  |   | 474,000    |   |  |   | 808,000   |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Total ongoing operations                                                                            |  |                            | 243,000    |   |                          |   | 1,634,000 |      |  |   | 67,749,000 |   |  |   | 3,118,000 |  
|                                                                                                    |  |                            |            |  
|Interim Activities Net Loss                                                                         |  |                            | (75,000    | ) |                          |   | (41,000   | )    |  |   | (106,000   | ) |  |   | (117,000  | )
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Total resource revenues                                                                             |  |                            | 168,000    |   |                          |   | 1,593,000 |      |  |   | 67,643,000 |   |  |   | 3,001,000 |  
|                                                                                                    |  |                            |            |  
|Resource Operating Costs                                                                            |  |                            |           |   |                          |   | 63,000    |      |  |   | 42,000     |   |  |   | 235,000   |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Income from Resources                                                                               |  |                            | 168,000    |   |                          |   | 1,530,000 |      |  |   | 67,601,000 |   |  |   | 2,766,000 |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Corporate General and Administrative Expenses                                                       |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Corporate overhead expenses, excluding stock based compensation and stock option repricing expenses |  |                            | 968,000    |   |                          |   | 785,000   |      |  |   | 1,968,000  |   |  |   | 1,628,000 |  
|Stock based compensation expense                                                                    |  |                            |           |   |                          |   |          |      |  |   | 195,000    |   |  |   |          |  
|Stock option repricing expense                                                                      |  |                            | 117,000    |   |                          |   |          |      |  |   | 1,272,000  |   |  |   |          |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|                                                                                                    |  |                            | 1,085,000  |   |                          |   | 785,000   |      |  |   | 3,435,000  |   |  |   | 1,628,000 |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Income (loss) from Operations                                                                       |  |                            | (917,000   | ) |                          |   | 745,000   |      |  |   | 64,166,000 |   |  |   | 1,138,000 |  
|                                                                                                    |  |                            |            |  
|Net interest income                                                                                 |  |                            | (1,012,000 | ) |                          |   | (48,000   | )    |  |   | (1,399,000 | ) |  |   | (156,000  | )
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Income before Income Tax Provision                                                                  |  |                            | 95,000     |   |                          |   | 793,000   |      |  |   | 65,565,000 |   |  |   | 1,294,000 |  
|                                                                                                    |  |                            |            |  
|Income tax provision                                                                                |  |                            | 25,000     |   |                          |   | 317,000   |      |  |   | 17,486,000 |   |  |   | 518,000   |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Net Income                                                                                          |  | $                          | 70,000     |   |                          | $ | 476,000   |      |  | $ | 48,079,000 |   |  | $ | 776,000   |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Basic Earnings Per Share                                                                            |  | $                          | .01        |   |                          | $ | .07       |      |  | $ | 7.35       |   |  | $ | .12       |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Diluted Earnings Per Share                                                                          |  | $                          | .01        |   |                          | $ | .07       |      |  | $ | 7.26       |   |  | $ | .12       |  
|                                                                                                    |  |                            |            |   |                          |   |           |      |  |   |            |   |  |   |           |  
|Basic Weighted Average Number of Shares Outstanding                                                 |  |                            | 6,463,000  |   |                          |   | 6,378,000 |      |  |   | 6,544,000  |   |  |   | 6,362,000 |  
|                                                                                                    |  |                            |            |  
|Diluted Weighted Average Number of Shares Outstanding                                               |  |                            | 6,541,000  |   |                          |   | 6,703,000 |      |  |   | 6,621,000  |   |  |   | 6,725,000 |  



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



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

for the Six Months Ended June 30

(Unaudited)



