**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      DC 20549





**FORM
      10-K/A**


**(Amendment
      No. 1)**


(Mark
      One)


**[X]**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934**For
                the fiscal year ended**October
                31, 2005**or**[
                ]**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934**For
                the transition period from _______ to
                _______


**Commission
      File Number 333-66291**




**The
                Doe Run Resources Corporation**(Exact
                name of registrant as specified in its charter)**New
                York**
            
            **13-1255630**(State
                or other jurisdiction**of**incorporation or organization)
            
            (IRS
                Employer Identification No.)**1801
                Park 270 Drive, Suite 300**
              **St.
                Louis, Missouri**
            
            **63146**(Address
                of principal executive offices)
            
            (Zip
                Code)**(314)
                453-7100**(Registrant’s
                telephone number, including area
                code)







**Securities
      registered pursuant to Section 12(b) of the Act:**


Title
                of each class
            Name
                of each exchange on which registeredNone
            Not
                Applicable




**Securities
      registered pursuant to Section 12(g) of the Act:**




None










Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


**[
                ]**
            **Yes**
            
            **[X]**
            **No**





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act


**[X]**
            **Yes**
            
            **[
                ]**
            **No**





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**


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











Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of the registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. **[X]**





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
      one)








**[
                ]Larger accelerated filer**
            **[
                ] Accelerated filer**
            **[X]
                Non-accelerated filer**





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


**[
                ]**
            **Yes**
            
            **[X]**
            **No**





Aggregate
      market value of the voting and non-voting common stock held by non-affiliates
      of
      the registrant: **$0;
      all shares of the voting stock of the registrant are owned by its parent, DR
      Acquisition Corp.**





Number
      of
      shares outstanding of each of the registrant’s classes of common stock, as of
      October 19, 2006: **Common
      stock, $0.10 par value per share; 1,000 shares**








**Amendment
      No. 1 to the Annual Report on Form 10-K**


**For
      the Fiscal Year Ended October 31, 2005**





**EXPLANATORY
      NOTE**





The
      Doe
      Run Resources Corporation (the “Company”) is filing this Amendment No. 1 on Form
      10-K/A (the “Amended Filing”) to the Company’s Form 10-K for the fiscal year
      ended October 31, 2005, filed with the Securities and Exchange Commission
      (“SEC”) on March 21, 2006 (the “Original Filing”), for the purposes of:





·
            Amending
                “Item 1. Business” to (a) include additional products in the Doe Run Peru
                products tables, (b) add a table of historical concentrate purchases
                from
                outside sources for the Company’s Peruvian operations for the last five
                years and (c) update the address for the SEC’s public reference
                room;





·
            Expanding
                “Item 2. Properties” to include greater detail regarding the Company’s
                properties and leases, including a small-scale map that displays
                the
                location of each of the Company’s properties;





·
            Amending
                “Item 3. Legal Proceedings” to clarify the Company’s disclosure regarding
                the BNSF Railway Company
                litigation;





·
            Amending
                “Item 7. Management’s Discussion and Analysis of Financial Condition and
                Results of Operations” to (a) include the costs associated with the
                Peruvian environmental remediation as of October 31, 2005 in the
                contractual obligation table, and (b) include depreciation, depletion
                and
                amortization amounts attributable to costs of sales in the gross
                margin on
                sales disclosure;





·
            Amending
                “Item 8. Financial Statements and Supplementary Data” to (a) include a
                revised audit report of Doe Run Peru’s prior auditor that references the
                correct fiscal periods covered by the report and incorporates such
                auditor’s letterhead that was inadvertently omitted during the
                Edgarization process, and (b) include revised audit reports of KPMG
                LLP
                and Doe Run Peru’s current auditors that incorporates such auditors’
                letterhead that was inadvertently omitted during the Edgarization
                process;
                and





·
            Correcting
                certain typographical errors.





Except
      as
      described above, no other changes have been made to the Original Filing and
      this
      Amended Filing does not amend, update or change any other items or disclosures
      in the Original Filing. This Amended Filing continues to speak as of the date
      of
      the Original Filing and the Company has not updated the disclosure in this
      Amended Filing to speak to any later date.











**THE
      DOE RUN RESOURCES CORPORATION**


**INDEX
      TO FORM 10-K/A**








Part
                IItem
                1.
            Business.Item
                2.
            Properties.Item
                3.
            Legal
                Proceedings.Part
                IIItem
                7.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations.Item
                8.
            Financial
                Statements and Supplementary
                Data.SignaturesExhibit
                Index




















*The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      forward-looking statements. We make forward-looking statements in this Annual
      Report on Form 10-K and in the public documents that are incorporated herein
      by
      reference, which represent our expectations or beliefs about future events
      and
      financial performance. When used in this report and the documents incorporated
      herein by reference, the words “expect,” “believe,” “anticipate,” “goal,”
“plan,” “intend,” “estimate,” “may,” “will” and similar words, or the negative
      of such words, are intended to identify forward-looking statements. These
      forward-looking statements are subject to known and unknown risks, uncertainties
      and assumptions, including those referred to under “Risk Factors” in this Annual
      Report on Form 10-K and otherwise described in our periodic
      filings.*




*All
      predictions as to future results contain a measure of uncertainty, and
      accordingly, actual results could differ materially. Among the factors that
      could cause actual results to differ from those contemplated, projected or
      implied by the forward-looking statements (the order of which does not
      necessarily reflect their relative significance) are:*




·**
            *general
                economic and business
                conditions;*


·**
            *increasing
                industry capacity and levels of imports of non-ferrous metals or
                non-ferrous metals products;*


·**
            *industry
                trends, including the price of metals and product pricing;*


·**
            *competition;*


·**
            *currency
                fluctuations;*


·**
            *the
                loss of any significant customer or supplier;*


·**
            *availability
                of raw materials;*


·**
            *availability
                of qualified personnel;*


·**
            *effects
                of future collective bargaining agreements;*


·**
            *outcome
                of litigation;*


·**
            *historical
                environmental liabilities;*


·**
            *changing
                environmental requirements and costs, including the capital requirements
                in Peru;*


·**
            *political
                uncertainty and terrorism;*


·**
            *major
                equipment failures;*


·**
            *changes
                in accounting principles or new accounting standards;
                and*


·**
            *compliance
                with laws and regulations and other unforeseen
                circumstances.*




*In
      light of these risks, uncertainties and assumptions, the forward-looking events
      discussed in this Annual Report on Form 10-K may not occur. In addition, actual
      results could differ materially from those suggested by the forward-looking
      statements. Accordingly, investors are cautioned not to place undue reliance
      on
      the forward-looking statements. Except as required by law, we undertake no
      obligation to publicly update or revise any forward-looking statements, whether
      as a result of new information, future events or otherwise. Investors should,
      however, review additional disclosures we make from time to time in our periodic
      filings with the Securities and Exchange Commission.*




*This
      Annual Report on Form 10-K and the documents incorporated herein by reference
      should be read completely and with the understanding that our actual future
      results may be materially different from what we expect. All forward-looking
      statements we make in this Annual Report on Form 10-K and our other filings
      with
      the Securities and Exchange Commission are qualified by these cautionary
      statements.*











**Part
      I**




**Item
      1. Business**




*All
      references in this Annual Report on Form 10-K to “we,” “us,” “our” or “Company”
refer to The Doe Run Resources Corporation and its subsidiaries. All dollars
      are
      in thousands except where noted otherwise.*




**Overview**




*General*




We
      are a
      producer of non-ferrous and precious metals with operations in the United States
      and Peru. We are also the largest integrated lead producer in North America
      and
      the largest primary lead producer in the western world. We
      operate our business in the United States through The Doe Run Resources
      Corporation, which we refer to as Doe Run, and our wholly owned subsidiary
      Fabricated Products, Inc., which we refer to as Fabricated Products. We operate
      our Peruvian operations through Doe Run Peru S.R.L., an indirect subsidiary
      of
      Doe Run that we refer to as Doe Run Peru. Doe Run operates an integrated primary
      lead operation and a recycling operation located in Missouri, referred to as
      Buick Resource Recycling. Fabricated Products operates a lead fabrication
      operation located in Arizona and a lead oxide business located in
      Washington. Doe Run
      Peru, operates a smelter in La Oroya, Peru, one of the largest polymetallic
      processing facilities in the world, producing an extensive product mix of
      non-ferrous and precious metals, including silver, copper, zinc, lead and gold.
      Doe Run Peru also has a copper mining and milling operation in Cobriza, Peru
      in
      the region of Huancavelica, which is approximately 200 miles southeast of La
      Oroya in Peru. See “Item
      8.
      Financial Statements and Supplementary Data—Note 16 to Consolidated Financial
      Statements” for
      financial information about operating segments and geographic
      areas.




Our
      auditors issued unqualified opinions on the 2005 audited consolidated financial
      statements of the Company and the 2005 audited financial statements of Doe
      Run
      Peru that expressed substantial doubt about the Company’s and Doe Run Peru’s
      ability to continue as going concerns due to net capital deficiencies,
      substantial debt service requirements, and significant capital requirements
      under environmental commitments. See
      further discussion and management’s plans in “Item 7. Management’s Discussion of
      Financial Condition and Results of Operations— *Liquidity
      and Capital Resources.* ”




*Corporate
      Structure*




Doe
      Run
      is a New York corporation formed in 1981. Doe Run is the successor via merger
      to
      the St. Joseph Lead Company, which was formed in 1864. All of Doe Run’s issued
      and outstanding common and preferred stock is directly or indirectly owned
      by
      The Renco Group, Inc. (Renco). Renco is owned by trusts established by Mr.
      Ira
      Leon Rennert, Renco’s Chairman and Chief Executive Officer, for himself and
      members of his family. As a result of such ownership, Mr. Rennert controls
      Doe
      Run and its subsidiaries, including Doe Run Peru, subject to the provisions
      of
      an Investor Rights Agreement discussed in “Item 5. Market for Registrant’s
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities.”




Doe
      Run
      owns 100% of Doe Run Cayman Ltd., a Cayman Islands corporation, which in turn
      owns in excess of 99% of the interest in Doe Run Peru. As required by Peruvian
      law, the remainder of Doe Run Peru’s shares are owned by present and former
      employees of both Doe Run Peru and Empresa Minera del Centro del Peru S.A.,
      (Centromin). Centromin is the Peruvian government entity whose subsidiary
      previously owned La Oroya. Doe Run Peru purchased that subsidiary on October
      23,
      1997.




Doe
      Run’s
      fiscal year ends on October 31. Any reference herein to a specific year, such
      as
      2005, refers to the *fiscal
      year* 2005,
      unless otherwise noted.




*U.S.
      Operations*




Doe
      Run’s
      primary lead operation in the U.S. consists of two primary lead smelters, one
      of
      which is active and the other is indefinitely suspended as a result of market
      conditions. The active smelter obtains concentrates principally from Doe Run’s
      four operating mills. The mills are supplied with ore mined from six production
      shafts along approximately 40 miles











of
      the Viburnum Trend in southeastern Missouri, one
      of the world’s most productive lead deposits. As of October 31, 2005, our U.S.
      ore reserves consisted of approximately 34 million proven and probable tons,
      containing average grades of 6.23% lead, 1.36% zinc and 0.26%
      copper.




Doe
      Run
      also operates the world’s largest secondary lead smelter, which is located in
      southeastern Missouri and produces lead metal from recycled lead-acid batteries
      and other lead-bearing materials.




Fabricated
      Products produces value-added lead products such as lead oxide, lead sheet
      and
      lead pipes at facilities in Arizona and Washington.




These
      operations enable our U.S. operations to participate in and manage the entire
      lead life cycle from mining lead ore, to producing refined lead metal, to
      fabricating value-added lead products, to recycling batteries and other
      materials containing lead.




In
      2005,
      our U.S. operations delivered approximately 324,000 tons of refined lead metal
      and lead alloy products, including lead recycled for customers (tolling). This
      represented approximately 17% of North American consumption and 6% of western
      world consumption. In addition, our U.S. operations delivered approximately
      152,000 tons of lead concentrates to international metal trading companies
      in
      2005.




Approximately
      50% of our U.S. operations’ sales in 2005 were to battery manufacturers or their
      suppliers. Historically, the lead-acid battery has been the dominant technology
      for automotive and other starting, lighting and ignition batteries as well
      as
      for motive power, telecommunication, network power, uninterruptible power
      systems and emergency lighting. Management believes this will continue to be
      the
      case for the foreseeable future because of its cost competitiveness,
      recyclability and existing infrastructure. Refined lead is also used in products
      such as computer and television screens, ammunition, and rolled and extruded
      lead products.




See
“Item
      7. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations— *Results
      of Operations* ”
for
      a
      detailed discussion of the markets for lead and other metals affecting Doe
      Run’s
      results of operations. By taking advantage of our extensive polymetallic ore
      resources and smelting assets, we are somewhat able to reduce the impact of
      metal price volatility through adjustments to our mining, milling and smelting
      plans beyond the short-term. In addition, sales from tolling services,
      by-products and fabricated products provide Doe Run with sources of revenue
      that
      are largely independent of lead prices.




*Peruvian
      Operations*




Doe
      Run
      Peru acquired La Oroya in October 1997 and Cobriza in August 1998. La Oroya’s
      unique combination of non-ferrous metal smelters, refineries and by-product
      circuits enable it to process complex polymetallic concentrates and to produce
      a
      number of high quality finished metals. In 2005, La Oroya was one of Peru’s
      largest exporters, exporting approximately 89% of its total sales to North
      America, Latin America, Asia and Europe. Its customers include end-users of
      non-ferrous and precious metals and metal by-products as well as international
      metal trading companies.




La
      Oroya’s operations smelt and refine complex concentrates obtained from Cobriza
      and from unaffiliated mining operations primarily in Peru. La Oroya typically
      purchases concentrate feedstock pursuant to contracts under which the cost
      of
      concentrates is based on a percentage of the non-ferrous metal and precious
      metal content of the concentrates, reduced by treatment and refining charges
      to
      process the concentrates and penalties for impurities within the concentrates.
      The impurities, such as arsenic, antimony and bismuth, can be processed and
      sold
      as by-products. Non-ferrous metal prices are generally established by reference
      to international metal markets, primarily the London Metal Exchange (LME).
      Treatment charges are negotiated with concentrate sellers, generally based
      on
      world terms. They are affected by numerous factors beyond Doe Run Peru’s control
      including:




·
            global
                and regional demand for smelter capacity,


·
            availability
                and quality of concentrates and


·
            expectations
                for inflation.











The
      aggregate effect of these factors is impossible for us to predict. La Oroya’s
      ability to process the impurities in copper and lead concentrates allows Doe
      Run
      Peru to charge a penalty for processing these concentrates. These penalties
      are
      a significant source of revenue to Doe Run Peru, and La Oroya is one of only
      six
      smelters in the western world that can process these types of
      concentrates.




La
      Oroya
      derives its operating profit primarily from treatment charges, refining charges
      and penalties on concentrates purchased. The smelter pays for the majority
      of
      the metal contained in the concentrates purchased, but metallurgical recoveries
      are typically greater than the percentage of metal content paid for. Therefore,
      it generates a portion of its operating profit from sales of the metals produced
      from these excess recoveries. Additional operating profit is generated from
      the
      sale of by-products as well as from premiums over market prices received on
      its
      refined metal sales.




The
      market for La Oroya’s products is global, and demand depends upon worldwide
      economic conditions. Given the diversity of its products and by-products, Doe
      Run Peru’s financial performance is not solely dependent upon any single product
      or by-product. Also, because the La Oroya smelter is primarily a processor
      of
      complex concentrates that are purchased based on market prices, its financial
      performance is less sensitive than Doe Run’s U.S. operations to the volatility
      of metal prices. La Oroya’s operating results, however, are sensitive to the
      level of treatment and refining charges and penalties received for concentrates
      processed and the availability of economically suitable concentrate feed. See
      “Doe Run Peru’s Operations— *Raw
      Materials* ”
for
      a
      discussion of treatment charges and difficulties encountered in obtaining
      adequate feed supply.




**Doe
      Run’s U.S. Operations**




*Products
      and Services*




The
      principal products produced by Doe Run’s operations include refined lead from
      primary and recycled sources, lead, zinc and copper concentrates, fabricated
      lead products and other by-products. Historically, the majority of lead
      concentrates produced have been used to feed Doe Run’s two primary smelters, but
      in November 2003, Doe Run indefinitely suspended operations at its Glover
      primary smelter and began selling its excess concentrates on the open market.
      Doe Run also generates revenue from tolling fees received for recycling spent
      lead-acid batteries and other lead-bearing materials for its customers. The
      following table sets forth net sales of products and services for Doe Run:




**Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**(dollars
                in thousands)Primary
                lead metal sales
            
            $
            174,285
            
            $
            131,919
            
            $
            134,530Recycling
                operation:Tolling
            
            
            35,178
            
            
            27,361
            
            
            29,709Metal
                sales
            
            
            41,432
            
            
            43,026
            
            
            33,717Other
            
            
            9,204
            
            
            6,919
            
            
            4,682Lead
                concentrates
            
            
            59,417
            
            
            42,369
            
            
            2,912Zinc
                concentrates
            
            
            30,627
            
            
            24,353
            
            
            19,717Copper
                concentrates
            
            
            16,924
            
            
            7,959
            
            
            4,336Fabricated
                products
            
            
            14,203
            
            
            12,658
            
            
            14,771Other
            
            
            6,918
            
            
            7,315
            
            
            4,735Total
            
            $
            388,188
            
            $
            303,879
            
            $
            249,109





For
      the
      years ended October 31, 2005, 2004 and 2003, exports represented approximately
      17%, 17% and 6%, respectively, of Doe Run’s operations’ net sales. See the
      discussion in “Item 7. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations— *Results
      of Operations* ”
for
      information regarding the impact of price and volume on sales.











*Transportation*




Doe
      Run
      transports its products by truck, barge and rail. It sells a significant amount
      of lead concentrates on the global market requiring transloading to barge on
      the
      Mississippi River.




*Customers*




Doe
      Run
      had approximately 128 lead metal customers in 2005, including the largest
      lead-acid battery manufacturers in the world. Approximately 50% of Doe Run’s
      revenues from unaffiliated customers were directly from U.S. battery
      manufacturers, primarily automotive, or their suppliers. Lead concentrates
      are
      sold to international trading companies.




*Competition*




Doe
      Run
      is the largest integrated lead producer in North America and the largest primary
      producer in the western world. It is also the third largest secondary lead
      producer in North America and the fourth largest in the world. Doe Run primarily
      services the North American lead metal market, where its major competitors
      are
      three primary lead producers and 12 secondary lead producers.




Competition
      within the North American lead metal market is based primarily on quality,
      price, service, timely delivery and reliability. Because lead is generally
      sold
      on a delivered basis with freight charges included, Doe Run’s central U.S.
      location typically allows it to have transportation costs significantly lower
      than its major competitors with operations outside of North America. Due to
      its
      location, Doe Run also is able to provide its customers just-in-time delivery
      at
      a lower cost than most of its competitors. In addition, management believes
      Doe
      Run’s combined primary and secondary production capabilities and focus on the
      lead business as its core business provide it with additional competitive
      advantages.




In
      response to a declining domestic metal market, and as battery manufacturers
      move
      production overseas, primarily to China, Doe Run has reduced its lead metal
      production and is selling more of its production as lead concentrates, competing
      in the global market for concentrates, where there is currently a deficit in
      supply. Doe Run
      produces clean concentrates, relatively free of impurities, which can be used
      with lower quality concentrates to improve smelters’ feed mix.




*Raw
      Materials*




At
      current production levels, lead concentrates for Doe Run’s primary smelting
      operation are supplied by its mining operations. However, should production
      levels change, lead concentrates may , from time to time, be purchased from
      third parties. For a discussion of our mineral reserves, see “Item 2.
      Properties—U.S. Operations— *Ore
      Reserves* .”
Doe
      Run utilizes various other raw materials, principally metallurgical coke,
      chemicals and reagents, which are secured from external sources, primarily
      on
      the basis of competitive bids.




There
      is
      a shortage in the U.S. market for coke due to competition from China. Coke
      supply was an issue in 2005 as was increased raw material costs at the
      Herculaneum primary smelter and Buick Resource Recycling Poor coke quality
      negatively impacted production at Buick Resource Recycling by approximately
      4,000 tons in 2005. We believe the coke supply is improving, and Doe Run is
      working on a contract for the 2006 supply requirements although the costs have
      continued to increase from current cost levels. Increased natural gas and
      propane costs also contributed to negative cost variances at the Herculaneum
      primary smelter and at the secondary operations. Soda ash was in short supply
      for the U.S. recycling operation in the first half of 2005. Alternative supplies
      have been located, and we do not anticipate an ongoing problem. We believe
      that
      Doe Run has adequate sources of the other raw materials to meet its present
      production needs.




Doe
      Run’s
      recycling operation recycles a variety of lead-bearing materials, primarily
      spent batteries, which it purchases from customers or tolls for customers.
      The
      chemistry and composition of feed materials can have a significant impact on
      the
      cost and operating performance of the recycling operation.











*Power*




The
      primary electric power source for the majority of Doe Run’s operations is Ameren
      UE, a public utility headquartered in St. Louis, Missouri. The Viburnum-35
      mine
      obtains its electric power from Black River Electric Cooperative located in
      southeastern Missouri. Natural gas and propane are secured from external
      sources, primarily under contracts that are awarded on the basis of competitive
      bidding, whose prices fluctuate with the market for natural gas and petroleum,
      respectively. We believe Doe Run has adequate power sources to meet its present
      production needs.




*Environmental
      Matters*




Doe
      Run’s
      operations are subject to numerous federal, state and local environmental laws
      and regulations governing, among other things, air emissions, wastewater
      discharge, solid and hazardous waste treatment, storage and disposal, and
      remediation of releases of hazardous substances. As is the case with much of
      the
      mining industry, Doe Run’s facilities are located on sites that have been used
      for heavy industrial purposes for decades and may require remediation.
      Environmental laws and regulations may become more stringent in the future,
      which could increase costs of compliance. See “Item 8. Financial Statements and
      Supplementary Data—Note 19 to Consolidated Financial Statements.”




*Safety*




For
      both
      our U.S. and Peruvian operations, we strongly emphasize providing a safe working
      environment through extensive employee training to ensure safe work practices
      and worker knowledge of proper equipment operation. In the U.S., the Mine Safety
      and Health Administration of the Department of Labor regulates Doe Run’s mining
      and milling operations, and the Occupational Safety and Health Administration
      of
      the Department of Labor regulates its smelting and fabricating operations.
      Doe
      Run has achieved safety results that are among the best in its industry
      classifications. In 2005, the mining and milling operations’ lost-time injury
      rate was about two times better than the national average for the underground
      metal mining industry. The lost-time injury rate for Doe Run’s primary smelter
      and its recycling operation was three times better than the national average
      for
      the primary nonferrous metals industry. In addition, the lost-time injury rate
      at Fabricated Products was two times better than the national fabricated metal
      products industry. The Fletcher, Viburnum #29, Viburnum #35 and Sweetwater
      mines, Buick Resource Recycling, and Fabricated Products completed 2005 with
      no
      lost-time injuries. Doe Run and its predecessor companies have won the
      prestigious Sentinels of Safety award 23 times in the past 31 years. The annual
      award is sponsored by the Mine Safety & Health Administration and the
      National Mining Association. The Doe Run Brushy Creek Mine won the award for
      2004, and five of the six SEMO mines are in contention for the 2005
      award.




*Employees*




As
      of
      October 31, 2005, Doe Run had 332 active salaried employees and 1,034 active
      hourly employees, of which Local 7450 of the United Steelworkers of America
      (USWA) represented five active hourly employees at our Glover primary smelter.
      Doe Run has extended a three-year labor agreement with the USWA for an
      additional period of one year. The labor agreement expires in May
      2006.




We
      received a letter on February 24, 2006 from the National Labor Relations Board
      requesting a representation election for all Buick Resource Recycling’s hourly
      production, maintenance and materials handling employees by the International
      union, United Automobile, Aerospace and Agricultural Implement Workers of
      America, AFL-CIO.