|                                                |  |      |             |   |      |   |            |  
|----------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|                                                |  | 2001 |             |   | 2000 |  
|Cash Flows from Operating Activities            |  |      |             |   |      |   |            |  
|Net income                                      |  | $    | 48,079,000  |   |      | $ | 776,000    |  
|(Income) from equity method investments         |  |      | (474,000    | ) |      |   | (808,000   | )
|Gain on sale of FUWC Stock                      |  |      | (65,171,000 | ) |      |   |           |  
|Gain on sale of California Mines                |  |      | (1,756,000  | ) |      |   |           |  
|Deferred tax expense                            |  |      | 12,860,000  |   |      |   |           |  
|Stock based compensation expense                |  |      | 159,000     |   |      |   |           |  
|Stock option repricing                          |  |      | 1,273,000   |   |      |   |           |  
|Depreciation and amortization                   |  |      | 129,000     |   |      |   | 233,000    |  
|Allowance for doubtful accounts                 |  |      |            |   |      |   | (7,000     | )
|Mill Site deferred gain realized                |  |      | (53,000     | ) |      |   |           |  
|Changes in assets:                              |  |      |             |   |      |   |            |  
|Receivables and other                           |  |      | 1,726,000   |   |      |   | 325,000    |  
|Changes in liabilities:                         |  |      |             |   |      |   |            |  
|Current liabilities                             |  |      | (960,000    | ) |      |   | (548,000   | )
|Income taxes payable                            |  |      | 1,054,000   |   |      |   | (3,400,000 | )
|Long-term accrued liabilities                   |  |      | (129,000    | ) |      |   | (208,000   | )
|                                                |  |      |             |   |      |   |            |  
|Net cash flows from operating activities        |  |      | (3,263,000  | ) |      |   | (3,637,000 | )
|                                                |  |      |             |   |      |   |            |  
|Cash Flows from Investing Activities            |  |      |             |   |      |   |            |  
|Proceeds from the sale of FUWC Stock            |  |      | 81,783,000  |   |      |   |           |  
|Proceeds from the sale of the California Mines. |  |      | 726,000     |   |      |   |           |  
|Distribution from West Valley MRF.              |  |      | 500,000     |   |      |   | 500,000    |  
|Minority interest and other liabilities         |  |      |            |   |      |   | 558,000    |  
|Note receivable collections                     |  |      | 114,000     |   |      |   | 53,000     |  
|Investment in Fontana Union Water Company       |  |      |            |   |      |   | (654,000   | )
|Environmental insurance                         |  |      | (3,800,000  | ) |      |   |           |  
|Capital expenditures                            |  |      | (579,000    | ) |      |   | (1,974,000 | )
|Environmental remediation expenditures          |  |      | (126,000    | ) |      |   | (496,000   | )
|                                                |  |      |             |   |      |   |            |  
|Net cash flows from investing activities        |  |      | 78,618,000  |   |      |   | (2,013,000 | )
|                                                |  |      |             |   |      |   |            |  
|Cash Flows from Financing Activities            |  |      |             |   |      |   |            |  
|Issuance of common stock                        |  |      | 131,000     |   |      |   | 559,000    |  
|                                                |  |      |             |   |      |   |            |  
|Net cash flows from financing activities        |  |      | 131,000     |   |      |   | 559,000    |  
|                                                |  |      |             |   |      |   |            |  
|Net Changes in Cash and Cash Equivalents        |  |      | 75,486,000  |   |      |   | (5,091,000 | )
|                                                |  |     
|Cash and Cash Equivalents at Beginning of Year  |  |      | 10,097,000  |   |      |   | 14,686,000 |  
|                                                |  |      |             |   |      |   |            |  
|Cash and Cash Equivalents at End of Quarter     |  | $    | 85,583,000  |   |      | $ | 9,595,000  |  
|                                                |  |      |             |   |      |   |            |  



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



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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

for the Six Months Ended June 30, 2001

(Unaudited)



|                                   |  |              |  |                                |         |                   |   |            |  |   |            |  |   |            
|---------------------------------- |  | ------------ |  | ------------------------------ | ------- | ----------------- | - | ---------- |  | - | ---------- |  | - | -----------
|                                   |  | Common Stock |  | Capital In Excess of Par Value |         | Retained Earnings |   | Total     
|                                   |  | Shares       |  | Amount                         |         |                   |  
|Balance at December 31, 2000       |  | 6,522,700    |  | $                              | 195,000 |                   | $ | 51,676,000 |  | $ | 7,603,000  |  | $ | 59,474,000 
|Issuance of shares of common stock |  | 30,487       |  |                                | 1,000   |                   |   | 1,561,000  |  |   |           |  |   | 1,562,000  
|Net income                         |  |             |  |                                |        |                   |   |           |  |   | 48,079,000 |  |   | 48,079,000 
|                                   |  |              |  |                                |         |                   |   |            |  |   |            |  |   |            
|Balance at June 30, 2001           |  | 6,553,187    |  | $                              | 196,000 |                   | $ | 53,237,000 |  | $ | 55,682,000 |  | $ | 109,115,000
|                                   |  |              |  |                                |         |                   |   |            |  |   |            |  |   |            



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



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KAISER VENTURES INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Note 1. BASIS OF PRESENTATION



The unaudited, consolidated financial statements as of June 30, 2001 and for the three and six month periods ended June 30, 2001 and 2000, 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, 2000. 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 June 30, 2001, and results of operations and cash flows for the three and six month periods ended June 30, 2001
and 2000.