**Doe
      Run Peru’s Operations**




*Products*




Doe
      Run
      Peru’s principal products are refined silver, copper, lead, zinc and gold. In
      addition, Doe Run Peru produces a variety of by-products and provides tolling
      services. The following table sets forth net sales, excluding sales to Doe
      Run,
      for each of Doe Run Peru’s principal products.











**Year
                  Ended October 31,****2005**
              
              **2004**
              
              **2003**(dollars
                  in thousands)Silver
              
              $
              238,671
              
              $
              227,546
              
              $
              167,698Copper
              
              
              156,945
              
              
              116,885
              
              
              104,987Lead
              
              
              106,709
              
              
              98,853
              
              
              55,884Zinc
              
              
              58,955
              
              
              68,524
              
              
              58,376Gold
                  Bullion
              
              
              30,063
              
              
              25,261
              
              
              28,496Zinc/Silver
                  Concentrates
              
              
              3,724
              
              
              3,038
              
              
              2,270Copper
                  Concentrates
              
              
              1,141
              
              
              -
              
              
              -Tolling
                  Services
              
              
              11,709
              
              
              5,311
              
              
              6,601By-Products
              
              
              33,335
              
              
              18,771
              
              
              11,961Total
              
              $
              641,252
              
              $
              564,189
              
              $
              436,273




See
      the
      discussion in “Item 7. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations— *Results
      of Operations* ”
for
      information regarding the impact of price and volume on sales.




*Transportation*




Doe
      Run
      Peru primarily transports its products by ocean freight after first being
      transported by truck and rail to the port of Callao in Lima, Peru. The primary
      exception is that exported gold is transported via aircraft. Ocean freight
      availability has tightened due to competition for cargo vessels with China,
      which has in turn led to higher shipping costs.




*Customers*




Doe
      Run
      Peru had approximately 327 customers in 2005, including a wide variety of
      industrial and international trading companies. In 2005, approximately 89%
      of
      net sales were exported, with sales to North America, Latin America, Asia and
      Europe representing approximately 37%, 24%, 16% and 12%, respectively, of net
      sales. Substantially all of Doe Run Peru’s 2005 metal sales were pursuant to
      contractual agreements, typically with terms of one year or less. Such contracts
      generally set forth pricing mechanisms with minimum volumes. Substantially
      all
      of Doe Run Peru’s sales are denominated in U.S. dollars.




*Competition*




The
      unique combination of non-ferrous metal smelters, refineries and by-product
      circuits at La Oroya are capable of processing complex concentrates into high
      quality base and precious metals. Only five other facilities in the western
      world have the capability to treat lead and copper concentrates containing
      high
      antimony, arsenic, bismuth and precious metal values in addition to a variety
      of
      residues. Chinese smelters, however, which can also process complex
      concentrates, are competing with Doe Run Peru in the market for concentrates.
      See the discussion of concentrates below in “ *Raw
      Materials.* ”




*Raw
      Materials*




Doe
      Run
      Peru’s primary raw material is concentrate feedstock. In addition, Doe Run
      Peru’s processes consume various other raw materials, principally coke and
      fluxes.




*Copper.* During
      2005, approximately 65% of the copper concentrates processed at La Oroya were
      obtained from the Peruvian domestic market, including approximately 25% from
      Cobriza. In 2006, we expect to obtain approximately 66% of La Oroya’s copper
      concentrate requirements from the Peruvian domestic market, including
      approximately 26% from Cobriza. We expect to obtain the remaining 34% primarily
      from neighboring Latin American countries. La Oroya requires approximately
      77,000 tons per year of copper metal contained in concentrates to produce at
      capacity.











*Zinc.* All of
      the zinc concentrates processed at La Oroya during 2005 were secured from the
      Peruvian domestic market. La Oroya requires approximately 50,000 tons of zinc
      metal contained in concentrates per year to optimize production volume. During
      2005, the capacity was voluntarily decreased from 88,200 tons to 50,000 tons
      per
      year in order to reduce sulfuric acid gas and other gas emissions as well as
      to
      reduce the disposal of liquid effluents.




*Lead.* During
      2005, approximately 96% of the lead concentrates processed at La Oroya were
      obtained from the Peruvian domestic market. The smelter requires approximately
      134,000 tons of lead contained in concentrates per year to produce at
      capacity.




The
      following table sets forth Doe Run Peru’s purchases of copper, zinc, and lead
      concentrates (in tons) from outside sources for the last five fiscal
      years.





**Year
                Ended October 31,**
              **(tons/year)****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001**Copper
            
            
            193,244
            
            
            165,468
            
            
            183,414
            
            
            178,306
            
            
            197,224Zinc
            
            
            95,251
            
            
            153,358
            
            
            168,402
            
            
            174,300
            
            
            174,300Lead
            
            
            246,300
            
            
            236,574
            
            
            226,768
            
            
            227,774
            
            
            231,943





*Feed
      Supply.* Most of
      Doe Run Peru’s copper, lead and zinc concentrate feed supplies are secured from
      a small number of suppliers in the Peruvian domestic market. Due to the
      proximity of La Oroya to these suppliers, it is economically advantageous for
      Doe Run Peru to acquire its concentrates from Peruvian suppliers. Tightness
      in
      the global market for concentrates, however, has caused intense competition
      from
      buyers outside of Peru, especially in China, for all concentrates, including
      the
      complex concentrates that may have been previously undesirable for some
      smelters. This intense competition has adversely affected concentrate
      availability and treatment charges received. Since the middle of 2003 and
      through October 31, 2005, however, copper, zinc and lead prices have increased
      significantly, primarily due to decreased availability of supply. The increase
      in the copper prices has encouraged more production from the mines and, together
      with the decision of Chinese smelters to reduce their copper concentrate
      imports, has generated a radical change in the availability of copper
      concentrate beginning in the last quarter of 2004. Management estimates that
      there will be an excess of copper concentrates for the near future, which will
      improve the performance of the copper circuit in La Oroya. In spite of the
      price
      improvements, in the case of lead and zinc concentrate, the market remains
      tight, and we project that it will be tighter for the next few years since
      there
      are only a few mining projects coming on stream.




Currently,
      Doe Run Peru has secured approximately 95% of its concentrate requirements
      for
      2006 through material supplied by Cobriza and contracts with independent
      suppliers. For 2005, all of Cobriza’s output fed the La Oroya smelter,
      representing approximately 25% of the smelter’s copper concentrate requirements.




*Water.* Doe Run
      Peru obtains water for La Oroya from two main sources: the Tishgo River and
      the
      Cuchimachay Spring. The Mantaro River was another source of water until
      September 2005 when we stopped taking water out of the river and began to
      recycle our industrial water. Management believes the remaining two sources,
      in
      addition to numerous adjacent springs and wells, provide adequate water supplies
      for the facility.




*Power.* La Oroya
      receives electric power from Empresa de Electricidad de los Andes S.A., also
      known as Electroandes, a local electric power company owned by PSEG Global
      Inc.
      The smelting complex consumes approximately 63 megawatts of ongoing load, which
      represents approximately 45% of the capacity of Electroandes. Doe Run Peru
      has a
      supply contract with Electroandes that expires in July 2008. Management believes
      this agreement provides sufficient power at satisfactory rates. Most of
      Cobriza’s electrical power is also provided by Electroandes. Cobriza’s
      requirements do not represent a significant portion of Electroandes’ capacity.
      Electroandes is not the only source of electricity in the areas where Doe Run
      Peru operates.




*Other.* Doe Run
      Peru uses various other raw materials, principally oxygen, coke, fluxes and
      oil.
      Its oxygen plant at La Oroya supplies oxygen for the oxy-fuel burners of the
      reverberatory furnace of the copper smelter and for the blast furnaces of the
      lead smelter. The plant supplies all of La Oroya’s oxygen requirements.











Historically,
      Doe Run Peru consumed coke it produced and coke it imported. In order to reduce
      emissions at its coke processing plant, on November 8, 2004, Doe Run Peru began
      importing all of its coke instead of producing it. By the end of 2004, coke
      prices increased significantly, which resulted in higher production costs.
      Fluxes consumed in the smelting process are supplied primarily by Doe Run Peru
      controlled mining concessions near La Oroya. Doe Run Peru also purchases silica
      and pyrite fluxes containing precious metals. The smelter primarily uses
      industrial and diesel oil for fuel. During 2004, fuel prices increased
      significantly. Management believes that its sources of these materials are
      adequate to support operations for the foreseeable future.




*Environmental
      Matters*




Modern
      environmental legislation has been introduced only in the last 15 years in
      Peru.
      Nevertheless, we are governed by a number of agencies. For instance, the
      National Environmental Council coordinates government regulations and policies,
      including the air quality standards for Peru. The Directorate General of
      Environmental Health (DIGESA), a division of the Ministry of Health, issues
      wastewater discharge permits based on water quality standards. For mining and
      metallurgical activities, the Ministry of Energy and Mines, known as the MEM,
      is
      the principal regulatory authority. The MEM has issued “maximum permissible
      limits” for liquid effluent and air emissions. MEM also requires all new mining
      or metallurgical operations, and existing operations expanding by over 50%
      of
      installed capacity, to submit an Environmental Impact Study to the
      MEM.




La
      Oroya’s operations historically and currently exceed some of the applicable MEM
      maximum permissible limits pertaining to air emissions and wastewater effluent
      quality. Prior to our acquisition of La Oroya, Metaloroya S.A., the former
      owner, and at the time a subsidiary of Centromin, received approval from the
      Peruvian government for an Environmental Remediation and Management Program,
      known as a PAMA. The PAMA was designed to achieve compliance with MEM’s air and
      wastewater limits. It consisted of an environmental impact analysis, monitoring
      plan and data, mitigation measures and a closure plan. The PAMA also sets forth
      the actions and corresponding annual investments the concession holder agrees
      to
      undertake in order to achieve compliance with the maximum permissible limits
      prior to expiration of the PAMA (ten years for smelters, such as Doe Run Peru’s
      operations in La Oroya, and five years for any other type of mining or
      metallurgical operation like Cobriza). After expiration of the PAMA, the
      operator must comply with all applicable standards and requirements. The PAMA
      projects, which are more fully discussed below, have been designed to achieve
      compliance with these requirements. The Peruvian government may, in the future,
      require compliance with additional environmental regulations that could
      adversely affect Doe Run Peru’s business, financial condition and results of
      operations.




As
      part
      of our acquisition of La Oroya, Doe Run Peru assumed certain obligations under
      the PAMA, and Centromin agreed to indemnify Doe Run Peru against any
      environmental liability arising out of its prior operations and its apportioned
      share of any other liabilities related to emissions as mentioned above.
      Performance of the indemnity has been guaranteed by the Peruvian government
      through the enactment of Supreme Decree No. 042-97-PCM. There can be no
      assurance, however, that Centromin will satisfy its environmental obligations
      and investment requirements, including those in its PAMA, or that the
      governmental guarantee will be honored. Any failure by Centromin to satisfy
      its
      environmental obligations could adversely affect Doe Run Peru’s business,
      financial condition or results and operations. There can be no assurance that
      the Peruvian government will not, in the future, require compliance with
      additional environmental regulations that could adversely affect Doe Run Peru’s
      business, financial condition and results of operations.




The
      PAMA
      provides a specific plan for achieving the applicable MEM maximum permissible
      limits pertaining to air emissions and wastewater effluent quality. However,
      the
      specific projects included in the PAMA may be modified and amended as to the
      actual design and timing to be implemented, provided compliance with the
      applicable maximum permissible limits is achieved by the date in the
      PAMA.




Under
      the
      current approved PAMA, Doe Run Peru has committed to implement projects that
      include:




·
            constructing
                water and sewage treatment
                facilities


·
            installing
                slag handling equipment and disposal facilities
                and


·
            building
                sulfuric acid plants for the metal circuits — including some process
                changes that may be necessary to ensure compliance with Peru government
                agency regulations.











La
      Oroya’s current PAMA requires Doe Run Peru to complete these projects by
      December 31, 2006. Doe Run Peru expects that it will not be able to comply
      with
      the spending requirements of La Oroya’s PAMA investment schedule in 2006 with
      respect to the construction of the sulfuric acid plants required by the PAMA
      and, as a result, could be subject to penalties. Failure to comply with the
      PAMA
      could result in the forced cessation of operations at the La Oroya smelter,
      which would adversely affect our business, financial condition and results
      of
      operations. Peruvian law changed in 2004 to allow companies to request an
      extension of the compliance date. Doe Run Peru applied for an extension to
      complete the construction of the sulfuric acid plant contemplated by the
      original PAMA. See the discussion in “Item 7. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations— *Liquidity
      and Capital Resources* ”
for
      a
      description of the law and Doe Run Peru’s plans.




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




*Safety*




In
      Peru,
      the MEM is also responsible for regulations enacted to minimize accidents.
      It
      conducts annual inspections to ensure compliance with numerous safety standards.
      The Peruvian operations maintain a high regard for safety and health. During
      2004, Doe Run Peru received the John T. Ryan award, granted by Mining Safety
      Appliances, or MSA, for obtaining the best performance in mining safety in
      the
      category of Smelting and Refineries and for having achieved the best indexes
      of
      safety in Peru during the last two years. The La Oroya smelter completed nearly
      two million employee hours without a lost-time accident between July and October
      2005.




During
      2005, La Oroya experienced a fatal accident involving a contractor’s employee,
      and Cobriza experienced a fatal accident involving an employee in February
      2005.
      Management has thoroughly investigated these incidents and reinforced the
      appropriate safety procedures with the workforce and its contractors. There
      were
      no other lost-time accidents at Doe Run Peru’s operations during
      2005.




*Employees*




As
      of
      October 31, 2005, Doe Run Peru’s employees included 779 active salaried
      employees, 2,119 active hourly employees and 1,185 contractors. Management
      believes its relations with employees are good. There are three unions for
      hourly employees and two unions for salaried employees. The principal union,
      representing 73% of the hourly employees, is the Sindicato de Trabajadores
      Metalúrgicos La Oroya (La Oroya Metallurgic Workers Union). The Sindicato de
      Trabajadores Cobriza (Cobriza Workers Union) and the Sindicato de Trabajadores
      Ferroviarios La Oroya (La Oroya Railroad Workers Union) represent 14% and 3%
      of
      the hourly workers, respectively. On July 21, 2003 and September 1, 2003, Doe
      Run Peru entered into a five-year labor agreement with the unions representing
      the hourly employees at La Oroya and Cobriza, respectively. The salaried
      employees are represented by the Sindicato de Empleados Yauli-La Oroya (Yauli-La
      Oroya Employees Union), representing 33% of the salaried employees, and by
      the
      Sindicato de Empleados Cobriza (Cobriza Employees Union), representing 4% of
      salaried employees. On January 6, 2003 and September 1, 2003, Doe Run Peru
      entered into a five-year labor agreement with the unions representing the
      salaried employees at La Oroya and Cobriza, respectively.




**Additional
      Information**




We
      file
      annual, quarterly and current reports with the SEC. Any materials filed with
      the
      SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street,
      Washington D.C. 20549. Further information is available at 1-800-SEC-0330.
      Reports are also available on the SEC’s website at www.sec.gov.




Additional
      information related to us is available on our website at www.doerun.com. Our
      website and information contained on our website are not part of this Annual
      Report on Form 10-K and are not incorporated by reference herein.











**Item
      2. Properties**




**Doe
      Run**




*Mining
      Operations*




Doe
      Run’s
      Southeast Missouri Mining and Milling Operations (‘SEMO”) based in Missouri are
      a major producer of lead, zinc and copper. In order to exploit the underground
      lead-zinc-copper reserves Doe Run has seven production shafts, six of which
      are
      currently operating, that form a north-south line along approximately 40 miles
      of the ore body. Two of its production shafts, Viburnum-29 and Viburnum-35,
      lie
      within a five-mile radius, north and south, respectively, of Viburnum, Missouri,
      which is located approximately 125 miles southwest of St. Louis, Missouri
      (Figure 1). Doe Run’s Buick, Brushy Creek, Fletcher, West Fork and Sweetwater
      production shafts are within 30 miles of Viburnum. The seventh production shaft,
      known as West Fork, is on care and maintenance status.
















**Figure** **1** **Doe Run's Missouri Mining Operations as of October 31,
      2005**





Doe
      Run
      also has five grinding/flotation mills located near its production shafts,
      four
      of which are currently operating as shown below. All of the mining and milling
      facilities are accessible by state or county roads or haul roads owned by Doe
      Run. Products are shipped by truck over public roads.











The
      production capacities of Doe Run’s mills are as follows:




Milling
                CapacityMill
            
            (Tons
                of Ore Per Day)Sweetwater
            
            6,800Buick
            
            6,400Fletcher
            
            5,000Brushy
                Creek
            
            5,000West
                Fork (1)
            
            4,000





(1)
            The
                West Fork mill is on care and maintenance status, where production
                at the
                facility is temporarily suspended, but certain maintenance activities
                are
                continued.




Historic
      SEMO Production




**SEMO
                Production Statistics 2001-2005**2001
            2002
            2003
            2004
            2005Ore
                milled (dry tons)
            5,354,098
            5,070,334
            4,672,924
            5,002,459
            5,537,230Ore
                grade - (%):Lead
            6.17%
            6.23%
            6.51%
            5.73%
            5.36%Zinc
            1.22%
            1.21%
            1.25%
            1.16%
            1.01%Copper
            0.10%
            0.12%
            0.16%
            0.22%
            0.23%Production
                (dry tons):Lead
                concentrates
            405,209
            388,648
            374,918
            352,728
            363,328Grade
                (%)
            78.66%
            78.79%
            78.84%
            77.95%
            77.55%Recovery
                (%)
            96.56%
            97.00%
            97.24%
            95.85%
            94.96%Lead
                content
            318,744
            306,208
            295,581
            274,950
            281,772Zinc
                concentrates
            93,238
            86,887
            82,047
            80,606
            73,899Grade
                (%)
            58.65%
            58.36%
            57.99%
            57.43%
            58.06%Recovery
                (%)
            83.74%
            82.47%
            81.50%
            79.78%
            76.44%Zinc
                content
            54,687
            50,708
            47,578
            46,290
            42,906Copper
                concentrates
            8,083
            9,433
            13,977
            20,643
            22,516Grade
                (%)
            27.17%
            28.10%
            28.82%
            28.79%
            28.74%Recovery
                (%)
            39.19%
            45.27%
            52.90%
            54.99%
            51.29%Copper
                content
            2,196
            2,651
            4,028
            5,943
            6,470





*Land
      Ownership*




Doe
      Run
      owns the property where the necessary surface structures for mining and milling
      are located. The mineral rights are held either by fee title or mineral leases
      with either private landowners or the federal government. There are also
      numerous prospecting permits, most of which are for exploration of new mineral
      ore deposits. Five of the production leases are private leases and 13 are
      government leases. Doe Run makes royalty payments under these leases. The
      mineral leases with private landowners have no expiration periods. The
      government leases are for a period of either 10 or 20 years and are renewable
      at
      Doe Run’s option if no default exists under the agreement, subject to
      negotiation of specific terms of the lease, including royalty rates. Although
      no
      assurance can be given, management anticipates that these leases will be renewed
      at rates that do not exceed the current levels.











A
      summary
      of the lands owned and leased by Doe Run for its Southeast Missouri Mining
      Operations as of October 31, 2005 is as follows:





**Land
                Owned by Doe Run**Acres
            Acres
            Acres
            TotalOperation
            Entire
                (1)
            Mineral
                (2)
            Surface
                (3)
            AcreageSEMO
            23,079.27
            19,474.70
            10,256.32
            52,810.29Exploration
            249.24
            2,284.05
            235.47
            2,768.76Total
                acreage
            23,328.51
            21,758.75
            10,491.79
            55,579.05**Third
                Party Land Leased by Doe Run**Area
            AcresBureau
                of Land Management -USA (“BLM”)
            33,622.79Missouri
            5,560.04Total
                acreage
            39,182.83





(1)
            Acres
                Entire refers to acres where both subsurface and mineral rights are
                owned.




(2)
            Mineral
                Acres refers to acres where only the mineral rights are
                owned.





(3)
            Surface
                Acres refers to where only surface rights are
                owned.







Doe
      Run’s
      producing leases from the federal government, managed by the BLM, consist of
      the
      following:




Number
                of
            ExpirationLocation
            Producing
                Leases
            DateViburnum
            7
            March
                31, 2018Fletcher
            2
            May
                31, 2013Buick
            1
            October
                31, 2014Brushy
                Creek
            2
            May
                31, 2013West
                Fork
            1
            January
                31, 2013





*Ore
      Reserves*




The
      following tables set forth the proven and probable reserves estimated by Doe
      Run
      for the fiscal years ended October 31, 2005 and 2003, which have been audited
      by
      the mining consulting firm of Pincock, Allen & Holt (PAH), a division of
      Runge, Inc. PAH reviewed the methodology and cost basis used in the reserve
      calculation, as discussed in their reports dated January 16, 2006 and January
      29, 2004, and believe that the reserve estimations have been performed in a
      reasonable manner consistent with industry accepted standards. For the purposes
      of calculating cutoff grades and reserves, beginning with the 2004 fiscal year,
      the 3-year annual average prices for lead, zinc and copper were used. Prior
      to
      that period 8-year annual price averages had been used for purpose of the
      calculation(s). The table below includes the audited reserves for the 2003
      and
      2005 fiscal years. The table does
      not include
      the total proven and probable reserves as of the fiscal year ended October
      31,
      2004, which were estimated by the Company to be 45.2 million tons consisting
      of
      5.51% lead, 1.31% zinc and 0.29% copper. The 2004 proven and probable reserves
      were not audited by Pincock, Allen & Holt and therefore were not included in
      the table.











**Audited
      Proven and Probable Reserves**


**As
      of October 31, 2005**




**Grade**(1)**Tons**
            **Lead**
            **Zinc**
            **Copper****(in
                thousands)**Proven
                (measured) reserves
            10,709
            8.17%
            1.52%
            0.30%Probable
                (indicated) reserves
            23,574
            5.34%
            1.28%
            0.24%Total
                proven and probable reserves
            34,283
            6.23%
            1.36%
            0.26%




**As
      of October 31, 2003**




Proven
                  (measured) reserves
              11,561
              7.64%
              1.54%
              0.31%Probable
                  (indicated) reserves
              36,125
              4.83%
              1.16%
              0.29%Total
                  proven and probable reserves
              47,686
              5.51%
              1.25%
              0.29%


(1)
            The
                estimated average extraction recovery of metals, after allowing for
                expected dilution for lead, zinc and copper, is approximately 89%.
                This
                dilution is included in the above reserve table. Estimated average
                metallurgical recoveries for lead, zinc and copper are 96.5%, 83.0%
                and
                50.0%, respectively. Metallurgical recovery losses have not been
                included
                in the above reserve table.




Included
      in the 2005 table of proven and probable reserves is the Higdon deposit, which
      is outside of the Viburnum trend, consisting of 2.3 million tons of ore with
      a
      grade of 5.7% lead and 2.2% zinc. Similarly, the table representing the 2003
      proven and probable reserves includes Higdon, which consisted of 2.7 million
      tons of ore with a grade of 5.7% lead and 2.0% zinc. While the surface
      structures and shaft are in place for the hoisting of ore from the mine,
      underground mine development requiring significant investment would be necessary
      in order to generate production from the mine. Processing of any ore mined
      from
      the Hidgon resource would require permitting and construction of a mill at
      the
      site or haulage of the ore to an existing mill in the Viburnum
      trend.




Total
      proven and probable reserves for 2005 declined 28% from the audited 2003
      total.  PAH attributed this reduction due mainly to higher operating
      costs, which resulted in higher cutoff grades for the calculation. 
Additionally, mine production decreases to the reserve base were only partially
      offset by ore added through exploration.




The
      term
“reserve” means that part of a mineral deposit that could be economically and
      legally extracted or produced at the time of the reserve determination. The
      term
“proven (measured) reserves” means reserves for which: 1) quantity is computed
      from dimensions revealed in outcrops, trenches, workings or drill holes; grade
      and/or quality are computed from the results of detailed sampling and 2) the
      sites for inspection, sampling and measurement are spaced so closely and the
      geologic character is so well defined that size, shape, depth and mineral
      content of reserves are well-established. The term “probable (indicated)
      reserves” means reserves for which quantity and grade and/or quality are
      computed from information similar to that used for proven (measured) reserves,
      but the sites for inspection, sampling and measurement are farther apart or
      are
      otherwise less adequately spaced. The degree of assurance, although lower than
      that for proven (measured) reserves, is high enough to assume continuity between
      points of observation.




*Smelting
      Operations*




Doe
      Run’s
      Herculaneum primary lead smelter is located approximately 35 miles south of
      St.
      Louis on the Mississippi River in Herculaneum, Missouri. It has a capacity
      of
      250,000 tons per year, but is limited to 200,000 tons per year by permit. The
      smelter is currently operating at an annualized run rate of approximately
      175,000 tons. The smelter, which began operations in 1892, is the largest
      primary lead smelter in North America and the third largest in the
      world.




Located
      in Glover, Missouri, approximately 20 miles southeast of the Sweetwater
      production shaft, is Doe Run’s Glover primary smelter, which began operations in
      1968 and has a capacity of approximately 136,000 tons per year. Doe Run
      indefinitely suspended operations at the Glover primary smelter in the first
      quarter of 2004 due to decreased U.S. demand for lead. See the discussion in
      “Item 7. Management’s Discussion and Analysis of Financial Condition and Results
      of











Operations—*Overview.*”




Doe
      Run’s
      recycling operation, located in Boss, Missouri, approximately ten miles south
      of
      Viburnum, began operations in 1991 and currently has an annual physical capacity
      of approximately 165,000 tons. The facility operates under a Resource
      Conservation and Recovery Act permit allowing it to handle hazardous waste,
      primarily lead-bearing material. Up until January 2005, the smelter was
      permitted for 152,410 tons of furnace production annually. A permit to
      permanently expand the emissions capacity of the recycling operation to allow
      approximately 175,000 tons of production was received in January 2005. The
      facility can, however, recycle lead metal scrap materials that are not required
      to go through the furnaces in order to achieve additional metal
      production.




Doe
      Run
      owns its two primary smelters and its secondary smelter.




Fabricated
      Products, operates in leased facilities located in Casa Grande, Arizona, and
      Vancouver, Washington. Fabricated Products ended production at its Lone Star
      Lead Construction facility in Houston, Texas in December 2003.




Substantially
      all of the assets of our U.S. operations are pledged as collateral under various
      financing agreements.




**Peruvian
      Operations**




*Smelting
      Operations*




Doe
      Run
      Peru’s smelting operations are located in the central Peruvian Andes town of La
      Oroya, approximately 110 miles east of the Peruvian capital of Lima and at
      an
      altitude of approximately 12,000 feet above sea level. The complex is linked
      to
      port facilities by highway and railroad service. Most local supply sources
      also
      have rail service. Doe Run Peru owns the facilities, which consist of a copper
      smelter, lead smelter, copper refinery, lead refinery, copper fabricating plant,
      zinc refinery, precious metals refinery, antimony plant, arsenic plant, coke
      plant, cadmium plant, maintenance shops and other support facilities. Current
      production capacities of primary products are as follows:




Product
            
            Annual
                CapacityCopper
                (short tons)
            
            
            77,000Lead
                (short tons)
            
            
            134,000Zinc
                (short tons)
            
            
            50,000Silver
                (thousands of troy ounces)
            
            
            37,000Gold
                (thousands of troy ounces)
            
            
            64





During
      2004, La Oroya produced at less than capacity primarily due to environmental
      limits and insufficient availability of suitable feed materials. See the
      discussion in “Item 1. Business—Doe Run Peru Operation’s— *Raw
      Materials.* ”
See
      the
      discussion of production levels for 2004 in “Item 7. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations— *Results
      of Operations.* ”




In
      2005,
      Doe Run Peru ceased operating its three New Jersey zinc roasters, which were
      costly to operate and environmentally inefficient. The decision resulted in
      a
      reduction of refined zinc production to 50,000 tons per year, down from the
      previous capacity of 88,200 tons per year. We believe that this change will
      reduce sulfuric acid gas and other gas emissions as well as reduce the disposal
      of liquid effluents.




*Mining
      Operations*




Doe
      Run
      Peru’s Cobriza mine is located approximately 250 miles southeast of Lima in the
      district of San Pedro de Coris, Churcampa Province (Figure 2). Access to the
      site is by improved unpaved road through rugged terrain. Concentrates produced
      at the mine are trucked 130 miles over unpaved road to Huancayo and then an
      additional 70 miles over paved road to the La Oroya smelter. Cobriza’s mill has
      a capacity of 10,000 short tons per day. Cobriza used approximately half of
      its
      capacity as of October 31, 2005.


















**Figure** **2** **Doe Run Peru's Mining Operations as of October 31, 2005**





The
      Cobriza Mine is a copper/iron skarn deposit which is accessed through a series
      of adits and a single production shaft. The mineralization occurs as a
      replacement body in the Cobriza Limestone, which is interbedded within a thick
      sequence of clastic, shale and lesser amounts of carbonate units.











Landholdings
      at Cobriza include approximately 2,700 acres of surface ownership and
      approximately 128,235 acres of mining concessions. The current mining operation
      is located on a portion of the area held. The mining concessions are issued
      by
      Instituto Nacional de Concesiones y Catastro Minero ("INACC") of the Peruvian
      government, the sole authority for issuing mining concessions. A mining
      concession gives the holder of the concession the right to explore and mine
      any
      minerals found on the concession. The concessions can be maintained in good
      standing by making an annual concession fee payment of US $3/hectare. An
      additional annual fee of US $6/hectare is required for the seventh year and
      onwards if no mine production is achieved from the mining concession. This
      additional annual fee rises to US $20/hectare for the twelfth year and onwards.
      In the case of the Mantaro property 1998 is considered the first year of the
      concession.





Economic
      mineralization outside the existing mining area has not been confirmed as of
      October 31, 2005. Doe Run Peru’s estimates indicate an unaudited, proven and
      probable ore reserves of approximately 7.2 million short tons containing
      approximately 1.20% copper. In the table below is the historical production
      for
      the Cobriza Mine for the period Fiscal Year 2001 through Fiscal Year
      2005.





Historic
      Cobriza Production.




**Cobriza
                Productions Statistics 2001-2005**2001
            2002
            2003
            2004
            2005Ore
                milled (dry tons)
            1,623,776
            1,649,539
            1,565,417
            1,453,843
            1,605,463Ore
                grade - (%):Copper
            1.07%
            1.02%
            1.10%
            1.10%
            1.00%Production
                (dry tons):Copper
                concentrates
            65,534
            67,243
            67,766
            62,992
            65,329Grade
                (%)
            24.79%
            23.36%
            24.02%
            24.03%
            22.93%Recovery
                (%)
            93.35%
            93.29%
            94.35%
            94.77%
            93.57%Copper
                content
            16,244
            15,705
            16,274
            15,135
            14,982





**Exploration**




We
      continue to explore for additional reserves within the Viburnum Trend, one
      of
      the world’s most productive lead-zinc ore districts. Current exploration is
      focused on surface and underground drilling in and adjacent to the operating
      mines for the purpose of discovering new ore reserves in the mines as well
      as
      discovering additional ore bodies in the general area of the existing mines. Drilling
      in 2004 in the Viburnum Trend led to the discovery of a new ore body, the RC
      West Fork ore body. Development on the ore body began in the first quarter
      of
      2005, with full production scheduled to begin in late 2006. The
      reserve, as calculated by Doe Run and audited by Pincock, Allen and Holt, stands
      at 2.9 million tons, grading 6.65% lead and 0.83% zinc. The RC West Fork ore
      body remains open both to the north and south and will remain a focus for
      further drilling planned for 2006.




We
      hold
      additional exploration tracts outside the Viburnum Trend in the U.S. In
      Missouri, 50 miles east of the Viburnum Trend, we have conducted pre-development
      work on the Higdon lead-zinc-cobalt deposit. See “ *Ore
      Reserves* ”
for
      further detail.




Current
      mine exploration at Doe Run Peru is focused on underground drilling in the
      Cobriza mine for the purpose of discovering additional ore reserves. Regional
      exploration is ongoing on Doe Run Peru landholdings in the Cobriza region.
      Geological mapping and surface sampling as well as airborne and ground
      geophysical methods are being utilized in the search for new ore bodies.
      Drilling of developed targets began in the first quarter of 2006.











In
      South
      Africa, through a subsidiary, we have conducted pre-feasibility work on a zinc
      and lead deposit approximately 100 miles from Kimberly, in the Northern Cape
      Province. Surface rights to these properties are currently being held with
      minimal cost pending further economic evaluation. We continue to pursue revised
      exploration permits for these properties from the South African
      government.




**Item
      3. Legal Proceedings**




In
      addition to the items discussed below, we are involved in various litigation
      and
      claims, government investigations and other legal proceedings that arise from
      time to time in the ordinary course of business. While management does not
      believe any of these matters will have a material adverse effect on our
      financial position, litigation is inherently unpredictable, and excessive
      verdicts do occur. Although management believes valid defenses exist in these
      matters, we could in the future incur judgments or enter into settlements of
      claims that could have a material adverse effect on our financial condition,
      liquidity and results of operations.




Doe
      Run
      is a defendant in 29 lawsuits alleging certain damages from lead emissions
      stemming from the operations at the Herculaneum smelter. The cases were brought
      in the Circuit Court of the City of St. Louis: *Meyer,
      et al. v. Fluor Corporation, et al. (formerly known as Mitchell, et al. v.
      Fluor
      Corporation, et al.)* , *Doyle,
      et al. v. Fluor Corporation, et al.* and *Figge,
      et al. v. Fluor Corporation et al.* ,
      all
      filed July 9, 2001; *Gross
      v. Fluor Corporation et al.* ,
      filed
      May 9, 2002; *Warden,
      et al. vs. Fluor Corporation et al.* ,
      filed
      September 12, 2002; *Cross
      v. Fluor Corporation et al.* ,
      filed
      January 10, 2003; *Johnson,
      et al. v. Fluor Corporation, et al.* and *Browning,
      et al. v. Fluor Corporation, et al.* ,
      both
      filed September 9, 2003; *Farrow,
      et al. v. Fluor Corporation, et al.,* filed
      May 6 2005; *Dawson,
      et al. v. Fluor Corporation, et al., Alexander, et al. v. Fluor Corporation,
      et
      al., Pedersen, et al. v. Fluor Corporation, et al., Heilig, et al. v. Fluor
      Corporation, et al., Lynch, et al. v. Fluor Corporation, et al., Brown II v.
      Fluor Corporation, et al., Whaley, et al. v. Fluor Corporation, et al., Duncan,
      et al. v. Fluor Corporation, et al., Meyer v. Fluor Corporation, et al., Edmond,
      et al. v. Fluor Corporation, et al., Lucas, et al. v. Fluor Corporation, et
      al.,
      McCoy v. Fluor Corporation, et al.,* and *Damazyn,
      et al. v. Fluor Corporation, et al.,* all
      filed
      August 25, 2005; ** and *Joyner,
      et al. v. Fluor Corporation, Miller, et al. v. Fluor Corporation, et al.,
      Wamble, et al. v. Fluor Corporation, et al., Hawley, et al. v. Fluor
      Corporation, et al., Wren, et al. v. Fluor Corporation, et al. , Jarvis v.
      Fluor
      Corporation, et al.,* and *Ruessler, et al. v. Fluor Corporation, et al.,* all
      filed
      August 26, 2005.




The *Doyle,
      Meyer* , ** and *Johnson* cases
      are class action lawsuits. In the *Doyle* and *Johnson* cases,
      the plaintiffs seek to have certified a class of property owners in a certain
      section of Herculaneum, alleging that property values have been damaged due
      to
      the operations of the smelter. In the *Meyer* case,
      plaintiffs seek to have certified a class of children who lived in Herculaneum
      during a period of time when they were six years old or younger and children
      born to mothers who lived in Herculaneum during their pregnancies. The remedy
      sought is medical monitoring for the class. The trial court has granted the
      property class action in *Doyle* ,
      but has
      denied the medical monitoring class action in *Meyer* .
      Both
      decisions are being appealed.




The
      remainder of the 29 cases are personal injury actions by 161 individuals who
      allege damages from the effects of lead poisoning they attribute to operations
      at the smelter and seek punitive damages.




Doe
      Run
      is also a defendant in a wrongful death action, *Schmidt-Sido,
      et al., v. Doe Run Resources Corporation,* filed
      August 26, 2005, concerning an individual who drowned in the City of
      Herculaneum. The lawsuit was filed in the circuit court of the City of St.
      Louis, Missouri.




Doe
      Run
      is a defendant in 17 lawsuits alleging certain damages from past mining
      operations in St. Francois County, Missouri (one suit also alleges exposure
      to
      operations in Iron County) filed in the Circuit Court of the City of St. Louis,
      Missouri: *Dowd,
      et al. v. Fluor Corporation, et al.,* filed
      July 9, 2001; *Lee
      Ann Stotler and Keely Stotler v. Fluor Corporation, et al.* and *Layne
      Stotler v. Fluor Corporation, et al.* ,
      both
      filed January 10, 2002; *Mullins
      v. Fluor Corporation, et al.* and *Mullins
      II v. Fluor Corporation, et al.* ,
      both
      filed April 15, 2002; *Shannon
      v. Fluor Corporation, et al., White, et al. v. Fluor Corporation, et al.,
      Stotler, et al. v. Fluor Corporation, et al., Sorbello, et al v. Fluor
      Corporation, et al* ,
      and *Brewer v. Fluor Corporation, et al.* ,
      all
      filed August 24, 2005; *Mullins II, et al. v. Fluor Corporation, et al., Losh, et al. v. Fluor
      Corporation, et al., Burnia, et al. v. Fluor Corporation, et al., Ball v. Fluor
      Corporation, et al.,* and *Snyder, et al. v. Fluor Corporation, et al.* ,
      all
      filed August 25, 2005; and *Politte,
      et al. v. Fluor Corporation, et al* and *Baker v. Fluor Corporation, et al.* ,
      all
      filed August 26, 2005.











The *Lee
      Ann Stotler* , *Layne
      Stotler, Mullins,* and *Mullins
      II* cases
      are class action lawsuits. The *Lee
      Ann Stotler* and *Layne
      Stotler* cases
      are
      class actions for property damages and medical monitoring, respectively,
      concerning alleged damages caused by tailings and related operations in Bonne
      Terre. The *Mullins* and *Mullins
      II* cases
      are
      class actions for property damages and medical monitoring, respectively,
      concerning alleged damages caused by chat, tailings and related operations
      in
      six areas in St. Francois County, Missouri.




The
      remainder of the 17 cases are personal injury actions by 28 individuals who
      allege damages from the effects of lead poisoning they attribute to chat,
      tailings and related operations and seek punitive damages.




Doe
      Run,
      with several other defendants, was named in several lawsuits alleging personal
      injuries as a result of lead poisoning from exposure to lead paint and
      tetraethyl lead dust. While filed in the summer of 2000, these suits have not
      been served on Doe Run: *Hall
      v. Lead Industries Association, Inc., et al.* , *Hart
      v. Lead Industries Association, Inc., et al.* , *Williams
      v. Lead Industries Association, Inc., et al.* and *Randell
      v. Lead Industries Association, Inc., et al* .
      The
      suits were all filed in the Circuit Court of Baltimore, Maryland and seek
      damages, including punitive damages.




Doe
      Run
      is a defendant in a lawsuit by the BNSF Railway Company, who has
      alleged that Doe Run and other companies associated with lead mining operations
      in Missouri are responsible for property damage at certain rail yards and for
      contribution and indemnity for costs incurred by the BNSF associated with
      settlement by BNSF of lead exposure cases. Although the demands in the complaint
      indicate that some amount of material liability is reasonably possible,
      given the early stage of this case and the uncertainty as to relative fault
      among the defendants, we are unable at this time to estimate the expected
      outcome and any final costs of this action or provide a reasonably possible
      range of these amounts.




*B.H.,
      et al. v. Gold Fields Mining Corporation, et al.* and *R.S.,
      et al. v. Gold Fields Mining Corporation, et al.,* were
      filed on July 19, 2004 in the U.S. District Court for the Northern District
      of
      Oklahoma and the District Court of Ottawa County, Oklahoma, respectively,
      against four companies, including Doe Run, alleging personal injury to 45 and
      three minors, respectively, resulting from past mining operations in Ottawa
      County, Oklahoma. The latter case has been removed to the U.S. District Court
      for the Northern District of Oklahoma. These two cases have been consolidated,
      and six of the 48 plaintiffs have been dismissed from the case.




Two
      class
      action suits, *Cole,
      et al. v. Asarco, Inc., et al.* ,
      filed
      May 14, 2003, and *Evans,
      et al. v. Asarco Inc., et al.,* filed
      February 9, 2004, were filed in the U.S. District Court for the Northern
      District of Oklahoma, alleging personal injury and property damage in Picher,
      Oklahoma and Quapaw, Oklahoma respectively. *Brewer,
      et al. v. Asarco, Inc., et al.,* was
      filed
      on July 8, 2003, and *Moss,
      et al. v. Asarco, Inc., et al., Nowlin, et al. v. Asarco, Inc., et al., Sargent,
      et al. v. Asarco, Inc., et al.* and *South,
      et al. v. Asarco, Inc., et al.,* were
      filed July 29, 2003 in the District Court of Ottawa County, Oklahoma and allege
      personal injury to children living in Picher, Oklahoma. These cases were
      subsequently removed to the U.S. District Court for the Northern District of
      Oklahoma and have been consolidated. Another class action suit, *The
      Quapaw Tribe of Oklahoma, et al. v. Asarco, Inc., et al.* ,
      was
      filed in the U.S. District Court for the Northern District of Oklahoma on
      December 10, 2003 against seven companies, including Doe Run. This action
      alleges damage to natural resources and to property of members of the Quapaw
      Tribe.




*Priesmeyer
      v. Union Carbide, et al* *.* was
      filed in the Circuit Court of Madison County, Illinois on May 16, 2002, alleging
      that a contractor was injured by exposure to asbestos and is seeking
      reimbursement for damages, but Doe Run has not been properly served. Doe Run
      received notice that a similar suit, *Hawrylak
      v. Allied Glove Corp., et al.* was
      filed on May 16, 2003 in the Court of Common Pleas of Lawrence County,
      Pennsylvania. *Straussner
      v. Union Carbide Corp., et al.* ,
      an
      asbestos suit originally filed on February 25, 2003, was dismissed on June
      8,
      2005. A new suit, *Straussner
      v. Union Carbide Corp., et al.* ,
      was
      filed on September 13, 2005 in the Circuit Court of Madison County, Illinois
      against 88 corporations, including Doe Run, alleging that a contractor has
      a cancer caused by exposure to asbestos. *Overberg
      v. Arch City Drywall Supply, et al.* ,
      an
      asbestos suit filed in the Circuit Court of the City of St. Louis, was dismissed
      on October 12, 2005. A tentative settlement has been reached in *Pagano
      and Roti v. Anheuser-Busch, Inc., et al.* ,
      an
      asbestos suit filed in the Circuit Court of Madison County, Illinois on December
      17, 2004.




Doe
      Run
      is in a commercial dispute with a buyer concerning one ocean shipment of lead
      concentrates. Buyer is seeking reimbursement of expenses incurred to address
      a
      large amount of water that appeared during the voyage on top of concentrates
      in
      the forward holds. This contract dispute is in arbitration before the
      LME.











Doe
      Run
      is a defendant in a lawsuit by Korea Zinc Co. and affiliates filed on January
      19, 2006 in the Circuit Court of St. Louis County, concerning alleged violations
      of an agreement regarding the sale of zinc concentrates. Doe Run disputes the
      claim and will seek dismissal because the dispute should be subject to
      arbitration.




On
      December 26, 2003, Peru’s tax authority, SUNAT, notified Doe Run Peru of an
      income tax assessment for the 1998 tax year. On December 23, 2004, assessments
      were received for tax years 1999 through 2001. The assessments primarily relate
      to Doe Run Peru’s income tax treatment of the December 1997 merger of Doe Run
      Peru and Metaloroya S.A., which was purchased by Doe Run Peru in October 1997,
      and its effects on subsequent years’ taxable income. Under the assessment by
      SUNAT, the tax basis of Doe Run Peru’s fixed assets acquired would decrease,
      resulting in lower tax depreciation expense than originally claimed. The
      assessed amount, consisting of additional income taxes due, penalties and
      interest, as of October 31, 2005, totals approximately $109.0 million. We
      estimate that the effect of a similar assessment for tax years after 2001 would
      be approximately $30.3 million.




Furthermore,
      Doe Run Peru would also be required to make additional workers’ profit sharing
      payments equal to 8% of the increase in taxable income generated by the changes
      discussed above, or approximately $11.2 million for tax years 1998 through
      2005.




On
      November 15, 2004, SUNAT notified Doe Run Peru of a Value Added Tax (VAT)
      assessment for the
      period from January through July 2004 .
      On
      December 23, 2004, Doe Run Peru received additional VAT assessments for tax
      years 1999 through 2001. The assessments primarily relate to Doe Run Peru’s
      exports with holding certificates and differences in a tax credit application.
      The total assessment for these periods was approximately $43.5 million. SUNAT
      offset the amount assessed for 2004 of $2.3 million against Doe Run Peru’s VAT
      receivable balance from July 2004. Future VAT reimbursements cannot be used
      to
      offset the assessment by SUNAT. The Company discontinued use of the holding
      certificates for exports in June 2004. We estimate expected additional
      assessments related to VAT for tax years 2002 and 2003 to total approximately
      $20.2 million in regard to its exports with holding certificates.




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




All
      existing and pending litigation at the time of the acquisition of Doe Run Peru
      were retained by Centromin, the prior owner of the La Oroya smelter and Cobriza
      mine. Centromin
      has also agreed to indemnify Doe Run Peru against environmental liability
      arising out of its prior operations and their apportioned share of any other
      complaint related to emissions.




Doe
      Run
      Peru is a defendant in 198 lawsuits in the Lima, Peru labor courts that allege
      damage to workers from industrial diseases. Doe Run Peru has made claims in
      most
      of the cases against Centromin and has also made claims against both
      governmental agencies and private companies that provide workers’ insurance. The
      average claim is $18. Of 17 concluded cases in this category, 16 were dismissed
      and one resulted in an award of $9.




Doe
      Run
      Peru is also a defendant in 163 lawsuits by workers alleging that they are
      owed
      certain differences in salaries and benefits. The average claim is $21. Of
      31
      concluded cases in this category, 26 were dismissed and five resulted in awards
      totaling $15. Doe Run Peru is also a defendant in a lawsuit by the Yauli-La
      Oroya Employees Union concerning salaries and benefits. The claims of the 146
      workers remaining in the lawsuit have been valuated at a total of $238 according
      to a report by an expert appointed by the court.




Doe
      Run
      Peru is also a defendant in 26 lawsuits alleging claims ranging from industrial
      diseases to salary disputes, including indemnification for arbitrary dismissal,
      nullity of dismissal, moral damage compensation, compensatory damages from
      work
      accident and readmission of worker. The average claim is $6. Of 29 concluded
      cases in this category 26 were dismissed and three resulted in awards totaling
      $22.




The
      amount of awards in the various categories of lawsuits referenced above
      represent total judgments issued by the relevant courts. For certain of these
      lawsuits, Centromin will pay a portion of the total award.











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




On
      May
      25, 2005, Doe Run Peru was served with a civil lawsuit alleging the existence
      of
      lead in a person caused by Doe Run Peru’s operations. The claim is for $100.




On
      July
      11, 2003, Doe Run Peru filed an administrative lawsuit against the Yauli -
      La
      Oroya Provincial City Hall in order to dismiss a number of fines for the amount
      of $2.8 million. Doe Run Peru was fined for not having construction licenses
      for
      the PAMA projects.




Doe
      Run
      is a party to a number of orders with various regulatory agencies that require
      ongoing expenditures for compliance. See “Item 8. Financial Statements and
      Supplementary Data—Note 19 to Consolidated Financial Statements” for a
      discussion of these matters.