Eagle Mountain Landfill Investment



The Eagle Mountain Landfill Investment includes the deferred cost of
permitting and developing the landfill project, $18.9 million as of June 30, 2001 and $18.4 million as of December 31, 2000, plus the $5.8 million of recorded land costs as of both June 30, 2001 and December 31, 2000, associated with the project.



Although the District agreed that interest on $39 million of
the purchase price of Eagle Mountain began to accrue on May 3, 2001, the Company will not, due to the numerous uncertainties involved with the sale, record any accrued interest until the uncertainties involved are adequately resolved.



Reclassification



Certain amounts in the prior year have been reclassified to conform to the current year financial statement presentation.



Accounting Change



Effective July 1, 2001, the Company changed its method of accounting for
premium costs and claims under a twelve-year insurance policy purchased June 30, 2001, to amortize the premium costs over the term of the underlying prospective insurance policy and record insurance recoveries on known claims liabilities when
recoveries are estimable and claims liabilities are accepted by the insurance carrier. Previously, the Company had capitalized the cost of the policy as prepaid insurance in other assets and reduced the prepaid insurance as claims were paid and
insurance recoveries were collected.



Note 2. SALE OF FONTANA UNION WATER
COMPANY STOCK



Effective March 6, 2001, the Company
completed the sale of its approximately 53.71% ownership interest in the capital stock of Fontana Union Water Company (FUWC) a mutual water company, to Cucamonga for $87.5 million. Included in the net gain of $65.2 million was the
payment of $1.0 million to management pursuant to the Companys Long-Term Transaction Incentive Program. In addition, the Company received approximately $2.5 million in payments under the lease of FUWC shares to Cucamonga. Stockholder approval
for the sale was obtained. With the sale of the FUWC interest, the lease with Cucamonga was effectively terminated and the rate dispute litigation between the Company and Cucamonga was settled.



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KAISER VENTURES INC. AND SUBSIDIARIES



In connection with the sale of the Companys ownership interest in FUWC, the Company terminated its $30 million credit
facility with Union Bank that was secured by FUWC stock and the Cucamonga Lease.



Note 3. ENVIRONMENTAL INSURANCE AND ENVIRONMENTAL REMEDIATION LIABILITES



One of the goals in the cash maximization strategy approved by the Companys Board of Directors in September 2000 was to reduce the liabilities associated with existing and potential future environmental and
other similar types of claims. In furtherance of such goal, the Company purchased an insurance policy effective June 30, 2001 that is designed to provide broad prospective commercial general liability, pollution legal liability, and contractual
indemnity coverage for the Companys ongoing and historical operations. The policy has a twelve (12) year term and limits of $50,000,000 in the aggregate for defense and indemnity, with no deductible or self-insured retention. The policy is
designed to provide coverage for future claims in excess of the Companys existing and historic insurance policies; however, to the extent that these other insurance policies are not responsive to a claim, the newly-purchased policy will
provide first dollar coverage for a claim resulting from property damage, personal injury, bodily injury, cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that may be brought against the
Company. The policy is specifically intended to provide additional coverage for the Companys potential liabilities arising from pollution conditions or known and/or potential asbestos-related claims. The policy also provides contractual
indemnity coverage for scheduled indemnity obligations of the Company arising from, e.g., prior corporate transactions and real estate sales. The aggregate cost for this policy was approximately $5.8 million, of which, based upon discussions among
the respective members of the Boards of Directors, KSC Recovery paid $2 million and the Company paid the balance of approximately $3.8 million. The portion of the policy paid by KSC Recovery was expected to cover known and/or potential asbestos
claims; while the portion of the policy paid by the Company was expected to cover future potential claims arising from the Companys historical operations.



The Company expects this policy will cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the
historical operations of the Company. As a result of the insurance company accepting liability for a claim filed against the Company in the third quarter of 2001, related to the historical operations conducted at the Mill Site, the Company has
reclassified $1.5 million previously reported in its environmental remediation liabilities to a litigation accrual at September 30, 2001.