We
      are
      unable at this time, except as noted, to estimate the expected outcome and
      the
      final costs of these actions. No amounts have been accrued as liabilities
      related to these actions. There can be no assurance that these cases will not
      have a material adverse effect, both individually and in the aggregate, on
      our
      results of operations, financial condition and liquidity. We have and will
      continue to vigorously defend ourselves against these claims.




Refer
      to
“Item 8. Financial Statements and Supplementary Data—Notes 13, 19 and 20 to
      Consolidated Financial Statements” for further information regarding the
      aforementioned legal proceedings.





**Part
      II**




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




The
      following discussion and analysis should be read in conjunction with our
      condensed consolidated financial statements and the notes thereto and other
      financial information included herein.




***Overview***




*Metal
      prices*




Metal
      prices extended their dramatic rise during 2005, continuing on an upward trend
      that began in mid-2003. Lead prices increased from a LME settlement monthly
      average of $847.40 per short ton in October 2004 to $911.40 per short ton in
      October 2005. The Company benefited from this price increase in both its U.S.
      operations’ lead metal and lead concentrate sales. See further discussion below
      in “ *Results
      of Operations—Impact of Metals Pricing* .”




*Primary* **** *lead
      operations*




In
      response to continued strong metal prices, our primary lead division made
      significant changes to operations in 2005. The lead grade of ore mined was
      lowered approximately 5% compared to the 2004 period, while the tonnage
      processed increased by 10%. These changes were made in an effort to optimize
      the
      return on Doe Run’s ore reserves. As in the previous year, Doe Run continued to
      sell a substantial portion of the lead concentrates produced from its mines
      into
      the open market.





A
      major
      development project was started at the south end of the Company’s Fletcher mine
      to access an ore body known as RC Westfork. We expect to complete this
      development project in 2006.











Lead
      production from the Herculaneum primary smelter in 2005 was 5% lower than in
      2004, primarily as a result of production interruption due to storm damage
      to
      some process buildings. Environmentally, the smelter did not meet the ambient
      air standard at the nearby Broad Street monitor in three of four quarters during
      the period. All other results were in attainment. The State Implementation
      Plan
      (“SIP”) will be revised to address attainment and maintenance of the standards
      and may include engineering controls and a buffer zone.




*Recycling
      operation*




Our
      recycling operation produced approximately 2% more lead in 2005 than in 2004.
      The increase is the result of 7% more batteries being processed than in 2004.
      This is the 12 th consecutive year that Buick Resource Recycling has set a new production record
      for the volume of batteries recycled.





The
      mix
      of feed into Buick Resource Recycling continues to be an issue that is limiting
      production. A tight scrap market and the reduced availability of high lead
      content feed have adversely affected production and costs at the division.





Production
      costs at both the primary lead division and the recycling operation were up
      substantially due to inflationary cost increases of raw materials, coke, fuels
      and repair parts. The increased costs were partially offset by savings realized
      from the implementation of lean manufacturing principles at the
      operations.




*Doe
      Run Peru*




Doe
      Run
      Peru is subject to numerous requirements pursuant to La Oroya’s PAMA. See “Item
      1. Business - Doe Run Peru’s Operations - Environmental Matters.” Doe Run Peru
      expects that it will not be able to comply with the spending requirements of
      La
      Oroya’s PAMA investment schedule in 2006 with respect to the construction of the
      sulfuric acid plant required by the PAMA and, as a result, could be subject
      to
      penalties. Failure to comply with PAMA could result in the forced cessation
      of
      operations at the La Oroya smelter, which would adversely affect our business,
      financial condition and results of operations.




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




Doe
      Run
      Peru applied for an extension to complete the construction of the sulfuric
      acid
      plant contemplated by the original PAMA on December 20, 2005.




Upon
      approval of a modified PAMA, Doe Run Peru would be required to create a trust
      account. The trust account would administer the receipts and disbursements
      related to the extended PAMA project. The Supreme Decree requires that receipts
      from sales, in an amount sufficient to fund the monthly cash requirements of
      the
      extended PAMA project, be remitted directly to the trust account.




The
      Supreme Decree also requires that, within 30 days of the approval of the PAMA
      extension, the Company provide financial security in an amount equal to 20%
      of
      the projected cost of the project or projects to be extended. The company
      currently expects the remaining investment needed to build the sulfuric acid
      plant to be approximately $102.0 million.




To
      achieve the financial guarantee and the trust contract required by Supreme
      Decree, Doe Run Peru has amended the Doe Run Peru Revolving Credit Facility
      to
      allow for those arrangements and has filed a draft of a trust guarantee contract
      with a Peruvian bank. Additionally, on December 10, 2005 Doe Run Peru signed
      a
      Working Capital Financial Facility Agreement for the amount of $30,000 (named
      Ferrites Loan) with Servicios Mineros Integrados S.A.C. a Trafigura Beheer
      B.V.,
      subsidiary, to use such funds in the fulfillment of the financial security
      requirements of the extended PAMA project.




Doe
      Run
      Peru has performed other environmental projects to reduce fugitive emissions
      in
      2005 including the installation work on the short rotary furnace, enclosing
      the
      blast furnace and dross plant, along with other complementary work. Major
      projects scheduled for fiscal year 2006 include an upgrade of the ventilation
      system in the Sinter plant, completion of the











enclosure
      work around the lead and dross furnace, the
      enclosure of the anode residue plant along with the elimination of its nitrous
      gases, and the reduction of fugitive emissions from the copper and lead beds.
      The total cost of the currently remaining PAMA projects, including the sulfuric
      acid plant construction, and these projects is approximately $130.0
      million.




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




In
      the
      future, as part of a modernization plan and to enrich sulfurous gas feed to
      the
      sulfuric acid plant, we are planning to replace the oxy-fuel reverberatory
      furnace with a reactor furnace to smelt copper concentrates. The anticipated
      cost is approximately $57 million.




Doe
      Run
      Peru has developed a business plan that identifies several revenue generating
      and cost reduction activities. Management believes the plan will enhance
      liquidity, which will improve Doe Run Peru’s ability to make the investments
      under the proposed modifications to the PAMA. In fiscal year 2005 Doe Run Peru
      launched its zinc ferrites processing plant, which, as of October 31, 2005,
      is
      producing 845 tons/month of high silver, zinc concentrates valued at
      approximately $991 per ton.




Doe
      Run
      Peru has received income tax assessments from Peru’s tax authority, SUNAT for
      tax years 1998 through 2001. The assessments primarily relate to Doe Run Peru’s
      income tax treatment of the December 1997 merger of Doe Run Peru and Metaloroya
      S.A., which was purchased by Doe Run Peru in October 1997, and its effects
      on
      subsequent years’ taxable income. Under the assessment by SUNAT, the tax basis
      of Doe Run Peru’s fixed assets acquired would decrease, resulting in lower tax
      depreciation expense than originally claimed. The estimated assessed amount
      consisting of additional income taxes due, penalties and interest as of October
      31, 2005 totals approximately $109.0 million. The Company estimates that the
      effect of a similar assessment for tax years after 2001 would be approximately
      $30.3 million. Furthermore, Doe Run Peru would also be required to make
      additional workers’ profit sharing payments equal to 8% of the increase in
      taxable income generated by the changes discussed above, or approximately $11.2
      million for calendar years 1998 through 2005.




Doe
      Run
      Peru has also received Value Added Tax (VAT) assessments for the tax years
      1999
      through 2001 and for the period from January through July 2004. The assessments
      primarily relate to Doe Run Peru’s exports with holding certificates and
      differences in a tax credit application. The total assessment for these periods
      was approximately $43.5 million. SUNAT offset the amount assessed for 2004
      of
      approximately $2.3 million against Doe Run Peru’s VAT receivable balance from
      July 2004. Future VAT reimbursements cannot be used to offset the assessment
      by
      SUNAT. The Company discontinued the use of holding certificates for exports
      in
      June 2004. The Company estimates expected additional assessments related to
      VAT
      for tax years 2002 and 2003 to total approximately $20.2 million in regard
      to
      its exports with holding certificates.





***Results
      of Operations***





*Impact
      of Metals Pricing*




Our
      results for 2005 reflect significant increases in the market prices of lead,
      copper, zinc and silver as compared to 2004. The following table sets forth
      average LME prices for lead, copper and zinc and the average London Bullion
      Market Association (LBMA) price for silver for the periods indicated:




**Year
                  Ended October 31,****2005**
              
              **2004**
              
              **2003**Average
                  PricesLead
                  ($/short ton)
              
              $
              870.40
              
              $
              759.00
              
              $
              436.20Copper
                  ($/short ton)
              
              
              3,146.60
              
              
              2,452.00
              
              
              1,535.40Zinc
                  ($/short ton)
              
              
              1,165.80
              
              
              921.80
              
              
              727.00Silver
                  ($/troy ounce)
              
              
              7.15
              
              
              6.34
              
              
              4.74











The
      average annual LME lead price increased in 2005 by over $111.00 per short ton,
      or 15%, from 2004. This increase was a result of several factors, including
      reduced supply of both lead concentrates and lead metal in the world market
      and
      an increase in global lead demand, particularly from China. Previously, the
      price had declined approximately 38% from 1996 through mid-2003. These low
      lead
      prices from 1996 through mid-2003 resulted in several lead producing mines
      closing, suspending operations or reducing production, mainly in North America
      and Australia.




In
      the
      United States and Western Europe, however, lead demand continues to decline
      as
      lead consuming industries move to lower labor cost areas. In the U.S., this
      movement has been most pronounced in automotive lead-acid batteries. Conversely,
      U.S. lead consumption in industrial batteries rebounded sharply in 2005 in
      line
      with overall economic improvements. The net result has been a significant
      tightening in lead metal availability.




Copper
      prices continued their strong rebound in 2005 from historically low prices.
      The
      copper price increased by nearly $695.00 per short ton, or 28%, from 2004 to
      2005. Again, Chinese demand was the main influence. The high copper prices
      have
      resulted in several producers announcing the re-opening of closed mines or
      increasing copper production of existing mines. Several commodity-forecasting
      services are predicting a balanced market of copper concentrates in 2006,
      ultimately resulting in the refined copper market moving into surplus by
      2006.




Zinc
      prices have also recovered from the lows set in 2002. Fundamentals for zinc
      improved as zinc metal consumption exceeded zinc production in 2005. Zinc
      prices, like lead and copper, also benefited from a weak U.S. dollar. Currently,
      demand for zinc concentrates is exceeding the supply, making the market very
      competitive.




Changes
      in the market prices for metals expose us to variability in our cash receipts.
      We employ a commodity price risk management strategy using forward sales
      commitments, futures and commodity put and call option contracts. The purpose
      of
      our price risk management program is to limit our risk to acceptable levels,
      while enhancing revenue through the receipt of option premiums. See the
      discussion in “Item 7A. Quantitative and Qualitative Disclosures About Market
      Risk.”




As
      with
      lead prices mentioned above, low zinc and copper prices in the preceding five
      years have induced mine closures and cutbacks and slowed the development of
      new
      copper, zinc and lead projects. In addition, new smelting capacity has come
      on
      stream in China and India, increasing demand for concentrates. As a result,
      supplies of lead and zinc concentrates have been very tight. Copper
      concentrates, however, are no longer in tight supply due to the re-opening
      of
      closed mines and increased copper production of existing mines.





*Production*




The
      following table sets forth our production statistics for the periods indicated:




**Year
                  Ended October 31,****2005**
              
              **2004**
              
              **2003**U.S.
                  OperationsLead
                  metal - primary (short tons)
              
              
              155,838
              
              
              171,664
              
              
              281,531Lead
                  metal - secondary (short tons)
              
              
              136,478
              
              
              133,986
              
              
              149,616Lead
                  concentrates (metal content, short tons)
              
              
              281,772
              
              
              274,950
              
              
              295,581Ore
                  grade (lead)
              
              
              5.36
              %
              
              5.73
              %
              
              6.53
              %Peruvian
                  OperationsRefined
                  copper (short tons)
              
              
              64,548
              
              
              63,518
              
              
              68,958Refined
                  lead (short tons)
              
              
              132,919
              
              
              130,959
              
              
              122,946Refined
                  zinc (short tons)
              
              
              49,554
              
              
              75,163
              
              
              80,679Refined
                  silver (thousands of troy ounces)
              
              
              33,998
              
              
              35,804
              
              
              35,305Refined
                  gold (thousands of troy ounces)
              
              
              67
              
              
              66
              
              
              82Copper
                  concentrates (metal content, short tons)
              
              
              16,516
              
              
              16,683
              
              
              17,944Ore
                  grade (copper content)
              
              
              1.00
              %
              
              1.10
              %
              
              1.10
              %











In
      response to continued strong lead metal market conditions at the beginning
      of
      2005, we made a number of changes in our U.S. primary lead division during
      the
      year. We increased the amount of tons of ore mined at the Viburnum-29,
      Viburnum-35 and Sweetwater mines, knowing that we would be mining a slightly
      lower lead grade of ore for 2005 due to the extra ore from Viburnum-29,
      Viburnum-35 and Sweetwater being relatively low grade. The net effect of these
      changes was that our lead grade of ore processed lowered from 5.73% in 2004
      to
      5.36% in 2005, but the volume of ore processed increased by over 535,000 tons,
      or 11%, from 2004 to 2005. Although the volume of ore mined increased by 11%
      in
      2005 versus 2004, our expected total ore volume was 2% less than planned because
      of less than planned production from the Sweetwater Mine. The Sweetwater Mine
      ore production shortfall was due to poor development results from the south
      end
      of the mine that limited the availability of production areas. Current
      production plans include the extraction of pillars and a retreat from the south
      end of the Sweetwater Mine with the abandonment of the last development to
      the
      south. We expect these changes will raise the grade of ore mined from Sweetwater
      and reduce its operating costs for the 2006 period. Also, technical changes
      made
      to the pillar recovery process in 2004 allowed the Buick mine to substantially
      improve its performance in 2005.




Gross
      operating costs from the mining operations were just over 8% over the amount
      planned for 2005, with some major consumable costs increasing over 20%. Major
      consumable costs include items such as tires, explosives, diesel fuel, repair
      parts and grinding media. The benefits derived from the continued implementation
      of lean manufacturing principles helped offset some of the inflationary cost
      increases. Manpower at our U.S. primary lead division mining operations
      increased by 6% as compared to 2004 in order to process the higher ore
      volume.




We
      started a major development to the south end of the Fletcher mine in 2005 and
      will continue that development throughout 2006. It accesses a new major ore
      body
      called RC Westfork. The total development is 5,000 feet, and is approximately
      50% complete at October 2005.  As
      of
      October 2005 the RC Westfork ore reserves are 2.9 million tons of ore grading
      6.65% lead and 0.83% zinc.  Exploration drilling will continue in
      2006.




In
      2005,
      production at the Herculaneum primary smelter was 155,800 tons, over 5% less
      than 2004. This was primarily due to storm damage to the sinter plant process
      building in the third quarter of 2005 that required several days for repair
      and
      sealing of the building. Production was curtailed during this period and was
      intermittently curtailed throughout the quarter to control emissions . Blast
      furnace slag chemistry control also contributed to some production shortfall
      in
      the third quarter of 2005. The reduced production combined with inflationary
      cost increases of coke, natural gas and repair parts resulted in higher unit
      costs. Process control changes and the completion of repairs to the sinter
      and
      acid plants resulted in increased fourth quarter production.




Environmentally,
      the Herculaneum primary smelter did not meet the ambient air lead standard
      at
      the Broad Street monitoring station in the first three quarters of 2005.
      However, it was in attainment for the fourth quarter. All other monitoring
      stations’ results were in attainment. Since the air quality monitors reflected
      three quarters of non-compliance, the permitted annual capacity of the
      Herculaneum primary smelter decreased from 250,000 to 200,000 tons, which does
      not affect results at current production levels.




Our
      recycling operation produced 136,500 tons of finished lead products in 2005,
      approximately 2% more than the prior year. However, production was less than
      management’s expectations for 2005. The production shortfall was the result of
      lower blast furnace production due to poor coke quality and high levels of
      sulfur in the feed. Coke quality improved during the second half of the year,
      and we made process changes to the slag handling system at the reverb furnace
      that have reduced sulfur levels in the feed to the blast furnace. October’s
      blast furnace production was about 20% greater than the average production
      rate
      during the balance of the year.




Unit
      operating costs at the recycling operation were higher than expected due to
      both
      the production shortfall described earlier and inflationary cost increases,
      particularly coke, propane and repair parts. The recycling operation made
      additional improvements to the desulfurization circuit in 2005 that allowed
      it
      to process 7% more scrap batteries in the period compared to the prior period.
      This represented the 12 th consecutive year that Buick Resource Recycling set a new record for tons of
      batteries processed. These improvements were the main contributor to the
      increase in production in 2005 versus 2004.











Doe
      Run
      Peru’s La Oroya smelter copper production was affected by frequent stoppages to
      reduce gaseous emissions and to perform maintenance on the reverberatory
      furnace, however not to the extent in 2004, therefore the overall result was
      an
      increase in copper production of 2% in 2005 as compared to 2004. Temperature
      inversions experienced at La Oroya can trap gases in the mountain peaks
      surrounding the plant. In order to reduce the level of gases, management may
      cease operations of the reverberatory furnace and copper converters. The
      temperature inversions also caused increased maintenance to replace the bricks
      in the furnace, since repeated heating and cooling shorten the life of the
      bricks. Receipts of lead concentrates improved in 2005, resulting in a 2%
      increase in lead production in 2005 compared to 2004. Feed costs increased
      substantially as a result of the increase in metal prices.




Ore
      production at Doe Run Peru’s Cobriza mine in 2005 was approximately 10% higher
      than 2004; however, ore grade was 9% lower. The net result was that metal
      content decreased by 1% from 2004 to 2005. Management is implementing corrective
      actions to address ground stability issues based on studies by the Company’s
      technical services personnel and outside consultants. Cobriza is in the process
      of obtaining new equipment, which management believes should improve production
      volume.




The
      aging
      of the Company’s assets has resulted in increased maintenance costs to keep them
      in condition to operate at current levels. All operations have seen an increase
      in maintenance costs over comparable periods in prior years.




Results
      of operations for the years ended October 31, 2005, 2004 and 2003 include the
      results of the Company’s U.S. operations and Doe Run Peru. In order to provide a
      more meaningful analysis, the results of operations attributable to Doe Run
      Peru
      will be noted and discussed separately under “ *Results
      of Doe Run Peru* .”




*Fiscal
      2005 Compared to Fiscal 2004*




*Gross
      margin* increased
      from $60.8 million in 2004 to $94.2 million in 2005 and gross margin for our
      U.S. operations increased from $36.8 million in 2004 to $57.5 million in 2005.
      The increase in gross margin from 2004 to 2005 was primarily due to an increase
      in our U.S. sales of approximately $84.3 million from 2004 to 2005. The largest
      factor driving our increased sales was a 30% increase in the U.S. operation’s
      realized prices for lead metal, fueled by higher LME prices, which contributed
      $49.3 million in sales in 2005. The increase in the lead metal net realized
      price in 2005 was more than the increase in the average LME settlement price,
      due to the effects of our risk management strategy, which reduced our exposure
      to changes in the market price in an attempt to fix an acceptable price for
      its
      products. Increases in copper and zinc metal prices in 2005, which fueled an
      increase in the net realized price for copper and zinc concentrate sales and
      the
      increase in lead concentrate prices in 2005 contributed an additional $7.0
      million and $7.4 million of sales in 2005, respectively. Our increased U.S.
      sales were partially offset by additional production costs at the U.S.
      operations in 2005 driven by the increases in repairs and maintenance costs,
      payroll and benefit costs, higher feed and raw material costs and the effects
      of
      the change in feed mix on the production at the recycling
      operation.




Gross
      margin is net sales less cost of sales, including depreciation, depletion,
      and
      amortization attributable to cost of sales disclosed in the table
      below.




Depreciation,
                Depletion and Amortization Attributable to Cost of Sales(dollars
                in the millions)2005
            
            2004
            
            2003U.S.
                operations
            
            $
            11.3
            
            $
            12.3
            
            $
            17.7Consolidated
            
            $
            23.5
            
            $
            24.3
            
            $
            29.3





*Selling,
      general and administrative costs* increased $10.3 million in 2005 compared to 2004, $4.5 million of which relates
      to Doe Run Peru. The increase was due to increased salaries and employee benefit
      costs, increase in professional services and an increase in insurance
      expense.




*Losses
      from impairment and disposal of long-lived assets* relate
      primarily to recognition of impairment losses for the value of houses purchased
      in Herculaneum relating to properties purchased under a residential property
      purchase plan in the town of Herculaneum.











As
      of
      October 31, 2005, a total of 149 homeowners had requested and were delivered
      offers, and 142 of those offers had been accepted. As of October 31, 2005,
      the
      Company had spent approximately $10.0 million under the residential property
      purchase plan. Another $1.1 million of accepted offers are awaiting a closing
      date and $0.4 million in outstanding offers have not been accepted. Doe Run
      has
      complied in all material respects with the property purchase provisions of
      the
      settlement agreement.




*Unrealized
      (gain) and loss on derivative financial instruments* are ** related
      to the change in fair market value of derivative financial instruments that
      were
      a part of Doe Run’s risk management strategy. The increase in unrealized gains
      from 2003 to 2005 is the result of the continual rise in the LME price over
      that
      period. See also “Item 7A. Quantitative and Qualitative Disclosures About Market
      Risk.”




*Income
      tax expense (benefit)* in
      2004
      reflects a reversal of a U.S. federal income tax liability and a change in
      tax
      law in Peru. In 2004, the Company reversed a U.S. federal income tax liability
      related to years that are closed to audit of $2.8 million. Offsetting this
      reversal were taxes of $2.2 million paid in the third quarter of 2004 pursuant
      to a law passed in Peru in December 2003, under which certain technical services
      that Doe Run provided under an agreement with Doe Run Peru are taxed at 30%.




Renco
      has
      elected for the Company to be treated as a qualified subchapter S subsidiary
      (QSSS) for U.S. federal tax purposes. Most states in which the Company operates
      will follow similar tax treatment. QSSS status requires the ultimate
      shareholders to include their pro rata share of the Company’s income or loss in
      their individual tax returns. As a result of the Company’s tax status in the
      U.S., the Company is not generally subject to U.S. federal and most state income
      taxes; however, under a tax sharing agreement with Renco, the Company is liable
      to Renco for pro forma federal and state income taxes as defined in the
      agreement. See “Item 13. Certain Relationships and Related Transactions” for
      more information.




*Fiscal
      2004 Compared to Fiscal 2003*




*Gross
      margin* increased from $12.2 million in 2003 to $60.8 million in 2004 and gross margin
      for our U.S. operations increased from $8.4 million in 2003 to $36.8 million
      in
      2004. The increase in gross margin from 2003 to 2004 was primarily due to an
      increase in U.S. sales of approximately $54.8 million from 2003 to 2004. The
      largest factor driving our increased sales was a 35% increase in the U.S.
      operation’s realized prices for lead metal, fueled by higher LME prices, which
      contributed $61.4 million in sales in 2004. The increase in the lead metal
      net
      realized price in 2004 was less than the increase in the average LME settlement
      price, due to the effects of our risk management strategy, which reduced our
      exposure to changes in the market price in an attempt to fix an acceptable
      price
      for its products. Increases in copper and zinc metal prices in 2004, which
      fueled an increase in the net realized price for copper and zinc concentrate
      sales and the increase in lead concentrate prices in 2004, contributed an
      additional $9.1 million and $9.4 million of sales in 2004, respectively. Our
      increased U.S. sales were partially offset by additional production costs the
      U.S. operations in 2004 driven by the increases in repairs and maintenance
      costs, payroll and benefit costs, higher feed and raw material costs and the
      effects of the change in feed mix on the production at the recycling operation.




*Selling,
      general and administrative costs* increased $7.4 million in 2004 compared to 2003, $1.4 million of which relates
      to Doe Run Peru. The remaining increase was due primarily to insurance refunds
      received in 2003 applicable to legal fees incurred in a previous fiscal year
      and
      credited to selling, general and administrative costs and to increased salaries
      and employee benefit costs and insurance expense.




*Losses
      from impairment and disposal of long-lived assets* relate
      primarily to recognition of impairment losses for the value of houses purchased
      in Herculaneum relating to properties purchased under a residential property
      purchase plan in the town of Herculaneum.