The Companys $3.8 million premium for the prospective insurance policy is capitalized as a long-term asset and is being amortized on a straight-line
basis over the twelve (12) year term of the policy; approximately $80,000 per quarter or $320,000 per year. To the extent a pre-existing liability has not been recorded, claims made for environmental matters are recorded as litigation accruals in
the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage
under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably estimated. Generally, unless previously accrued, the liability and the receivable relating to
claims covered by this policy should occur in the same accounting period, thereby having no adverse or beneficial impact on the Companys operating results for that accounting period.



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Note 4. INCOME TAXES



The Companys income tax provisions were calculated in accordance with FAS 109 and, as such, reflect both current amounts due and changes in the
Companys current and long-term deferred tax assets and liabilities. On this basis, the income tax provisions for the six months ended June 30, 2001 and 2000 were as follows:



|                         |  |      |            |      |   |        
|------------------------ |  | ---- | ---------- | ---- | - | -------
|                         |  | 2001 |            | 2000
|Current taxes due        |  | $    | 4,626,000  |      | $ | 356,000
|Change in deferred taxes |  |      | 12,860,000 |      |   | 162,000
|                         |  |      |            |      |   |        
|Income tax expense       |  | $    | 17,486,000 |      | $ | 518,000
|                         |  |      |            |      |   |        



The change in deferred
income taxes of $12,860,000 in 2001 represents the utilization of all the deferred tax assets recorded as of December 31, 2000.



The following is a reconciliation of the income taxes payable as of June 30, 2001 and 2000:



|                                 |  |      |           |   |      |   |          
|-------------------------------- |  | ---- | --------- | - | ---- | - | ---------
|                                 |  | 2001 |           |   | 2000
|Balance at prior year end        |  | $    | (221,000  | ) |      | $ | 3,501,000
|Current taxes due                |  |      | 4,626,000 |   |      |   | 356,000  
|Payments made in current year    |  |      | 3,351,000 |   |      |   | 3,756,000
|                                 |  |      |           |   |      |   |          
|Income tax payable as of June 30 |  | $    | 1,054,000 |   |      | $ | 101,000  
|                                 |  |      |           |   |      |   |          



Note 5. SUPPLEMENTAL CASH FLOW
INFORMATION



In the first quarter of 2001, the Company
sold its California Mine Property for $2 million, $726,000 cash at closing and approximately a $1.3 million note receivable secured by the real estate.



During the six months ended June 30, 2001 the Company had 44,833 stock options exercised on a net basis. These transactions resulted in the Company
receiving 30,146 shares of its own common stock as payment for the purchase price of the options and for the payment of income taxes.



Note 6. COMMITMENTS AND CONTINGENCIES



Environmental Contingencies. As discussed in Note 3, effective June 30, 2001, the Company purchased, a 12-year $50 million insurance policy, which
is expected to cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company. To the extent a pre-existing liability has not been recorded, claims made for
environmental matters are recorded as litigation accruals in the Companys consolidated financial statements pursuant to



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KAISER VENTURES INC. AND SUBSIDIARIES



FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss can be reasonably estimated. Claims accepted by
the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably estimated.



At the inception of the insurance contract, the Company estimated, based upon
current information and discussions with environmental consultants, that its future environmental liabilities related to certain matters not assumed by CCG Ontario, LLC in its purchase of the mill site property, including a certain groundwater
matter as well as potential matters at Eagle Mountain and at other historical locations, would be approximately $4.0 million. These liabilities reflected managements estimate of potential future environmental claims, remediation and related
costs but did not represent known claims at the inception of the policy. In the event a future claim for damages is filed against the Company that relates to the remaining $4.0 million environmental reserve, management believes that the claim may be
covered by insurance depending upon the nature and timing of the claim.



PART II



Item 1. LEGAL PROCEEDINGS



As
discussed in the Companys Form 10-K Report for 2000 and in the Companys First Quarter 10-Q Report, the Company is engaged in certain claims and litigation. Except as discussed below, there were no material developments in any legal
proceeding.