*Unrealized
      losses on derivative financial instruments* are ** related
      to the change in fair market value of derivative financial instruments that
      were
      a part of Doe Run’s risk management strategy. The decrease in unrealized losses
      in 2004 compared to 2003 is the result of the substantial increase in the LME
      price at the end of 2003, which caused large unrealized losses to be recognized
      in the fourth quarter of 2003. See also “Item 7A. Quantitative and Qualitative
      Disclosures About Market Risk.”











*Income
      tax expense (benefit)* in
      2004
      reflects a reversal of a U.S. federal income tax liability and a change in
      tax
      law in Peru. In 2004, the Company reversed a U.S. federal income tax liability
      related to years that are closed to audit of $2.8 million. Offsetting this
      reversal were taxes of $2.2 million paid in the third quarter of 2004 pursuant
      to a law passed in Peru in December 2003, under which certain technical services
      that Doe Run provided under an agreement with Doe Run Peru are taxed at 30%.




*Cumulative
      effect of change in accounting principle* resulted
      in a charge of $3.9 million in the first quarter of 2003, which relates to
      the
      adoption of Statement No. 143.







***Results
      of Doe Run Peru***




*Fiscal
      2005 Compared to Fiscal 2004*




*Gross
      margin* for
      Doe
      Run Peru increased from $24.1 million in 2004 to $36.7 million in 2005. This
      increase is primarily due to the improvement in treatment charges received
      in
      processing copper and lead concentrates and free metal benefits for lead and
      zinc. Also contributing to the improved gross margin were increases in sales
      from by-product sales such as indium, tellurium and premium improvements for
      copper and lead metal. These increases in sales were offset by higher conversion
      costs primarily due to higher fuel and coke prices, increased salaries combined
      with a weakened U.S. dollar, and higher maintenance, spare parts and supplies
      costs.




Gross
      margin is net sales less cost of sales, including depreciation, depletion,
      and
      amortization attributable to cost of sales disclosed in the table
      below.




Depreciation,
                Depletion and Amortization Attributable to Cost of Sales(dollars
                in the millions)2005
            
            2004
            
            2003Doe
                Run Peru
            
            $
            12.2
            
            $
            11.9
            
            $
            11.5





*Selling,
      general and administrative costs* for Doe
      Run Peru increased by $4.5 million in 2005 compared to the prior year. The
      difference is due primarily to increases in compensation costs, professional
      fees and contributions to community activities, partially offset by a decrease
      in insurance expense.




*Other,
      net* for
      Doe
      Run Peru increased by $1.2 million in 2005 compared to 2004, primarily due
      to
      exchange gains on transactions denominated in Peruvian nuevos soles as a result
      of the effect of a decrease in the value of nuevos soles against the U.S.
      dollar.




*Income
      tax expense* for Doe
      Run Peru was $0 in 2005 and 2004, reflecting tax losses and management’s belief
      that sufficient uncertainty exists regarding the realization of certain deferred
      tax assets, which requires that a valuation allowance be
      established.




*Fiscal
      2004 Compared to Fiscal 2003*




*Gross
      margin* for Doe
      Run Peru increased from $3.8 million in 2003 to $24.1 million in 2004. The
      increase in gross margin was a result of the increase in metal prices which
      fueled price related increases of $32.2 million in sales for 2004. These
      increases in sales were offset by increased production costs. More specifically,
      conversion costs increased slightly due to increases in maintenance, fuel and
      coke costs and maintenance expense increased as Doe Run Peru completed
      maintenance programs originally scheduled for 2003 in 2004. These increases
      in
      production costs were partially offset by lower labor costs as the benefits
      of a
      2003 reduction in labor were realized in 2004.




*Selling,
      general and administrative costs* for Doe
      Run Peru increased by $1.4 million in 2004 compared to the prior year. The
      difference is due primarily to increases in contributions to community and
      regional activities, compensation costs and professional fees, partially offset
      by a decrease in insurance expense.




*Other,
      net* for
      Doe
      Run Peru decreased in 2004 compared to 2003, primarily due to exchange losses
      on
      transactions denominated in Peruvian nuevos soles as a result of the effect
      of
      an increase in the value of nuevos soles against the U.S. dollar.




*Income
      tax expense* for Doe
      Run Peru was $0 in 2004 and 2003, reflecting tax losses and management’s belief
      that sufficient uncertainty exists regarding the realization of certain deferred
      tax assets, which requires that a valuation allowance be
      established.







***Liquidity
      and Capital Resources***




*Overview*




Doe
      Run
      is highly leveraged. Doe Run Peru has significant capital requirements under
      environmental commitments, which, if not met, could result in defaults of the
      Company’s credit agreements; has substantial contingencies related to tax; and
      has significant debt service obligations that raise substantial doubt about
      the
      Company’s ability to continue as a going concern. These commitments require us
      to dedicate a substantial portion of cash flow from operations to the payment
      of
      these obligations, which will reduce funds available for other business
      purposes. See “ *Contractual
      Obligations”* for a
      summary of these and other contractual obligations. These factors also increase
      our vulnerability to general adverse conditions, limit our flexibility in
      planning for or reacting to changes in its business and industry, and limit
      our
      ability to obtain financing required to fund working capital and capital
      expenditures and for other general corporate purposes. An unfavorable outcome
      to
      the lawsuits and tax assessments in Peru, as discussed in “Item 3. Legal
      Proceedings,” would have a further adverse effect on our ability to meet our
      obligations when due. These factors are discussed in more detail
      below.




Our
      auditors issued unqualified opinions on the 2005 audited consolidated financial
      statements of the Company and the audited financial statements of Doe Run Peru
      that expressed substantial doubt about our ability to continue as going concerns
      due to net capital deficiencies, substantial debt service requirements and
      significant capital requirements under environmental commitments.




*Cash
      Flow Summary*




Net
      cash
      provided by or (used in) activities of the Company are identified
      below.




**Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**Operating
                activities
            76,198
            
            21,597
            
            22,448Investing
                activities
            (50,663)
            
            (29,734)
            
            (15,295)Financing
                activities
            (22,367)
            
            8,755
            
            5,529Cash
                and Cash Equivalents, beginning of period
            20,318
            
            19,700
            
            7,018Cash
                and Cash equivalents end of period
            23,486
            
            20,318
            
            19,700







We
      had
      capital expenditures of $51.3 million in 2005 and have projected capital
      expenditures of approximately $54.1 million for 2006, including spending on
      Doe
      Run Peru’s PAMA projects. In the U.S., we had capital expenditures of $17.2
      million in 2005 and have projected total capital expenditures of approximately
      $14.7 million for 2006, primarily to fund expansion, to support ongoing
      operations and for operational and environmental improvements, including
      expenditures required pursuant to a settlement agreement with the State of
      Missouri that established a residential property purchase plan in Herculaneum.
      See “Item 8. Financial Statements and Supplementary Data—Note 19 to Consolidated
      Financial Statements.” In addition to these capital investments, our U.S.
      operations expended approximately $82.6 million, $66.5 million and $51.3 million
      on repairs and maintenance for 2005, 2004 and 2003, respectively. Doe Run Peru
      had capital expenditures of $34.0 million in 2005 and has projected capital
      expenditures of approximately $39.4 million for 2006, primarily for PAMA
      projects and to support ongoing operations. Doe Run Peru expended approximately
      $22.6 million, $19.6 million and $16.8 million on repairs and maintenance for
      2005, 2004 and 2003, respectively. As a result of these expenditures, we believe
      that the operations will continue to maintain modern and efficient
      facilities.




*Capital
      Resources*




The
      Company’s primary available sources of liquidity are cash provided by operating
      activities and its two revolving credit facilities. The Doe Run revolving credit
      facility allows Doe Run and certain U.S. subsidiaries to borrow up to $75.0
      million and expires August 29, 2008. The availability of loans under the Doe
      Run
      revolving credit facility is limited to a percentage of eligible U.S. accounts
      receivable and inventories, less any outstanding loans and letters of credit.
      All cash received by Doe Run’s domestic operations is transferred by wire daily
      to the financial institutions to pay down the











outstanding
      loan balance, if any. The Doe Run Peru
      revolving credit facility had an expiration date of November
      23, 2005, which was subsequently extended to June 23, 2006,and
      provides Doe Run Peru with working capital loans up to $40.0 million, with
      a
      limit on letters of credit of $5.0 million, but the total commitments may not
      exceed the maximum line of $40.0 million. The balances in these revolving credit
      facilities are classified as current liabilities on the balance
      sheet.




Net
      unused availability at October 31, 2005 under the Doe Run revolving credit
      facility and Doe Run Peru revolving credit facility was approximately $22.1
      million and $0.2 million, respectively. In addition to the availability under
      its revolving credit facilities, cash balances at Doe Run and Doe Run Peru
      were
      $8.9 million and $14.6 million, respectively, at October 31, 2005. Net unused
      availability at October 31, 2004 was approximately $22.5 million and $0.06
      million under the Doe Run revolving credit facility and Doe Run Peru revolving
      credit facility, respectively, and cash balances at Doe Run and Doe Run Peru
      were $13.4 million and $6.9 million, respectively, at October 31, 2004.




The
      Doe
      Run revolving credit facility, the Doe Run Peru revolving credit facility,
      the
      term note and the indenture governing the notes contain numerous covenants
      and
      restrictions. They include certain requirements with respect to net worth,
      working capital, EBITDA and debt to earnings ratios. These agreements also
      place
      limitations on capital expenditures, dividend payments and other outside
      borrowings. The Doe Run Peru revolving credit facility also contains covenants
      that restrict Doe Run Peru’s ability to make distributions to Doe Run in excess
      of a $4.0 million management fee.




The
      Company has debt service requirements in the future, as shown in “ *Contractual
      Obligations* ,”
      including the maturity in 2006 of $8.0 million for the term note, of which
      $6.0
      million was subsequently paid, and interest payments of $25.7 million for the
      11.75% notes. At October 31, the Doe Run Peru revolving credit facility had
      an
      expiration date of November 23, 2005, which was subsequently extended to June
      23, 2006. It will need to be renegotiated and there can be no assurance that
      we
      will be successful in renewing the agreement, or if it is successful, that
      the
      renewal would be at terms favorable to us.




Effective
      July 1, 2004, Doe Run and Doe Run Peru cancelled a sales agency agreement under
      which Doe Run acted as a sales agent on behalf of Doe Run Peru. Under the
      cancellation, the balance owed to Doe Run of $22.6 million will be paid in
      $1.0
      million quarterly installments or as otherwise agreed by the
      parties.




*Debt
      Instruments*




On
      October 29, 2002, the Company consummated the Restructuring whereby most of
      its
      Old Notes were exchanged with a principal amount of $294.84 million, plus unpaid
      accrued interest of $37.473 million, for stock warrants, exercisable for an
      aggregate of approximately 39% of the fully diluted common stock of the Company
      and new 11.75% notes with a principal amount of $175.832 million described
      in
“Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and
      Issuer Purchases of Equity Securities.” In addition to the reduction of
      principal, the notes improved the Company’s liquidity by extending the maturity
      date to November 1, 2008, and provided that a portion of interest may be paid
      in
      kind with the issuance of additional notes whereby, through October 15, 2005,
      interest may be paid, at the option of Doe Run, at an annual rate of either
      3%
      in cash and 11.5% paid in kind or 8.5% paid in cash. After October 15, 2005,
      interest will accrue at the rate of 11.75% per annum and will be payable in
      cash. Beginning with the April 2005 interest payment, the Company began paying
      cash interest. The notes are recorded in accordance with Statement of Financial
      Accounting Standards No. 15, *Accounting
      by Debtors and Creditors for Troubled Debt Restructurings* (SFAS
      No.
      15). See the discussion in *Significant
      Accounting Policies and Estimates* for a
      description of SFAS No. 15. The effect of this accounting is that Doe Run will
      recognize substantially less interest expense related to the notes during their
      term than is reflected in the stated rate of interest because the majority
      of
      the interest payments are reflected in the carrying amount of the
      notes.




Our
      balance sheet reflected $386.5 million and $417.3 million of total debt on
      a
      consolidated basis as of October 31, 2005 and 2004, respectively. The face
      amount of indebtedness outstanding at October 31, 2005 and 2004 was $219.0
      million.




We
      were
      in compliance with the covenants under the various debt agreements as of October
      31, 2005, with the exception of the delivery of audited financials and other
      reporting requirements for the year ended October 31, 2005 by January 29, 2006
      under the Doe Run Revolving Credit Facility and the Term Note. Waivers for
      these
      reporting defaults were received on March 17, 2006 and March 16, 2006,
      respectively.




During
      the period beginning on October 29, 2005 and ending on October 29, 2012, the
      holders of a majority of the warrants have the right to require Doe Run to
      repurchase all, but not less than all, of the warrants and any outstanding
      shares











issued
      upon the exercise thereof at a price equal to
      the fair market value of the warrants, as determined by a third party appraisal.
      Management
      engaged a nationally recognized valuation firm to calculate the fair value
      of
      the warrants at October 31, 2005 and 2004.Management’s
      estimate of the fair value of the warrantsbased
      on
      the valuationis
      approximately $0.6 million at each of the years ended October 31, 2005 and
      2004.




*Environmental
      Commitments*




Our
      commitments under agreements with regulatory agencies for environmental
      activities are significant. Our recorded liability for environmental matters
      and
      asset retirement obligations was $34.7 million at October 31, 2005, which does
      not include capital expenditures related to Doe Run Peru’s PAMAs. Spending
      estimates may change based on the activities required, which could have a
      significant adverse impact on our liquidity.




Doe
      Run
      Peru’s existing PAMA requires it to perform projects in 2006 at an additional
      cost of $108 million. Doe Run Peru expects that it will not be able to comply
      with the spending requirements of the PAMA investment schedule in 2006 with
      respect to the construction of the sulfuric acid plant required by the PAMA
      and,
      as a result, could be subject to penalties. Failure to comply with the PAMA
      could result in the cessation of operations at the La Oroya smelter, which
      would
      adversely affect our business, financial condition and results of operations.
      Doe Run Peru submitted an application for extension discussed in the
“ *Overview—Doe
      Run Peru* ”
to
      modify the requirements of the existing PAMA and extend the term of the PAMA.
      Doe Run Peru will perform other environmental projects to reduce fugitive
      emissions, including heavy metal dust, to address the health issues of the
      community. The total estimated completion cost of the PAMA projects, including
      the sulfuric acid plant construction, and these projects is approximately $130.0
      million. Doe Run Peru’s actual expenditures for these projects in 2005 was $12.7
      million. If the extension of the PAMA is approved, management expects to fund
      the PAMA projects from cash from operations. Failure to comply with the PAMA
      could result in the cessation of operations at the La Oroya smelter. See the
      discussion of the PAMA requirements and compliance in “Item 1. Business—Doe Run
      Peru’s Operations— *Environmental
      Matters.* ”
A
      default under the requirements of the PAMA could result in a default under
      the
      Doe Run Peru revolving credit facility. A default under the Doe Run Peru
      revolving credit facility would result in a default under the Doe Run revolving
      credit facility.




Management
      believes that the price improvements and other revenue enhancements and the
      issuance of the Supreme Decree allowing an application to extend La Oroya’s PAMA
      requirement for the construction of the sulfuric acid plant will enable us
      to
      continue as a going concern. Our ability to meet obligations after 2005 could
      be
      affected by the factors discussed in “Item 1. Business— *Risk
      Factors* ”
or
      an
      unfavorable outcome to any of the items noted above, and, accordingly, no
      assurance can be given that it will be able to meet such obligations.




*Tax
      Commitments*




Doe
      Run
      Peru has received income tax assessments from Peru’s tax authority, SUNAT for
      tax years 1998 through 2001. The assessments primarily relate to Doe Run Peru’s
      income tax treatment of the December 1997 merger of Doe Run Peru and Metaloroya
      S.A., which was purchased by Doe Run Peru in October 1997, and its effects
      on
      subsequent years’ taxable income. Under the assessment by SUNAT, the tax basis
      of Doe Run Peru’s fixed assets acquired would decrease, resulting in lower tax
      depreciation expense than originally claimed. The estimated assessed amount
      consisting of additional income taxes due, penalties and interest as of October
      31, 2005 totals approximately $109.0 million. The Company estimates that the
      effect of a similar assessment for tax years after 2001 would be approximately
      $30.3 million. Furthermore, Doe Run Peru would also be required to make
      additional workers’ profit sharing payments equal to 8% of the increase in
      taxable income generated by the changes discussed above, or approximately $11.2
      million for calendar years 1998 through 2005.





Doe
      Run
      Peru has also received Value Added Tax (VAT) assessments for the tax years
      1999
      through 2001 and for the period from January through July 2004. The assessments
      primarily relate to Doe Run Peru’s exports with holding certificates and
      differences in a tax credit application. The total assessment for these periods
      was approximately $43.5 million. SUNAT offset the amount assessed for 2004
      of
      approximately $2.3 million against Doe Run Peru’s VAT receivable balance from
      July 2004. Future VAT reimbursements cannot be used to offset the assessment
      by
      SUNAT. The Company discontinued the use of holding certificates for exports
      in
      June 2004. The Company estimates expected additional assessments related to
      VAT
      for tax years 2002 and 2003 to total approximately $20.2 million in regard
      to
      its exports with holding certificates .












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




*Contractual
      Obligations*




The
      following table summarizes our contractual obligations at October 31, 2005
      (in
      millions):




**Payments
                Due By Period****Less
                Than**
            
            **1
                - 3**
            
            **3
                - 5**
            
            **After
                5****Total**
            
            **1
                Year**
            
            **Years**
            
            **Years**
            
            **Years**Long-term
                debt (a)
            
            $
            308.2
            
            $
            89.2
            
            $
            219.0
            
            $
            -
            
            $
            -Redeemable
                Preferred Stock (b)
            
            
            28.5
            
            
            -
            
            
            -
            
            
            28.5
            
            
            -Operating
                leases
            
            
            30.8
            
            
            8.1
            
            
            7.8
            
            
            4.0
            
            
            10.9Purchase
                obligations (c)
            
            
            880.4
            
            
            508.6
            
            
            369.8
            
            
            2.0
            
            
            -Royalty
                obligations (d)
            
            
            1.7
            
            
            0.2
            
            
            0.5
            
            
            0.4
            
            
            0.6Pension
                funding obligations
            
            
            10.1
            
            
            10.1
            
            
            (e
            )
            
            (e
            )
            
            (e
            )Doe
                Run Peru’s PAMA (f)
            
            
            108.1
            
            
            40.4
            
            
            67.7
            
            
            -
            
            
            -Total
            
            $
            1,367.8
            
            $
            656.6
            
            $
            664.8
            
            $
            34.9
            
            $
            11.5





(a)
            The obligations relating to long-term debt reflect the commitments
                as of
                October 31, 2005 for principal payments. The amounts recorded as
                long-term
                debt in our financial statements in Item 8 reflect long-term debt
                as
                accounted for under SFAS No. 15. See “Item 8. Financial Statements and
                Supplementary Data—Note 8 to the Company’s Consolidated Financial
                Statements” for more information.




(b)
            The
                Redeemable Preferred Stock is redeemable after May 1, 2009.




(c)
            Purchase
                obligations include Doe Run Peru’s commitments to purchase 277,011,
                178,381 and 80,689 short tons of copper concentrates, 243,611, 169,403
                and
                49,763 short tons of lead concentrates and 100,310, 77,823 and 14,771
                short tons of zinc concentrates in 2006, 2007 and 2008, respectively.
                Purchase prices are generally based on the average quoted exchange
                prices
                for the month of delivery, less deductions for treatment and refining
                charges and impurity penalties. The estimated cost of the obligations
                less
                than one year was based on the following metal prices: $3,319/ton
                for
                copper, $865/ton for lead and $1,549/ton for zinc. The estimated
                cost of
                the obligations greater than one year was based on the following
                metal
                prices: $2,800/ton for copper, $722/ton for lead and $1,522/ton for
                zinc.




(d)
            Royalty obligations represent royalty commitments calculated through
                the
                next renewal date. As discussed in “Item 2. Properties—U.S.
                Operations—*Mining
                Operations*,”
                government leases are for a period of either 10 or 20 years and are
                renewable at Doe Run’s option if no default exists under the agreement,
                subject to negotiation of specific terms of the lease, including
                royalty
                rates.




(e)
            Our projected benefit obligation in excess of plan assets was $38.2
                million as of October 31, 2005. Our defined benefit plan is funded
                to
                comply with the minimum funding requirements under ERISA. The minimum
                contribution requirements will differ from year to year based on
                actual
                market returns, changes in assumptions, changes in plan demographics
                and
                any significant updates to government regulations. In order to maintain
                minimum funding levels for the pension plan, the Company expects
                to fund
                approximately $10.1 million in 2006. Subsequent payments will be
                dependent
                upon the factors discussed above.




(f)
            Doe Run Peru submitted an application for extension of its PAMA in
                December 2005. See the discussion in “Overview” and “Environmental
                Commitments”.











For
      a
      discussion of environmental and reclamation obligations, see “Item 8. Financial
      Statements and Supplementary Data—Note 19 to Consolidated Financial Statements.”
Our recorded liability for environmental matters and asset retirement
      obligations (AROs) was $34.7 million at October 31, 2005. Timing of the related
      spending is dependent upon a number of factors, including the required
      completion date of reclamation work under agreements with regulatory agencies
      and the date of facility closures. Therefore, these obligations are not included
      in the table.




*Off-Balance
      Sheet Arrangements*




In
      the
      normal course of business, we are involved in certain off-balance sheet
      arrangements. These include letters of credit, surety bonds and joint and
      several liability with all other members of a controlled group under ERISA
      for
      obligations of other members of the controlled group. Liabilities related to
      these arrangements are not reflected in our consolidated balance sheets. We
      do
      not expect any material adverse effect on the results of operations, financial
      condition and liquidity to result from these off-balance sheet arrangements.
      See
“Item 1. Business— *Risk
      Factors* —Risks
      Relating to Control by Renco—DOE RUN MAY HAVE OBLIGATIONS UNDER A CONTROLLED
      GROUP THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON US” for more information on
      the pension controlled group liabilities.




***Significant
      Accounting Policies and Estimates***




The
      consolidated financial statements are impacted by the accounting policies used
      and the estimates and assumptions made by management during their preparation.
      Significant accounting policies and estimates that most impact the consolidated
      financial statements are those related to revenue recognition, mineral
      interests, impairment of long-lived assets, estimated liabilities for
      environmental and legal claims, income taxes, pension benefits and derivative
      instruments.




Sales
      are
      recorded as products are delivered to customers or as tolling services are
      performed in accordance with contract terms. Concentrate and certain smelter
      product sales are recorded based upon estimated weights and metal contents
      and
      metal prices in effect at time of delivery. Revenues are adjusted between month
      of delivery and month of settlement based on changes in market prices.
      Adjustments with respect to such sales are recorded based on final settlement
      weights, metal contents and metal prices pursuant to applicable customer
      agreements.




Mineral
      interests are amortized using the units of production method. Our ore reserves
      are based on geological studies and test hole drillings conducted by our
      geologists. These estimates are reviewed and certified periodically by an
      independent mining consultant. The most recent independent report on our ore
      reserves was issued in January 2006. Ore reserves can and do fluctuate with
      the
      underlying market price or prices of the metals to be mined. As such, there
      can
      be no assurances that the reserves currently reported would be economical to
      mine in the future.




Long-lived
      assets, such as property, plant and equipment, and purchased intangibles subject
      to amortization are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Recoverability of assets to be held and used is measured by a
      comparison of the carrying amount of an asset to the estimated undiscounted
      future cash flows expected to be generated by the asset. If the carrying amount
      of an asset exceeds its estimated future cash flows, an impairment charge is
      recognized by the amount by which the carrying amount of the asset exceeds
      the
      fair value of the asset. Assets to be disposed of are separately presented
      in
      the balance sheet and reported at the lower of the carrying amount or fair
      value
      less costs to sell and are no longer depreciated. The assets and liabilities
      of
      a disposed group classified as held for sale are presented separately in the
      appropriate asset and liability sections of the balance sheet.