California Regional Water Quality Control
Board. The California Regional Water Quality Control Board, Santa Ana Region, (RWQCB) has recently communicated with the Company that the City of Ontario is again alleging that one of its municipal water wells has been impacted by a
total dissolved solids plume, that allegedly emanated from the Mill Site Property. By way of background, in the Fall of 1993, RWQCB approved a settlement agreement resolving the Companys groundwater remediation obligation. The settlement
agreement provided that the Company would: (i) pay $1,500,000 upon approval of the settlement agreement; and (ii) contribute 1,000 acre feet of water in storage per year for 25 years for the benefit of a regional groundwater de-salter program either
by direct transfer to the de-salter project or abandonment to the basin with a Watermaster waiver of the de-salter replenishment obligation. The Company has satisfied all of its obligations under the settlement agreement. However, the settlement
agreement left open the possibility of certain third party claims. The City of Ontario is asserting that the Company is responsible for high total dissolved solids, i.e., salt, impacts to one of its wells. The Company has the right to commence its
own investigation and to present its findings to the RWQCB before the RWQCB makes a decision on the matter. The Company believes this matter is covered under its new insurance policy that addresses, among other items, environmental matters.



Warrant Claims. New Kaiser Employees Voluntary
Benefit Association (VEBA), is the beneficial owner of a warrant to purchase 460,000 shares of the Companys common stock. The Pension Benefit Guaranty Corporation (PBGC) is the beneficial owner of a warrant to purchase
285,260 shares of the Companys common stock. VEBA and the PBGC each have claimed that the proposed treatment of their respective warrants in the proposal to convert the Company to a limited liability company could violate the terms of their
warrants. We do not believe that these claims have any merit. However, because VEBA and PBGC believe their rights may depend on the future stock price of the common stock, VEBA, PBGC and Kaiser have agreed that the rights under their respective
warrant agreements will not be changed or waived by (i) any consent to or approval of the conversion proposal by PBGC or VEBA or any VEBA representative on the Companys Board of Directors, or (ii) any decision by VEBA or the PBGC to delay any
potential legal challenge until after the adoption and completion of the conversion proposal.



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KAISER VENTURES INC. AND SUBSIDIARIES



Item 2. CHANGES IN SECURITIES



Not applicable.



Item 3. DEFAULTS UPON SENIOR SECURITIES



Not applicable.



Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS



Not applicable.



Item 5. OTHER INFORMATION



None.



Item 6. EXHIBITS AND REPORTS ON FORM 8-K



| | A. | Exhibits
| | -- | --------



Exhibit 10.1* - First Amendment to the Second Amended and Restated Employment Agreement between Richard E. Stoddard and Kaiser Ventures Inc. dated
as of April 11, 2001.**



Exhibit 10.2* - First Amendment to the Amended and Restated Employment Agreement between Terry L. Cook and Kaiser Ventures Inc. dated as of
April 11, 2001.**



Exhibit 10.3* - First Amendment to the Amended and Restated Employment Agreement between Anthony Silva and Kaiser Ventures Inc. dated as of April
11, 2001.**



Exhibit 10.4* - First Amendment to the Amended and Restated Employment Agreement between Paul E. Shampay and Kaiser Ventures Inc. dated as of April
11, 2001.**



Exhibit 10.5* - Second Amended and Restated Employment Agreement between James F. Verhey and Kaiser Ventures Inc. dated as of April 11,
2001.**



Exhibit 31.1 - Certificate of Richard E. Stoddard, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.



Exhibit 31.2 - Certificate of James F. Verhey, Chief
Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.



Exhibit 32.1  Certificate of Richard E. Stoddard, Chief Executive Officer, pursuant to Section 1350, filed with this Report.



Exhibit 32.2 - Certificate of James F. Verhey, Chief Financial Officer, pursuant to Section 1350, filed with this
Report.

---

|* | Reflects a compensation plan or agreement.
|- | ------------------------------------------

|** | Exhibit filed with the Original 10-Q.
|-- | -------------------------------------



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|B. | Reports on Form 8-K.
|-- | --------------------



On July 16, 2001, the Company filed an 8-K Report with the Securities and Exchange Commission regarding an investor conference call held on July 11, 2001 addressing the proposed conversion of the Company to a limited
liability company.



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KAISER VENTURES INC. AND SUBSIDIARIES



SIGNATURES



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



|                        |  |                            
|----------------------- |  | ---------------------------
|                        |  | KAISER VENTURES INC.       
|                        | 
|Dated: December 2, 2004 |  | /s/ James F. Verhey        
|                        |  | James F. Verhey            
|                        |  | Principal Financial Officer



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