The
      restructuring, discussed in *Debt
      Instruments* above,
      was accounted for in accordance with SFAS No. 15. Under SFAS No. 15, a debtor
      may not change the carrying amount of the payable at the time of restructuring
      unless the total future cash payments, including interest, specified by the
      new
      terms are less than the carrying amount of the payable at the time of
      restructuring. Under the terms of the 11.75% notes, total expected payments,
      including all amounts contingently payable, will be greater than the carrying
      amount of the old notes exchanged. In accordance with Statement No. 15 the
      11.75% notes are recorded on the balance sheet at a carrying amount equal to
      the
      carrying amount of the notes exchanged, including unpaid accrued interest,
      reduced by deferred issue costs related to the old notes exchanged and the
      fair
      value of the warrants issued.




We
      accrue
      for loss contingencies, including costs associated with environmental
      remediation obligations, when it is probable that a liability has been incurred
      and can be reasonably estimated. Liability estimates for environmental











remediation
      obligations are based on an evaluation
      of, among other factors, currently available facts, existing technology,
      presently enacted laws and regulations, our experience in remediation, our
      status as a potentially responsible party (PRP) and the ability of other PRPs
      to
      pay their allocated portions. Costs of future expenditures for environmental
      remediation obligations are not discounted to their present value. Recoveries
      of
      costs from other parties are recorded as assets when their receipt is deemed
      probable, consistent with the American Institute of Certified Public Accountants
      Statement of Position 96-1, *Environmental
      Remediation Liabilities*.
      However, there can be no assurance established liabilities will be sufficient
      to
      cover the costs of the actual commitments or that in the future new commitments
      will not arise that could have a material adverse effect on our results of
      operations, financial condition and liquidity. See “Item 8. Financial Statements
      and Supplementary Data—Notes 19 and 20 to Consolidated Financial Statements” for
      a more detailed discussion of environmental and litigation
      matters.




As
      of
      November 1, 2002, we adopted SFAS No. 143, which addresses financial accounting
      and reporting for obligations associated with the retirement of tangible
      long-lived assets and the associated asset retirement costs. The standard
      applies to legal obligations associated with the retirement of long-lived assets
      that result from the acquisition, construction, development and/or normal use
      of
      the asset. SFAS No. 143 requires that the fair value of a liability for an
      ARO
      be recognized in the period in which it is incurred if a reasonable estimate
      of
      fair value can be made. The fair value of the liability is added to the carrying
      amount of the associated asset, and this additional carrying amount is
      depreciated over the life of the asset. These liabilities will be increased
      to
      full value over time through charges of accretion to operating expense. Changes
      in the ARO liability resulting from revisions to the timing or the amount of
      the
      original estimate of undiscounted cash flows shall be recognized as an increase
      or a decrease in the carrying amount of the liability for an ARO and the related
      asset retirement cost capitalized as part of the carrying amount of the related
      long-lived asset. If the obligation is settled for other than the carrying
      amount of the liability, we will recognize a gain or loss on
      settlement.




The
      cumulative effect related to the adoption of SFAS No. 143 for the year ended
      October 31, 2003 was a loss of $3.9 million, a net decrease to plant, property
      and equipment of $2.1 million and an increase of $1.9 million to the liability
      for asset retirement obligations.




Renco
      has
      elected for us to be treated as a QSSS for U.S. federal tax purposes. Most
      states in which we operate will follow similar tax treatment. QSSS status
      requires the ultimate shareholders to include their pro rata share of our income
      or loss in their individual tax returns. The election does not affect foreign
      income taxes related to our foreign subsidiaries.




Deferred
      tax assets and liabilities are recognized in foreign jurisdictions for the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and the respective
      tax bases of these assets and liabilities. Deferred tax assets and liabilities
      are measured using enacted tax rates expected to apply to taxable income in
      the
      years in which those temporary differences are expected to be recovered or
      settled. Management believes that sufficient uncertainty exists regarding the
      realization of certain deferred tax assets such that a valuation allowance
      is
      required.




We
      sponsor a noncontributory defined benefit plan for our U.S. employees. We have
      also adopted a supplemental defined benefit plan, the Supplemental Employee
      Retirement Plan (SERP), effective November 1, 1996. The SERP provides benefits
      to those participants of the defined benefit plan whose benefits under the
      plan
      are limited by Sections 401(a) (17) or 415 of the Internal Revenue Code. Changes
      in the assumptions used to calculate Doe Run’s accumulated benefit obligation
      and periodic pension cost can have a significant effect on our results of
      operations. On April 11, 2005, our Board of Directors adopted changes to our
      defined benefit plans. Effective July 1, 2005, no new employees are eligible
      to
      participate in the plans and participants’ benefit accruals have been frozen. A
      curtailment loss of $690 thousand was reflected in operating expenses for the
      year ended October 31, 2005.




We
      record
      all derivative instruments on the balance sheet at fair value. The accounting
      for changes in the fair value (that is, gains and losses) of a derivative
      instrument depends on whether it has been designated and qualifies as part
      of a
      hedging relationship, and if so, whether the derivative instrument is designated
      as a hedge of exposures to changes in fair value or cash flows. If the hedged
      exposure is an exposure to changes in the fair value of a fixed commitment,
      the
      gain (loss) is recognized in earnings in the period of change, with an equal
      and
      offsetting (loss) gain recognized on the change in value of the hedged item.
      If
      the hedged exposure is an exposure to changes in forecasted cash flows, the
      effective portion of the gain (loss) is reported as a component of other
      comprehensive income (outside earnings) until the forecasted hedged transaction
      affects earnings, when it is reclassified into earnings.











***Recent
      Accounting Pronouncements***




In
      November 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      151, *Inventory
      Costs* ,
      which
      requires that amounts
      of idle facility expense, freight, handling costs, and wasted material be
      recognized as current-period charges. In addition, the Statement requires that
      allocation of fixed production overheads to the costs of conversion be based
      on
      the normal capacity of the production facilities. This statement is effective
      for inventory costs incurred during the year beginning after June 15, 2005.
      Therefore, the Company will adopt this standard beginning November 1, 2005.
      The
      Company does not expect the adoption of this interpretation to have a material
      impact on its financial statements.




In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      153, *Exchanges
      of Nonmonetary Assets* ,
      which
      eliminates the exception for nonmonetary exchanges of similar productive assets
      and replaces it with a general exception for exchanges of nonmonetary assets
      that do not have commercial substance. The provisions of this statement are
      effective for nonmonetary assets exchanges occurring in fiscal periods beginning
      after June 15, 2005 therefore, the Company will adopt this standard beginning
      November 1, 2005. The Company does not expect the adoption of this
      interpretation to have a material impact on its financial
      statements.




In
      May
      2005, the FASB issued Statement of Financial Standards No. 154, *Accounting
      Changes and Error Corrections* (SFAS
      No. 154) *,* which
      requires retrospective application to prior periods’ financial statements of a
      voluntary change in accounting principle unless it is impracticable. In
      addition, SFAS No. 154 requires that a change in method of deprecation,
      amortization or depletion for long-lived, non-financial assets be accounted
      for
      as a change in accounting estimate that is affected by a change in accounting
      principle. SFAS No. 154 is effective for accounting changes and corrections
      of
      errors made in fiscal years beginning after December 15, 2005. Earlier adoption
      is permitted for fiscal years beginning after June 1, 2005. The Company does
      not
      expect the adoption of this interpretation to have a material impact on its
      financial statements.




**Item
      8. Financial Statements and Supplementary
      Data**




Financial
      statements and supplementary data follow immediately and are listed in Item
      15
      of Part IV of this report.







Report
      of
      Independent Registered Public Accounting Firm




Board
      of
      Directors and Shareholders


The
      Doe
      Run Resources Corporation


St. Louis,
      Missouri




We
      have
      audited the accompanying consolidated balance sheets of The Doe Run Resources
      Corporation and subsidiaries as of October 31, 2005 and 2004, and the
      related consolidated statements of operations, comprehensive income and
      shareholders’ deficit, and cash flows for the years then ended.  These
      financial statements are the responsibility of the Company’s
      management.   Our responsibility is to express an opinion on these
      financial statements based on our audits.




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




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of The Doe Run Resources
      Corporation and subsidiaries as of October 31, 2005 and 2004, and the
      results of their operations and their cash flows for the years then ended in
      conformity with U.S. generally accepted accounting principles.




The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern.  As further discussed in Note 2
      to the consolidated financial statements, the Company’s Peruvian subsidiary has
      significant capital requirements under environmental commitments, which, if
      not
      met, could result in defaults of the Company’s credit agreements; has
      substantial contingencies related to tax; and has significant debt service
      obligations that raise substantial doubt about the Company’s ability to continue
      as a going concern.  Management’s plans in regard to these matters are also
      described in Note 2.  The consolidated financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty.






Crowe
      Chizek


and
      Company


LLC




Oak
      Brook, Illinois


March 15,
      2006 except for Note 8


as
      to which the date is March 17, 2006








**KPMG
      LLP**


Suite
      900


10
      South
      Broadway


St.
      Louis, MO 63102-1761





**Report
      of Independent Registered Public Accounting Firm**




The
      Board
      of Directors


The
      Doe
      Run Resources Corporation:




We
      have
      audited the accompanying consolidated statements of operations, comprehensive
      income and shareholder’s deficit, and cash flows of The Doe Run Resources
      Corporation and subsidiaries (the Company) for the year ended October 31, 2003.
      These consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall consolidated financial statement presentation. We believe
      that our audit provides a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the results of operations and the cash flows of The
      Doe Run Resources Corporation and subsidiaries for the year ended October 31,
      2003 in conformity with U.S. generally accepted accounting
      principles.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company has suffered recurring net
      losses, has a net capital deficiency, and has liquidity concerns that raise
      substantial doubt about its ability to continue as a going concern. Management’s
      plans in regard to these matters are also described in Note 2. The consolidated
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




As
      discussed in Notes 1 and 19 to the consolidated financial statements, the
      Company adopted the provisions of SFAS No. 143, *Accounting
      for Asset Retirement Obligations* ,
      as of
      November 1, 2002.




KPMG
      LLP




February
      2, 2004











**THE
                DOE RUN RESOURCES CORPORATION****Consolidated
                Balance Sheets****(Dollars
                in thousands, except share data)****October
                31,**
            
            **October
                31,****2005**
            
            **2004****ASSETS**Current
                assets:Cash
            
            $
            23,486
            
            $
            20,318Trade
                accounts receivable, net of allowance for doubtful accounts
            
            
            85,740
            
            
            64,219Inventories
            
            
            105,634
            
            
            103,309Prepaid
                expenses and other current assets
            
            
            20,814
            
            
            35,858Total
                current assets
            
            
            235,674
            
            
            223,704Property,
                plant and equipment, net
            
            
            253,263
            
            
            229,640Other
                noncurrent assets, net
            
            
            5,838
            
            
            4,075Total
                assets
            
            $
            494,775
            
            $
            457,419**LIABILITIES
                AND SHAREHOLDER'S DEFICIT**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            114,947
            
            $
            96,767Accounts
                payable
            
            
            92,275
            
            
            65,855Accrued
                liabilities
            
            
            87,060
            
            
            83,878Total
                current liabilities
            
            
            294,282
            
            
            246,500Long-term
                debt, less current maturities
            
            
            271,566
            
            
            320,561Other
                noncurrent liabilities
            
            
            68,337
            
            
            75,765Total
                liabilities
            
            
            634,185
            
            
            642,826Series
                A redeemable preferred stock, $1,000 par value per share; 5,000 sharesauthorized;
                2,849 and 2,533 shares issued and outstanding at October 31, 2005and
                October 31, 2004, respectively; liquidation and redemption value
            
            
            28,495
            
            
            25,329Shareholder's
                deficit:Common
                stock, $0.10 par value per share, 1,667 shares authorized;1,000
                shares issued and outstanding at October 31, 2005 and 2004
            
            
            -
            
            
            -Additional
                paid-in capital
            
            
            -
            
            
            -Accumulated
                deficit
            
            
            (123,141
            )
            
            (168,609
            )Accumulated
                preferred stock dividends in excess of paid in capital
            
            
            (3,257
            )
            
            (91
            )Accumulated
                other comprehensive losses
            
            
            (41,507
            )
            
            (42,036
            )Total
                shareholder's deficit
            
            
            (167,905
            )
            
            (210,736
            )Total
                liabilities and shareholder's deficit
            
            $
            494,775
            
            $
            457,419The
                accompanying notes are an integral part of these consolidated financial
                statements.
















**THE
                DOE RUN RESOURCES CORPORATION****Consolidated
                Statements of Operations****(Dollars
                in thousands)****Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**Net
                sales
            
            $
            1,029,440
            
            $
            868,068
            
            $
            685,382Costs
                and expenses:Cost
                of sales
            
            
            911,732
            
            
            782,981
            
            
            643,893Depreciation,
                depletion and amortization
            
            
            24,170
            
            
            25,322
            
            
            30,407Selling,
                general and administrative
            
            
            46,096
            
            
            35,782
            
            
            28,366Exploration
            
            
            2,984
            
            
            2,178
            
            
            1,078Losses
                from impairment and disposal of long-lived assets
            
            
            2,978
            
            
            3,591
            
            
            1,409Unrealized
                (gain) loss on derivative financial instruments
            
            
            (4,876
            )
            
            231
            
            
            7,220Total
                costs and expenses
            
            
            983,084
            
            
            850,085
            
            
            712,373Income
                (loss) from operations
            
            
            46,356
            
            
            17,983
            
            
            (26,991
            )Other
                income (expense):Interest
                expense
            
            
            (10,010
            )
            
            (13,289
            )
            
            (13,270
            )Interest
                income
            
            
            141
            
            
            19
            
            
            29Gain
                (Loss) on retirement/restructure of long-term debt
            
            
            9,233
            
            
            -
            
            
            (550
            )Other,
                net
            
            
            666
            
            
            (460
            )
            
            (176
            )Total
                other income (expense)
            
            
            30
            
            
            (13,730
            )
            
            (13,967
            )Income
                (loss) before income tax benefit and cumulativeeffect
                of change in accounting principle
            
            
            46,386
            
            
            4,253
            
            
            (40,958
            )Income
                tax benefit
            
            
            -
            
            
            (661
            )
            
            -Income
                (loss) before cumulative effectof
                change in accounting principle
            
            
            46,386
            
            
            4,914
            
            
            (40,958
            )Cumulative
                effect of change in accounting principle,net
                of income tax benefit
            
            
            -
            
            
            -
            
            
            (3,940
            )Net
                income (loss)
            
            $
            46,386
            
            $
            4,914
            
            $
            (44,898
            )Preferred
                stock dividends
            
            
            (3,166
            )
            
            (2,815
            )
            
            (2,514
            )Net
                income (loss) allocable to common shares
            
            $
            43,220
            
            $
            2,099
            
            $
            (47,412
            )The
                accompanying notes are an integral part of these consolidated financial
                statements.










**THE
                  DOE RUN RESOURCES CORPORATION****Consolidated
                  Statements of Comprehensive Income and Shareholder's
                  Deficit****(Dollars
                  in thousands)****Year
                  Ended October 31,****2005**
              
              **2004**
              
              **2003**Net
                  income (loss)
              
              $
              46,386
              
              $
              4,914
              
              $
              (44,898
              )Unrealized
                  gain (loss) on derivative financial instruments, net
              
              
              97
              
              
              1,757
              
              
              (1,854
              )Unrealized
                  gain (loss) on available-for-sale investments
              
              
              37
              
              
              (10
              )
              
              242Adjustment
                  to minimum pension liability
              
              
              395
              
              
              (5,516
              )
              
              (12,871
              )Comprehensive
                  income (loss)
              
              
              46,915
              
              
              1,145
              
              
              (59,381
              )Preferred
                  stock dividends
              
              
              (3,166
              )
              
              (2,815
              )
              
              (2,514
              )Dividends
              
              
              (918
              )
              
              -
              
              
              -Change
                  in shareholder's deficit
              
              
              42,831
              
              
              (1,670
              )
              
              (61,895
              )Shareholder's
                  deficit, beginning of year
              
              
              (210,736
              )
              
              (209,066
              )
              
              (147,171
              )Shareholder's
                  deficit, end of year
              
              $
              167,905
              
              $
              (210,736
              )
              $
              (209,066
              )The
                  accompanying notes are an integral part of these consolidated financial
                  statements.











**THE
                DOE RUN RESOURCES CORPORATION****Consolidated
                Statements of Cash Flows****(Dollars
                in thousands)****Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**Cash
                flows from operating activities:Net
                income (loss)
            
            $
            46,386
            
            $
            4,914
            
            $
            (44,898
            )Cumulative
                effect of change in accounting principle
            
            
            -
            
            
            -
            
            
            3,940Adjustments
                to reconcile net income (loss) to net cashprovided
                by operating activities:Depreciation,
                depletion and amortization
            
            
            24,170
            
            
            25,322
            
            
            30,407Imputed
                interest and amortization of deferred financing costs
            
            
            748
            
            
            949
            
            
            1,231Unrealized
                (gain) loss on derivative financial instruments
            
            
            (4,876
            )
            
            231
            
            
            7,220Losses
                from impairment and disposal of long-lived assets
            
            
            2,978
            
            
            3,591
            
            
            1,409(Gain)
                Loss on retirement/restructure of long-term debt
            
            
            (9,233
            )
            
            -
            
            
            550Increase
                (decrease) resulting from changes in:Trade
                accounts receivable
            
            
            (21,521
            )
            
            (7,560
            )
            
            8,119Inventories
            
            
            (1,910
            )
            
            (7,629
            )
            
            7,666Prepaid
                expenses and other current assets
            
            
            14,539
            
            
            (14,399
            )
            
            (2,093
            )Accounts
                payable
            
            
            26,420
            
            
            14,557
            
            
            2,422Accrued
                liabilities
            
            
            7,772
            
            
            996
            
            
            20,496Other
                noncurrent assets and liabilities, net
            
            
            (9,275
            )
            
            625
            
            
            (14,021
            )Net
                cash provided by operating activities
            
            
            76,198
            
            
            21,597
            
            
            22,448Cash
                flows from investing activities:Purchases
                of property, plant and equipment
            
            
            (51,261
            )
            
            (29,762
            )
            
            (15,349
            )Net
                proceeds from disposal of assets
            
            
            129
            
            
            28
            
            
            54Net
                proceeds from sale of investments
            
            
            469
            
            
            -
            
            
            -Net
                cash provided by (used in) investing activities
            
            
            (50,663
            )
            
            (29,734
            )
            
            (15,295
            )Cash
                flows from financing activities:Proceeds
                from revolving loans, net
            
            
            9,996
            
            
            12,075
            
            
            14,224Payments
                on long-term debt
            
            
            (31,454
            )
            
            (3,320
            )
            
            (8,145
            )Payment
                of financing costs
            
            
            (375
            )
            
            -
            
            
            (550
            )Payments
                of dividends
            
            
            (534
            )
            
            -
            
            
            -Net
                cash provided by (used in) financing activities
            
            
            (22,367
            )
            
            8,755
            
            
            5,529Net
                increase in cash
            
            
            3,168
            
            
            618
            
            
            12,682Cash
                at beginning of period
            
            
            20,318
            
            
            19,700
            
            
            7,018Cash
                at end of period
            
            $
            23,486
            
            $
            20,318
            
            $
            19,700Supplemental
                disclosure of cash flow information -Cash
                paid during the period for:Interest,
                net of capitalized interest
            
            $
            28,372
            
            $
            10,747
            
            $
            11,018Income
                taxes
            
            $
            -
            
            $
            2,147
            
            $
            -The
                accompanying notes are an integral part of these consolidated financial
                statements.








**THE
      DOE RUN RESOURCES CORPORATION**





**Notes
      to Consolidated Financial Statements**


**October
      31, 2005, 2004 and 2003**


**(Dollars
      in thousands, except share data)**




**(1)  Summary
      of Significant Accounting Policies**




***Principles
      of Consolidation***




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




***Nature
      of Business***




The
      principal domestic business of the Company is the exploration, development,
      and
      mining and processing of non-ferrous metals, primarily lead, and recycling
      of
      lead-acid batteries and other lead-bearing materials. Doe Run, doing business
      as
      The Doe Run Company, has mines in southern Missouri, primary smelters in
      Herculaneum, Missouri and Glover, Missouri and operates a recycling facility
      in
      Boss, Missouri. Operations at the Glover primary smelter were indefinitely
      suspended in the first quarter of 2004. Fabricated Products, Inc. (FPI), a
      subsidiary, fabricates lead products used in radiation, X-ray shielding and
      nuclear shielding and is a leader in the production of shaped anodes and anode
      sheets for those applications. In Peru, Doe Run Peru S.R.L. (Doe Run Peru)
      is
      engaged in the mining, smelting and refining of polymetallic concentrates,
      producing mainly silver, copper, lead, zinc and gold, which are sold as refined
      metals primarily to customers located outside of Peru. Doe Run’s issued and
      outstanding common and preferred stock is owned directly or indirectly by The
      Renco Group, Inc. (Renco).




***Foreign
      Currency Translation***




The
      functional currency of the Company’s foreign subsidiaries is the U.S. Dollar.
      Accordingly, foreign currency translation gains and losses are included in
      determining net income (loss).




***Use
      of Estimates***




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




***Cash
      Management***




All
      cash
      received by Doe Run's domestic operations is transferred daily by wire to pay
      down the outstanding balance, if any, of its revolving credit facility (the
      Doe
      Run Revolving Credit Facility), which is described in further detail in Note
      8.
      Doe Run borrows under the Doe Run Revolving Credit Facility to fund its accounts
      on a daily basis as checks are disbursed. At October 31, 2005 and 2004,
      outstanding checks of $612 and $2,859, respectively, were included in accounts
      payable.




***Inventories***




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




Inventory
      costs include labor, material and other production costs.











***Property,
      Plant and Equipment***




Property,
      plant and equipment are recorded at cost. In accordance with Statement of
      Financial Accounting Standards Statement No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      long-lived assets, such as property, plant and equipment, and purchased
      intangibles subject to amortization are reviewed for impairment whenever events
      or changes in circumstances indicate that the carrying amount of an asset may
      not be recoverable.




Recoverability
      of assets to be held and used is measured by a comparison of the carrying amount
      of an asset to the estimated undiscounted future cash flows expected to be
      generated by the asset. If the carrying amount of an asset exceeds its estimated
      future cash flows, an impairment charge is recognized by the amount by which
      the
      carrying amount of the asset exceeds the fair value of the asset. Assets to
      be
      disposed of are separately presented in the balance sheet and reported at the
      lower of the carrying amount or fair value less costs to sell and are no longer
      depreciated. The assets and liabilities of a disposed group classified as held
      for sale are presented separately in the appropriate asset and liability
      sections of the balance sheet.




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




Interest
      incurred for the direct or indirect debt for the construction of assets to
      be
      used in operations is capitalized when the interest is charged. The amount
      of
      interest capitalized was $1,040, $274, and $414 for the years ended October
      31,
      2005, 2004 and 2003, respectively.




Costs
      to
      treat environmental contamination are capitalized when they extend the life,
      increase the capacity or improve the safety or efficiency of the property,
      when
      they mitigate or prevent future environmental contamination or when they are
      incurred in preparing property for sale.




Mineral
      interests are amortized using the units of production method.




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




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


Facilities
      at which operations have temporarily ceased may be placed on a standby care
      and
      maintenance basis. The Company continues to depreciate the related assets during
      the standby period.




***Software
      Costs***




The
      company accounts for computer software development costs that are incurred
      in
      the preliminary project stage as expense. Once the project is in the application
      development stage, the direct costs are capitalized. The costs associated with
      the accounting application and infrastructure development are capitalized.
      The
      capitalized costs of computer software and accounting applications developed
      or
      obtained for internal use are amortized on a straight-line basis over five
      years. All other software development costs are expensed as
      incurred.




***Exploration
      and Development Costs***




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











***Reclamation
      and Mine Closure Costs***




The
      Company’s mines and related processing facilities are subject to governance by
      various agencies that have established minimum standards for reclamation.




As
      of
      November 1, 2002, the Company adopted Statement of Financial Accounting
      Standards No. 143, *Accounting
      for Asset Retirement Obligations* (SFAS
      No. 143), which addresses financial accounting and reporting for obligations
      associated with the retirement of tangible long-lived assets and the associated
      asset retirement costs. The standard applies to legal obligations associated
      with the retirement of long-lived assets that result from the acquisition,
      construction, development and/or normal use of the asset.




Prior
      to
      the adoption of SFAS No. 143, the Company accrued for mine and other closure
      obligations at their estimated, undiscounted cost. SFAS No. 143 requires that
      the fair value of a liability for an asset retirement obligation be recognized
      in the period in which it is incurred if a reasonable estimate of fair value
      can
      be made. The fair value of the liability is added to the carrying amount of
      the
      associated asset, and this additional carrying amount is depreciated over the
      life of the asset. These liabilities will be increased to full value over time
      through charges of accretion to operating expense. If the obligation is settled
      for other than the carrying amount of the liability, the Company will recognize
      a gain or loss on settlement.




The
      cumulative effect related to the adoption of SFAS No. 143 for the year ended
      October 31, 2003 was a loss of $3,940, a net decrease to plant, property and
      equipment of $2,088, and an increase of $1,852 to the liability for asset
      retirement obligations.




***Commitments
      and Contingencies***




The
      Company accrues for loss contingencies, including costs associated with
      environmental remediation obligations, when it is probable that a liability
      has
      been incurred and can be reasonably estimated. Liability estimates for
      environmental remediation obligations are based on an evaluation of, among
      other
      factors, currently available facts, existing technology, presently enacted
      laws
      and regulations, the Company’s experience in remediation, the Company’s status
      as a potentially responsible party (PRP), and the ability of other PRPs to
      pay
      their allocated portions. Costs of future expenditures for environmental
      remediation obligations are not discounted to their present value. Recoveries
      of
      costs from other parties are recorded as assets when their receipt is deemed
      probable, as is consistent with the American Institute of Certified Public
      Accountants Statement of Position 96-1, *Environmental
      Remediation Liabilities* .




***Revenue
      Recognition***




Sales
      are
      recorded as products are delivered to customers as defined in the specific
      contracts or as tolling services are performed. Concentrate and certain smelter
      product sales are recorded based upon estimated weights and metal contents
      and
      metal prices in effect at the time of delivery. Revenues are adjusted between
      the month of delivery and the month of settlement based on changes in market
      prices. Adjustments with respect to such sales are recorded based on final
      settlement weights, metal contents and metal prices using applicable customer
      agreements.




***Derivative
      Instruments and Hedging Activities***




Statement
      of Financial Accounting Standards No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      was
      issued by the Financial Accounting Standards Board in June 1998 and amended
      by
      Statement No. 138, *Accounting
      for Certain Derivative Instruments and Certain Hedging Activities, an amendment
      of FASB Statement No. 133* ,
      issued
      in June 2000 (collectively, SFAS No. 133). Under SFAS No. 133, the Company
      carries all derivative instruments on the balance sheet at fair value. The
      accounting for changes in the fair value (i.e. gains and losses) of a derivative
      instrument depends on whether it has been designated and qualifies as part
      of a
      hedging relationship and if so, whether the derivative instrument is designated
      as a hedge of exposures to changes in fair value or cash flows. If the hedged
      exposure is an exposure to changes in the fair value of a fixed commitment,
      the
      gain (loss) is recognized in earnings in the period of change, with an equal
      and
      offsetting (loss) gain recognized on the change in value of the hedged item.
      If
      the hedged exposure is an exposure to changes in forecasted cash flows, the
      effective portion of the gain (loss) is reported as a component of other
      comprehensive income (outside earnings) until the forecasted hedged transaction
      affects earnings, when it is reclassified into earnings.







***Research
      and Development***




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




***Income
      Taxes***




Renco
      has
      elected for the Company to be treated as a qualified subchapter S subsidiary
      (QSSS) for U.S. federal tax purposes. Most states in which the Company operates
      will follow similar tax treatment. QSSS status requires the ultimate
      shareholders to include their pro rata share of the Company’s income or loss in
      their individual tax returns. The election does not affect foreign income taxes
      related to the Company’s foreign subsidiaries.




Deferred
      tax assets and liabilities are recognized in foreign jurisdictions for the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and the respective
      tax bases of these assets and liabilities. Deferred tax assets and liabilities
      are measured using enacted tax rates expected to apply to taxable income in
      the
      years in which those temporary differences are expected to be recovered or
      settled. See Note 13- Income Taxes for additional discussion.




***Recent
      Accounting Pronouncements***




In
      November 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      151, *Inventory
      Costs* ,
      which
      requires that amounts
      of idle facility expense, freight, handling costs, and wasted material be
      recognized as current-period charges. In addition, the Statement requires that
      allocation of fixed production overheads to the costs of conversion be based
      on
      the normal capacity of the production facilities. This statement is effective
      for inventory costs incurred during the year beginning after June 15, 2005.
      Therefore, the Company will adopt this standard beginning November 1, 2005.
      The
      Company does not expect the adoption of this interpretation to have a material
      impact on its financial statements.




In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      153, *Exchanges
      of Nonmonetary Assets* ,
      which
      eliminates the exception for nonmonetary exchanges of similar productive assets
      and replaces it with a general exception for exchanges of nonmonetary assets
      that do not have commercial substance. The provisions of this statement are
      effective for nonmonetary assets exchanges occurring in fiscal periods beginning
      after June 15, 2005 therefore, the Company will adopt this standard beginning
      November 1, 2005. The Company does not expect the adoption of this
      interpretation to have a material impact on its financial
      statements.




In
      May
      2005, the FASB issued Statement of Financial Standards No. 154, *Accounting
      Changes and Error Corrections* (SFAS
      No. 154) *,* which
      requires retrospective application to prior periods’ financial statements of a
      voluntary change in accounting principle unless it is impracticable. In
      addition, SFAS No. 154 requires that a change in method of deprecation,
      amortization or depletion for long-lived, non-financial assets be accounted
      for
      as a change in accounting estimate that is affected by a change in accounting
      principle. SFAS No. 154 will be effective for accounting changes and corrections
      of errors made in fiscal years beginning after December 15, 2005. Earlier
      adoption is permitted for fiscal years beginning after June 1, 2005. We do
      not
      expect the adoption of SFAS No. 154 to have a material impact on our financial
      statements.




***Reclassifications***




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




**(2)  Financial
      Condition**




***General***




The
      Company is highly leveraged and has significant commitments both in the US
      and
      Peru for environmental matters and for Environmental Remediation and Management
      Program (PAMA) expenditures that require it to dedicate a substantial portion
      of
      cash flow from operations to the payment of these obligations, which will reduce
      funds available for other business purposes. (See Note 19: Asset Retirement
      and
      Environmental Obligations). These factors also increase the Company’s











vulnerability
      to general adverse conditions, limit the
      Company’s flexibility in planning for or reacting to changes in its business and
      industry, and limit the Company’s ability to obtain financing required to fund
      working capital and capital expenditures and for other general corporate
      purposes. An unfavorable outcome to certain contingencies, discussed below,
      would have a further adverse effect on the Company’s ability to meet its
      obligations when due. The Company’s ability to meet these obligations is also
      dependent upon future operating performance and financial results which are
      subject to financial, economic, political, competitive and other factors
      affecting Doe Run, many of which are beyond the Company’s control.




***Fiscal
      Year 2003***





For
      the
      year ended October 31, 2003 and for several years prior, the Company reported
      recurring losses, primarily the result of the low treatment charges for
      concentrates processed by Doe Run Peru and low metal prices for metals sold
      by
      both the US and Peru operations, a condition exacerbated by the Company's
      significant interest costs prior to a debt restructuring in October 2002. During
      fiscal 2003, the Company’s liquidity continued to be affected by these factors.
      The Company failed to meet certain financial covenant requirements contained
      in
      its revolving credit agreements and a term note (the Term Note), which defaults
      continued into fiscal years 2004 and 2005. In addition, the Company had the
      environmental and litigation matters mentioned above. These issues combined
      raised substantial doubt about the Company's ability to continue as a going
      concern.





Doe
      Run
      Peru's fiscal year 2003 results of operations and liquidity were severely
      impacted by low treatment charges received by Doe Run Peru for processing raw
      materials resulting from a shortage in the global supply of concentrates. The
      effects of low metals prices also caused some of Doe Run Peru's suppliers of
      concentrates to suffer financial distress, which affected the availability
      of
      concentrate feed, which resulted in changes to concentrate mix and interruptions
      in delivery schedules adversely affecting Doe Run Peru's metal production and
      results of operations. Doe Run (US) was negatively impacted by the low metal
      prices, primarily lead.





Doe
      Run
      Peru proceeded with efforts to identify alternative methods of achieving
      compliance with environmental requirements. These efforts included, but were
      not
      limited to, reducing or curtailing production from a portion of the plant thus
      eliminating the need for the equipment presently contemplated and replacing
      it
      with another alternative. These efforts took into consideration the impacts
      on
      profitability and liquidity, as well as other economic impacts.





During
      fiscal year 2003, the Company implemented actions to improve its liquidity,
      including changes in mine plans, reductions in production and its workforce,
      and
      acceleration of cash receipts. In response to declining demand in the U.S.
      for
      lead metal and increasing global demand for clean lead concentrates, the Company
      indefinitely suspended operations at its Glover smelter in November, 2003 and
      began selling on the open market any concentrates that are not required to
      maintain production at its Herculaneum smelter. These changes improved the
      Company’s cash flow and availability in 2003. At October 31, 2003, Doe Run cash
      balance and net unused availability under its revolving credit facility were
      $16,794 and $14,373, respectively, and Doe Run Peru’s cash balance and net
      unused availability under its revolving credit facility were approximately
      $16,794 and $3,830 at October 31, 2003, respectively.





Doe
      Run
      and Doe Run Peru were in the process of negotiating amendments to agreements
      governing the revolving credit facilities and the Term Note at October 31,
      2003, and amendments to the revolving credit facilities were finalized
      subsequent to October 31, 2003.





***Fiscal
      Years 2004-2005***





Metal
      prices have risen dramatically over the past two fiscal years. Lead prices
      increased from a London Metal Exchange (LME) settlement monthly average of
      $532.60 per short ton in October 2003 to $847.40 per short ton in October 2004
      to $911.76 per short metal ton in October 2005. The Company has benefited from
      this price increase in both its lead metal and lead concentrate sales. In
      response to continued strong metal prices, our primary lead division made
      significant changes to operations in 2005. The lead grade of ore mined was
      lowered while the tonnage processed increased. These changes were made in an
      effort to optimize the return on Doe Run’s ore reserves. Doe Run continued to
      sell a substantial portion of the lead concentrates produced from its mines
      into
      the open market.











The
      Company continues to have substantial cash requirements in the future, including
      maturities in 2006 of $8,000 for the Term Note, cash interest payments on Bonds
      of $25,729 and revolving credit facilities (See Note 8: Debt), and also
      significant capital requirements under environmental commitments (See Note
      19:
      Asset Retirement and Environmental Obligation). In addition, there are
      substantial contingencies related to taxes (See Note 13: Income Taxes) and
      litigation (See Note 20: Litigation).





Net
      unused availability at October 31, 2005 and 2004 under the Doe Run Revolving
      Credit Facility was $22,138 and $22,506, respectively. Net unused availability
      at October 31, 2005 and 2004 under the Doe Run Peru Revolving Credit Facility
      was approximately $200 and $60, respectively. In addition to the availability
      under its revolving credit facilities, cash balances at Doe Run were $23,486
      and
      $20,318, respectively, at October 31, 2005 and 2004 and at Doe Run Peru were
      $14,569 and $6,905, respectively, at October 31, 2005 and 2004. Doe Run Peru
      has
      reached and maintained its maximum borrowing level under the Doe Run Peru
      Revolving Credit Facility due in part to the higher metal prices resulting
      in
      higher outlays for concentrate purchases and higher VAT payments funded by
      cash
      from operations.





The
      Doe
      Run Revolving Credit Facility expires on August 29, 2008. The Doe Run Peru
      Revolving Credit Facility expires in the fourth quarter of 2006, and will
      require renegotiation to extend their terms. There can be no assurance that
      the
      Company will be successful, or if it is successful, that the renewal would
      be at
      terms that are favorable to the Company. The maturity date of the Term Note
      has
      been extended to June 16, 2006 with an amended repayment schedule.





A
      default
      under the requirements of the PAMA could result in a default under the Doe
      Run
      Peru Revolving Credit Facility. A default under the requirements of the Doe
      Run
      Peru Revolving Credit Facility results in a defaults under the Doe Run Credit
      Facility and the Indenture governing the Bonds.





***Current
      Status***





The
      consolidated financial statements have been prepared assuming the Company will
      continue as a going concern. Doe Run Peru has significant capital requirements
      under environmental commitments, which, if not met, could result in defaults
      of
      the Company’s credit agreements; has substantial contingencies related to tax;
      and has significant debt service obligations that raise substantial doubt about
      the Company’s ability to continue as a going concern. Management believes that
      the price improvements seen through fiscal year 2005 and the continuing
      increases seen in the first quarter of fiscal year 2006, the potential revenues
      and cash flow enhancements from the new ferrite project in Peru and the
      anticipated approval of the application to extend the PAMA requirement for
      the
      construction of the sulfuric acid plant, will enable the Company to continue
      as
      a going concern through October 31, 2006. However, there can be no assurance
      that these actions will achieve the desired results.





**(3)  Related
      Party Transactions**




Doe
      Run
      has a management consulting agreement with Renco. Under the agreement, Renco
      provides Doe Run with management services for an annual fee. The agreement
      is
      automatically renewed every three years unless either party gives six months
      prior notice, with the current term ending October 31, 2006. Fees expensed
      under
      this agreement were $2,400 in each of the years ended October 31, 2005,
      2004 and 2003. Fees outstanding and unpaid were $8,700 and $7,600 at October
      31,
      2005 and 2004, respectively. The indenture for the 11.75% notes limits the
      payment of fees to $1,200 per year unless defined earnings before interest,
      taxes, depreciation and amortization for the Company, less that for Doe Run
      Peru, exceeds $35,000, in which case an additional $1,200 is allowed. No
      additional management fees were permitted to be paid to Renco for 2004 under
      this provision of the 11.75% notes. For 2005 the aforementioned defined earnings
      were exceeded, therefore the additional $1,200 of management fees were paid
      during 2006. See Note 8 for a description of the Company’s debt.




Renco
      held 2,849 and 2,533 shares of Doe Run’s Series A Redeemable Preferred Stock at
      October 31, 2005 and October 31, 2004, respectively. See Note 9 for more
      information.




On
      October 29, 2002, Renco signed a Junior Participation Agreement with the lender
      under the Doe Run Revolving Credit Facility to provide credit support for
      supplemental loans to Doe Run. No supplemental loans have been made and on
      October 14, 2005 this agreement was terminated.




At
      October 31, 2005 and 2004, Doe Run owed $8,000 and $15,500, respectively, on
      the
      Term Note due to Renco pursuant to a credit facility. See further discussion
      in
      Note 8.











On
      October 29, 2002, Doe Run and Renco signed a tax sharing agreement. See Note
      13
      for further discussion. The amounts paid under this agreement were $534 and
      $0
      during the years ended October 31, 2005 and 2004, respectively, and was paid
      in
      the form of dividends. The amounts due under this agreement were $384 and $0,
      respectively for the years ending October 31, 2005 and 2004.




At
      times,
      to obtain the advantages of volume, Renco purchased certain insurance policies
      for a number of its subsidiaries, including the Company. The actual cost of
      such
      policies, without markup, is reimbursed by the covered subsidiaries. For the
      years ended October 31, 2005, 2004 and 2003, the Company made payments to
      Renco of approximately $66, $35 and $23, respectively, under the Renco insurance
      program.




**(4)  Inventories**




Inventories
      consist of the following:




**October
                31,****2005**
            
            **2004**Finished
                metals and concentrates
            
            $
            18,461
            
            $
            16,646Metals
                and concentrates in process
            
            
            55,681
            
            
            58,664Materials,
                supplies and repair parts
            
            
            31,492
            
            
            27,999$
            105,634
            
            $
            103,309




Materials,
      supplies and repair parts are stated net of reserves for obsolescence of $5,389
      and $5,146 at October 31, 2005 and 2004, respectively.




The
      FIFO
      cost of inventories valued under the LIFO cost method were approximately
      $139,220 and $113,092 at October 31, 2005 and 2004, respectively. If the
      FIFO cost method had been used to determine cost, inventories would have been
      approximately $61,274 and $38,289 higher at October 31, 2005 and 2004,
      respectively.




As
      a
      result of reducing certain inventory quantities valued on the LIFO basis in
      2005, 2004, and 2003, inventory costs prevailing in previous years were charged
      to cost of sales. The Company calculates the effect of LIFO liquidations on
      results of operations based on the current cost method. The effect of such
      liquidations on the results of operations were increases to net income of
      approximately $1,780 and $1,900 for the years ended October 31, 2005 and 2004,
      respectively. The impact was not significant in 2003.




In
      2004,
      the Company changed its methodology of calculating the remaining effect of
      adjustments to “lower of cost or market” on inventory costed on a LIFO basis in
      years after the initial year the adjustment to market was recorded. . Inventory
      at October 31, 2005 and 2004 would have been $851 and $855, respectively, lower
      under the method used prior to 2004.




**(5)  Property,
      Plant and Equipment, Net**




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




**October
                31,****2005**
            
            **2004**Land
            
            $
            13,164
            
            $
            12,689Buildings
                and improvements
            
            
            92,587
            
            
            84,886Machinery
                and equipment
            
            
            302,112
            
            
            297,615Mineral
                interests
            
            
            31,313
            
            
            31,313Construction
                in progress
            
            
            76,766
            
            
            42,574515,942
            
            
            469,077Less
                accumulated depreciation and depletion
            
            
            262,679
            
            
            239,437Property,
                plant and equipment, net
            
            $
            253,263
            
            $
            229,640











Depreciation
      and depletion expense are as follows:




**Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**Depreciation
            
            $
            22,873
            
            $
            23,795
            
            $
            28,285Depletion
            
            $
            1,297
            
            $
            1,527
            
            $
            2,122




The
      net
      book value of the Company’s mineral interests was $9,632 and $10,929 at October
      31, 2005 and 2004, respectively.




Changes
      to the estimates of expected cash flows related to asset retirement obligations
      resulted in an additional increase (decrease) to plant, property and equipment
      of ($537), ($1,547) and ($691) for the years ended October 31, 2005, 2004 and
      2003, respectively. See additional disclosures related to SFAS No. 143 in Note
      19.




Losses
      from impairment or retirement of long-lived assets for the years ended October
      31, 2005, 2004 and 2003 included $2,881, $3,588 and $1,255, respectively,
      relating to residential properties purchased under a residential property
      purchase plan in Herculaneum, Missouri, where one of the Company’s primary
      smelters is located. See further discussion of the residential property purchase
      plan in Note 19.




Rental
      expense applicable to minimum rentals under operating leases was $10,707, $8,063
      and $7,725 for the years ended October 31, 2005, 2004 and 2003,
      respectively. Contingent rental payments, based primarily on equipment usage,
      were $0, $796 and $666 for the years ended October 31, 2005, 2004 and 2003,
      respectively. Other various rental expense amounted to $3,095, $2,483 and $1,080
      for the years ended October 31, 2005, 2004 and 2003, respectively.




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




**Fiscal
                year ending October 31:**2006
            
            $
            8,0682007
            
            
            4,7932008
            
            
            3,0462009
            
            
            2,1002010
            
            
            1,849Thereafter
            
            
            10,900$
            30,756




**(6)  Valuation
      and Qualifying Accounts**




**Year
                Ended October 31,***Allowance
                for doubtful accounts*
            
            **2005**
            
            **2004**
            
            **2003**Balance
                at beginning of year
            
            $
            1,576
            
            $
            1,479
            
            $
            1,160Amounts
                charged to costs and expenses
            
            
            265
            
            
            144
            
            
            458Deductions
                - write-offs against allowance
            
            
            (898
            )
            
            (47
            )
            
            (139
            )Balance
                at end of year
            
            $
            943
            
            $
            1,576
            
            $
            1,479**Allowance
                for inventory obsolescence**Balance
                at beginning of year
            
            $
            5,146
            
            $
            4,411
            
            $
            5,157Amounts
                charged to costs and expenses
            
            
            1,319
            
            
            1,254
            
            
            905Deductions
                - write-offs against allowance
            
            
            (1,076)_
            
            
            (519
            )
            
            (1,651
            )Balance
                at end of year
            
            $
            5,389
            
            $
            5,146
            
            $
            4,411











**Accrual
                for major maintenance**Balance
                at beginning of year
            
            $
            1,648
            
            $
            2,155
            
            $
            3,061Amounts
                charged to costs and expenses
            
            
            575
            
            
            317
            
            
            477Deductions
                - write-offs against allowance
            
            
            (1,117
            )
            
            (824
            )
            
            (1,383
            )Balance
                at end of year
            
            $
            1,106
            
            $
            1,648
            
            $
            2,155




**(7)  Accrued
      Liabilities**




Accrued
      liabilities consist of the following:




**October
                31,****2005**
            
            **2004**Payroll,
                related taxes and employee benefits
            
            $
            26,490
            
            $
            23,531Accrued
                pension benefit liability (see Note 14)
            
            
            10,083
            
            
            9,025Fair
                value of derivatives
            
            
            2,001
            
            
            8,976Reclamation
                and environmental (see Note 19)
            
            
            10,496
            
            
            5,444Other
            
            
            37,990
            
            
            36,902$
            87,060
            
            $
            83,878




**(8)  Debt**




Long-term
      debt consists of the following:




**October
                31,****2005**
            
            **2004**Revolving
                credit facilities
            
            $
            81,197
            
            $
            71,20111.75%
                secured notes due November 1, 2008 (face amount of $ 218,967
                at
            
            
            297,295
            
            
            323,139October
                31, 2005 and 2004)11.25%
                unsecured senior notes due March 15, 2005
            
            
            -
            
            
            5,75011.25%
                secured senior notes due March 15, 2005, less unamortizeddiscount
                of $12 at October 31, 2004.
            
            
            -
            
            
            1,738Term
                note, due June 16, 2006
            
            
            8,000
            
            
            15,500Capital
                lease obligations
            
            
            21
            
            
            -386,513
            
            
            417,328Less
                current maturities
            
            
            114,947
            
            
            96,767Long-term
                debt, less current maturities
            
            $
            271,566
            
            $
            320,561




The
      Company has available two revolving credit facilities. The first facility,
      the
      Doe Run Revolving Credit Facility, allows Doe Run and certain U.S. subsidiaries
      to borrow up to $75,000 and expires August 29, 2008. The availability of loans
      under the Doe Run Revolving Credit Facility is limited to a percentage of
      eligible U.S. accounts receivable and inventories, less any outstanding loans
      and letters of credit. The Doe Run Revolving Credit Facility bears interest
      at
      the prime rate plus 0.75% per annum for an effective rate of 7.50% at October
      31, 2005 and requires an unused line fee equal to 0.25% on the amount by which
      the maximum credit of $75,000 exceeds the average daily balance of outstanding
      loans and letters of credit. All cash received by Doe Run’s domestic operations
      is transferred by wire daily to the financial institution to pay down the
      outstanding loan balance, if any. Revolving loans outstanding under this
      facility were $41,397 and $31,801 at October 31, 2005 and 2004, respectively.
      Actual availability was $22,138 and $22,506 at October 31, 2005 and 2004,
      respectively. Because the agreement requires a lockbox for cash receipts and
      contains a subjective acceleration clause, loans under this agreement are
      classified as current in the balance sheet.











On
      October 14, 2005, Doe Run entered into an amendment of Doe Run’s Revolving
      Credit Facility. The amendment extended the maturity date to August 29, 2008,
      removed the net worth measurement the Company was required to maintain, and
      included an option for Libor rate loans.




The
      second facility, the Doe Run Peru Revolving Credit Facility, allows Doe Run
      Peru
      to borrow up to $40,000 for working capital,, with a limit on letters of credit
      of $5,000 and expires on November 23, 2005 . The Doe Run Peru Revolving Credit
      Facility bears interest at LIBOR (1-month, 3-month or 6-month rate, depending
      on
      the term of the loan) plus 3.5% per annum for an effective rate of 7.59% at
      October 31, 2005. An unused line fee of 0.375% per annum on the average unused
      portion of the line is payable quarterly, in arrears. The Doe Run Peru Revolving
      Credit Facility is secured by accounts receivable and inventories. Availability
      of loans under the Doe Run Peru Revolving Credit Facility is limited to a
      percentage of Doe Run Peru’s eligible accounts receivable and inventories, less
      any outstanding loans and letters of credit. Revolving loans outstanding under
      this facility were $39,800 and $39,400 at October 31, 2005 and 2004,
      respectively. The availability was approximately $200 and $60 at October 31,
      2005 and 2004 respectively.




On
      November 22, 2005 Doe Run Peru entered into an amendment of its revolving credit
      facility which extended the maturity date of the Doe Run Peru Revolving Credit
      Facility to December 15, 2005.




On
      December 15, 2005, Doe Run Peru entered into an amendment of its revolving
      credit facility. The amendment extended the maturity date to June 23, 2006
      with
      certain conditions precedent, that if met would extend the maturity date to
      September 23, 2006. The conditions precedent are, that the PAMA extension be
      approved, that Doe Run Peru diligently seek financing to replace the existing
      credit line and that Doe Run Peru obtain the letter of guarantee required by
      the
      Peruvian government if the PAMA extension is approved. The amendment also
      changed the interest rates to LIBOR (1-month, 2-month or 3-month rate, depending
      on the term of the loan) plus 3.5%, 3.75% and 4.25%, respectively, per annum.
      The amendment also allows Doe Run Peru additional indebtedness, and the ability
      to create a trust account to administer the receipts and disbursements related
      to the PAMA project.




On
      October 29, 2002, Doe Run consummated a consensual restructuring (the
      Restructuring) of most of its previously outstanding notes (Old Notes) by
      exchanging Old Notes with a principal amount of $294,840, plus unpaid accrued
      interest of $37,473, for stock warrants (Warrants) exercisable for an aggregate
      of approximately 39% of the fully diluted common stock of Doe Run and new 11.75%
      notes with a principal amount of $175,832. In connection with the completion
      of
      the exchange offer, Doe Run borrowed $15,500 under the Term Note and received
      $20,000 from the sale of redeemable preferred stock to Renco, and used the
      proceeds from these transactions to pay down the balance on the Doe Run
      Revolving Credit Facility, pay certain fees related to the transaction and
      pay
      interest due and unpaid, plus penalties, on the outstanding notes that were
      not
      exchanged.




The
      Restructuring was accounted for in accordance with Statement of Financial
      Accounting Standards No. 15, *Accounting
      by Debtors and Creditors for Troubled Debt Restructurings* (Statement No. 15). Under Statement No. 15, a debtor may not change the carrying
      amount of the payable at the time of restructuring unless the total future
      cash
      payments, including interest, specified by the new terms are less than the
      carrying amount of the payable at the time of restructuring. Under the terms
      of
      the 11.75% notes, total expected payments, including all amounts contingently
      payable, will be greater than the carrying amount of the Old Notes exchanged.
      In
      accordance with Statement No. 15 the 11.75% notes were recorded on the balance
      sheet on October 29, 2002 at a carrying amount equal to the carrying amount
      of
      the Old Notes exchanged, including unpaid accrued interest, reduced by deferred
      issue costs related to the Old Notes exchanged and the fair value of the
      warrants issued.




The
      effect of this accounting treatment is that substantially less interest expense
      will be recognized related to the 11.75% notes during their term because the
      majority of the interest payments are reflected in the carrying amount of the
      11.75% notes. In addition, Statement No. 15 required that all costs of
      restructuring be expensed when incurred. Because contingent amounts payable
      are
      assumed payable in the application of Statement No. 15, a gain may result in
      future periods if contingent amounts payable are not paid. In conjunction with
      the Restructuring, the Company recognized a gain of $9,233 in the year ended
      October 31, 2005 and a loss of $550 the year ended October 31, 2003,
      representing the costs of restructuring.




The
      face
      amount of the 11.75% notes, plus accrued interest, was $218,967 at October
      31,
      2005. Interest on the 11.75% notes is paid semi-annually in arrears on April
      15
      and October 15, except that on each payment date occurring on or prior to
      October 15, 2005, Doe Run, at its option, could have paid interest by either
      a)
      a cash payment of accrued interest at an annual rate of 3% and issuance of
      additional notes with a principal amount equal to interest accrued since the
      last payment date at a











rate
      of 11.5% or b) a cash payment of accrued
      interest at an annual rate of 8.5%. During 2005 interest was paid in cash at
      a
      rate of 8.5%. During 2004 and 2003, interest was paid in cash at the 3% rate
      and
      additional notes totaling $23,165 and $19,971 were issued during the years
      ended
      October 31, 2004 and 2003, respectively. Doe Run may redeem the notes prior
      to
      maturity at a premium dependent on the date of redemption. Renco has the right,
      at any time, to purchase all or part of the then outstanding notes at a price
      equal to the price (including accrued interest) that Doe Run would have to
      pay
      to redeem such notes at that time. The 11.75% notes are guaranteed by certain
      subsidiaries of Doe Run.




The
      11.25% unsecured senior notes (the Unsecured Notes) and 11.25% senior secured
      notes (the Secured Notes) were paid at the maturity date of March 15,
      2005.




The
      Term
      Note is held by Renco, pursuant to a credit facility (Senior Credit Facility).
      The Senior Credit Facility allows for loans and letters of credit up to $35,500,
      as agreed to by Doe Run and the lender. Interest is paid monthly at the rate
      of
      11.25% per annum. In addition, an annual anniversary fee of $75 is payable
      on
      each anniversary prior to the maturity date and at maturity.




There
      were two amendments to the Term Note since October 31, 2004, with the most
      recent “Fourth Amendment” dated January 17, 2006. The Fourth Amendment extended
      the maturity date to June 16, 2006, reaffirmed the waiver of a default and
      amended the repayment schedule. The loan matures on June 16, 2006 but requires
      minimum aggregate principal payments of $2,000 by February 13, 2006, $4,000
      by
      March 13, 2006 and $6,000 by May 12, 2006, with earlier payments required if
      the
      cash availability exceeds prescribed limits before such dates. As a result
      of
      excess cash availability, in February, 2006 the Company paid $6 million in
      aggregate principle payments.




In
      2002,
      Doe Run tendered a deposit made in 1998 (the Special Term Deposit) as payment
      of
      a loan made to Doe Run Peru by a foreign bank, and, in return, Doe Run Peru
      delivered an intercompany note to Doe Run in an equivalent amount, plus accrued
      and unpaid interest, for an aggregate balance of $139,063. This intercompany
      note does not bear interest during the term of the Doe Run Peru Revolving Credit
      Facility. Obligations under the intercompany note are subordinate to Doe Run
      Peru’s obligations under its revolving credit facility.




The
      aggregate estimated amounts of long-term debt maturing after October 31,
      2005 are as follows:




**Fiscal
                year ending October 31:**2006
            
            $
            114,9472007
            
            
            25,7352008
            
            
            26,8702009
            
            
            218,967$
            386,519




Included
      in the long-term debt maturities is a portion of the interest payments due
      on
      the 11.75% notes that under Statement No. 15 was included in the carrying amount
      of the 11.75% notes. Interest of $25,729, $25,729 and $26,870 is included in
      the
      maturities of long-term debt for the fiscal years ending October 31, 2006,
      2007,
      and 2008, respectively.




The
      Doe
      Run Revolving Credit Facility is secured by substantially all of the accounts
      receivable and inventory relating to the Company’s U.S. operations. The Doe Run
      Peru Revolving Credit Facility is secured by the accounts receivable and
      inventory of Doe Run Peru. The lender of the Term Note has a second priority
      security interest in the accounts receivable and inventory pledged under the
      Doe
      Run Revolving Credit Facility and a first priority security interest in the
      remainder of the Company’s assets of its U.S. operations. The 11.75% notes have
      a second priority interest in substantially all of the assets related to U.S.
      operations, except for accounts receivable and inventory pledged under the
      Doe
      Run Revolving Credit Facility, for which they have a third priority
      interest.




At
      October 31, 2005, the Company’s various debt agreements contained certain
      requirements with respect to net worth, working capital, earnings before
      interest, taxes, depreciation, depletion and amortization (EBITDA), and fixed
      charge coverage ratios. These agreements also place limitations on domestic
      and
      foreign capital expenditures, dividend payments and other outside borrowings.
      The Doe Run Peru Revolving Credit Facility limits Doe Run Peru’s ability to make











distributions
      to Doe Run in excess of management fees
      of $4,000 per year unless certain cash flow tests are met. The Company was
      in
      compliance with its covenants as of October 31, 2005, with the exception of
      the
      delivery of audited financials and other reporting requirements for the year
      ended October 31, 2005 by January 29, 2006 under the Doe Run Revolving Credit
      Facility and the Term Note. Waivers for these reporting defaults were received
      on March
      17,
      2006and
      March
      16, 2006, respectively.




**(9)  Redeemable
      Preferred Stock**




The
      Company has 2,849 outstanding shares of Series A Redeemable Preferred Stock
      (Redeemable Preferred Stock). The Redeemable Preferred Stock is redeemable
      by
      the holder of the shares only after May 1, 2009. The shares have a par value
      of
      $1,000 per share and a liquidation and redemption value of $10,000 per share.
      There were no accrued or unpaid dividends at October 31, 2005 or 2004. Dividends
      of 12.5% of the liquidation value per share per annum accrue and are payable
      only in kind as long as obligations under the Senior Credit Facility or Warrants
      remain outstanding. Because the Company has an accumulated deficit, dividends
      are recorded as a reduction to additional paid-in capital until depleted, after
      which they will be accumulated in a contra-equity account called preferred
      stock
      dividends. Of the 2,849 outstanding shares of Redeemable Preferred Stock, 2,000
      were issued to Renco for $20,000 on October 29, 2002 in conjunction with the
      Restructuring referred to in Note 8. An additional number of shares in the
      amount of 316, 282 and 251 shares were issued to Renco on October 31, 2005,2004
      and 2003, respectively, as payment of the aforementioned dividends.




The
      Redeemable Preferred Stock’s dividend rights and liquidation preference rank
      prior and in preference to the Company’s common stock. The holder of the
      Redeemable Preferred Stock has voting rights with respect to matters of mergers,
      issuance of debt or equity securities, stock transactions and
      reorganization.




**(10)  Warrants**




In
      conjunction with the Restructuring, Warrants were issued to holders of the
      11.75% notes. The Warrants entitle warrant-holders to purchase 644.7813 shares
      of common stock, representing approximately 39% of the common stock outstanding
      on a diluted basis, at the initial exercise price of $5,997 per share beginning
      November 1, 2008 until October 29, 2012 (Expiration Date). Alternatively, the
      Warrants may be converted into common stock whereby the holders will be entitled
      to receive a number of shares whose fair value is equal to the difference
      between the fair value of the shares the holder would receive upon exercise
      and
      the exercise value of the shares. The Warrants may not be exercised or converted
      unless a majority of Warrant holders vote in favor of such, and then all
      Warrants must be exercised or converted.




The
      Warrants are also subject to a call and a put feature. Either Doe Run or
      Renco
      may, at any time, call all (but not less than all) of the Warrants and any
      outstanding shares of stock issued upon exercise thereof at a price equal to
      the
      greater of $10,000 or the appraised fair market value of the Warrants, provided
      that in the event that this call option is exercised by Doe Run or Renco during
      the first 48 months after the Warrants are issued, Doe Run or Renco will be
      required to, at the same time, redeem the 11.75% notes at the applicable
      redemption prices. After October 29, 2005 holders of the Warrants may , require
      Doe Run or Renco to repurchase all (but not less than all) of the Warrants
      at a
      price equal to the appraised fair market value of the stock the Warrant holders
      would receive if exercised. If this option is exercised by the Warrant holders,
      Doe Run may, under certain circumstances, defer the payment of the purchase
      price to the warrant holders. Such a deferral of the purchase price would
      require interest to accrue on any unpaid amounts and, upon the third anniversary
      of the exercise of the put option with such purchase price still unpaid, the
      warrants holders will have the right to cause the Doe Run’s stockholders to
      elect a special director to serve on Doe Run’s Board of Directors for the
      remainder of the period such purchase price remains unpaid.




On
      the
      Expiration Date, the Company must purchase all outstanding warrants or shares
      issued pursuant to an exercise or conversion of the warrants. With the Company’s
      permission, Renco may honor the purchase.




Management
      engaged a nationally recognized valuation firm to calculate the fair value
      of
      the Warrants. Management estimates that the fair value of the Warrants based
      on
      the valuation was $639 at each of the fiscal years ended October 31, 2005,
      2004
      and 2003, and this value is reflected in other noncurrent liabilities. Any
      changes in the fair market value of the Warrants will be recorded in the
      Company’s results of operations as interest expense.







**(11)  Accumulated
      Other Comprehensive Losses**




Accumulated
      other comprehensive losses consist of the following:




**October
                31,****2005**
            
            **2004**Minimum
                pension liability (see Note 14)
            
            $
            41,507
            
            $
            41,902Unrealized
                loss on available-for-sale investments
            
            
            -
            
            
            37Unrealized
                (gain) loss on derivative financial instruments (see Note
                18)
            
            
            -
            
            
            97Accumulated
                other comprehensive losses
            
            $
            41,507
            
            $
            42,036





**(12)  Fair
      Value of Financial Instruments**




At
      October 31, 2005 and 2004, the fair values of the Company’s financial
      instruments, except for long-term debt, were not materially different from
      their
      carrying amounts. The fair value of the Company’s long-term debt was
      approximately $266,586 and $282,513 at October 31, 2005 and 2004, respectively.
      The fair values of the Company’s long-term debt were based on the estimates of
      incremental borrowing rates for similar types of borrowing arrangements or
      dealer quotes.




**(13)  Income
      Taxes**




Renco
      has
      elected for the Company to be treated as a QSSS for U.S. federal tax purposes.
      Most states in which the Company operates will follow similar tax treatment.
      QSSS status requires the ultimate shareholders to include their pro rata share
      of the Company’s income or loss in their individual tax returns. The election
      does not affect foreign income taxes related to the Company’s foreign
      subsidiaries.




Doe
      Run
      is subject to a tax sharing agreement with Renco, effective October 29, 2002.
      Pursuant to the agreement, Doe Run is required to make quarterly payments to
      Renco based on a pro forma U.S. federal and state income tax liability, assuming
      that the Company is not and never was a subsidiary of Renco (subject to certain
      limitations), and amounts reasonably determined by Renco to cover tax
      liabilities of current or prior years not reflected in the Company’s pro forma
      tax calculations. The pro forma income tax liabilities will assume that Doe
      Run
      became a C corporation under the Internal Revenue Code of 1986 (the Code) on
      the
      day after the Restructuring and will include no income attributable to any
      cancellation of indebtedness prior to the Restructuring or any effect of such
      cancellation on the basis of the assets of the Company. See Note 3 for further
      information.




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




On
      December 30, 1997, Doe Run Peru signed a Contract of Guarantees and Measures
      to
      Promote Investments, as modified in 2005. This agreement is effective beginning
      in the calendar year ended December 31, 2007, provided that Doe Run Peru
      complies with the committed investments related to the improvements of the
      facilities, and provides tax stability through December 31, 2021. The principal
      provisions are similar to those established in the Tax Stabilization Agreement,
      except that Doe Run Peru will utilize the tax statutes prevailing as of December
      23, 1997.




The
      last
      accepted modification of the current contract requires Doe Run Peru to spend
      a
      total $108,442 on a specific set of projects. Included in this list of projects
      is a portion of the total sulfuric acid plant cost of $39,000. All expenditures
      for this contract must be completed by December 31, 2006. Through October 31,
      2005, Doe Run Peru had invested $117,315 on projects within the projects list
      of
      this contract. Even though the total spending has been exceeded, specific
      projects expenditures on the list have not been accomplished. As of October
      31,
      2005 only $4,600 of the $39,000 has been spent on a new sulfuric acid plant.
      Under the current agreement the remaining $34,400 must be spent by December
      31,
      2006.











On
      August
      23, 2005, Doe Run Peru filed for a modification to the contract, to reduce
      the
      total investment commitment to $102,342. This modification included addition
      of
      some projects and reduction of others. Included in the reduction was a reduction
      of the sulfuric acid plant project from $39,000 to $5,600. On January 19, 2006
      the Energy and Mines Ministry ruled on the modification and did not approve
      the
      reduction, but did approve certain new projects expenditures. As a result of
      the
      January 19, 2006 ruling, the overall commitment under the modification is now
      $133,542 which still includes a sulfuric acid plant commitment of $39,000.
      On
      February 9, 2006, Doe Run Peru filed before the Mining Council of the Mining
      Ministry an appeal against this ruling. Doe Run Peru is expecting reductions,
      one of which reduction is the sulfuric acid plant investment to $5,600. With
      these changes the total investment amount to meet the contract will be reduced
      to $95,642, with remaining specific project investments required by December
      31,
      2006 of $17,000.




As
      a
      result of the Company’s status as a QSSS, the Company was not subject to U.S.
      federal income taxation for the years ended October 31, 2005, 2004 and 2003,
      and
      recognized no state or U.S. federal income tax expense during that period.
      For
      the year ended October 31, 2004 certain technical services that Doe Run provided
      under an agreement with Doe Run Peru were taxed at 30% under a law passed in
      Peru in December 2003. Taxes of $2,146 were paid in the third quarter of 2004.
      Offsetting this tax was the reversal of a U.S. federal income tax liability
      related to years that are closed to audit of $2,807. Doe Run Peru had no foreign
      income tax expense for the years ended October 31, 2005 and 2004 due to tax
      loss
      carryforwards and an increase in the valuation allowance against deferred tax
      assets, as discussed below.




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




October
                31,2005
            
            2004Deferred
                tax assets:Trade
                accounts receivable
            
            $
            787
            
            $
            -Inventories
            
            
            12,378
            
            
            7,865Property,
                plant and equipment
            
            
            9,721
            
            
            6,565Accrued
                liabilities
            
            
            2,479
            
            
            2,488Tax
                loss carryforwards
            
            
            14,178
            
            
            27,344Other
                noncurrent assets and liabilities
            
            
            1,038
            
            
            1,03540,581
            
            
            45,297Less
                valuation allowance
            
            
            (29,034
            )
            
            (38,720
            )Total
                deferred tax assets
            
            
            11,547
            
            
            6,577Deferred
                tax liabilities:Property,
                plant and equipment
            
            
            (11,547
            )
            
            (6,577
            )Total
                deferred tax liabilities
            
            
            (11,547
            )
            
            (6,577
            )Net
                deferred tax assets
            
            $
            -
            
            $
            -




The
      deferred tax balances as of October 31, 2005 and 2004 relate solely to the
      Company’s Peruvian subsidiaries. The deferred tax assets and liabilities related
      to property, plant and equipment are principally due to differences in book
      and
      tax allocations of the excess of the fair value of the sum of assets acquired,
      less liabilities assumed over the purchase price paid and accelerated
      depreciation methods used for tax purposes.




The
      net
      operating loss carryforwards in Peru may be offset against the taxable income
      that the Company obtains up to December 31, 2007, inclusively.




Management
      believes that sufficient uncertainty exists regarding the realization of certain
      deferred tax assets such that a valuation allowance is required. The valuation
      allowance decreased $9,686 and $1,287 for the years ended October 31, 2005
      and
      2004, respectively, and increased $5,473 in the year ended October 31, 2003.




Doe
      Run
      Peru has received income tax assessments from Peru’s tax authority, SUNAT for
      tax years 1998 through 2001. The assessments primarily relate to Doe Run Peru’s
      income tax treatment of the December 1997 merger of Doe Run Peru and Metaloroya
      S.A., which was purchased by Doe Run Peru in October 1997, and its effects
      on
      subsequent years’ taxable income. Under the assessment by SUNAT, the tax basis
      of Doe Run Peru’s fixed assets acquired would decrease, resulting in











lower
      tax depreciation expense than originally
      claimed. The assessed amount consisting of additional income taxes due,
      penalties and interest as of October 31, 2005 totals approximately $109,030.
      The
      Company estimates that the effect of a similar assessment for tax years after
      2001 would be approximately $30,300. Furthermore, Doe Run Peru would also be
      required to make additional workers’ profit sharing payments equal to 8% of the
      increase in taxable income generated by the changes discussed above, or
      approximately $11,200 for calendar years 1998 through 2005.




Doe
      Run
      Peru has also received Value-Added Tax (VAT) assessments for the tax years
      1999
      through 2001 and for the period from January through July 2004. The assessments
      primarily relate to Doe Run Peru’s exports with holding certificates and
      differences in a tax credit application. The total assessment for these periods
      was approximately $43,489. SUNAT offset the amount assessed for 2004 of
      approximately $2,300 against Doe Run Peru’s VAT receivable balance from July
      2004. Future VAT reimbursements cannot be used to offset the assessment by
      SUNAT. The Company discontinued use of the holding certificates for exports
      in
      June 2004. The Company estimates expected additional assessments related to
      VAT
      for tax years 2002 and 2003 to total approximately $20,166 in regard to its
      exports with holding certificates.




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




**(14)  Employee
      Benefits**




**Domestic
      Plans**




***Defined
      Benefit Plans***




The
      Company sponsors a noncontributory defined benefit plan for its U.S. employees.
      Benefits provided to salaried employees under the defined benefit plan are
      based
      on average final compensation and years of service. Benefits provided to hourly
      employees are based on a flat rate and years of service. The Company has also
      adopted a supplemental defined benefit plan, the Supplemental Employee
      Retirement Plan (SERP), effective November 1, 1996. The SERP provides
      benefits to those participants of the defined benefit plan whose benefits under
      the plan are limited by Sections 401(a)(17) or 415 of the Code. Benefits under
      the SERP represent the amount by which the benefits under the defined benefit
      plan, if such benefits were not limited, exceed those benefits the participants
      are entitled to receive. The SERP plan is unfunded.




On
      April
      11, 2005, the Company’s Board of Directors adopted changes to the Company’s
      defined benefit plans. Effective July 1, 2005, no new employees are eligible
      to
      participate in the plans and participants’ benefit accruals have been frozen. A
      curtailment loss of $690 was reflected in operating expenses for the year ended
      October 31, 2005.




The
      Company uses a measurement date of October 31 for its pension benefit
      plans.




Net
      periodic pension expense is comprised of the following:




**Year
                ended October 31,****2005**
            
            **2004**
            
            **2003**Service
                cost
            
            $
            1,764
            
            $
            2,122
            
            $
            1,952Interest
                cost on projected benefit obligation
            
            
            6,530
            
            
            6,450
            
            
            5,742Expected
                return on assets
            
            
            (5,786
            )
            
            (4,660
            )
            
            (4,344
            )Net
                amortization and deferral of unrecognized netlosses
            
            
            4099
            
            
            3,420
            
            
            1,605Curtailment
                loss
            
            
            690
            
            
            -
            
            
            -Net
                periodic pension expense
            
            $
            7,297
            
            $
            7,332
            
            $
            4,955











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




**Year
                ended October 31,****2005**
            
            **2004**
            
            **2003**Discount
                rates
            
            
            5.75
            %
            
            6.25
            %
            
            7.00
            %Rate
                of increase in compensation levels
            
            
            3.00
            %
            
            3.00
            %
            
            3.00
            %Expected
                long-term rate of return on assets
            
            
            8.50
            %
            
            8.50
            %
            
            9.00
            %





The
      expected return on assets assumption for fiscal 2005 was 8.50% and will continue
      to remain at 8.50% for fiscal 2006. The expected long-term rate of return on
      plan assets is based on the historical and projected rates of return for the
      asset classes in the plan’s investment portfolio. Assumed projected rates of
      return for each asset class were selected after analyzing historical experience,
      future expectations of the returns and the volatility of the various asset
      classes. Based on the target asset allocation for each asset class, the overall
      expected rate of return for the portfolio was developed, with adjustments for
      the historical and expected future experience of active portfolio management
      results compared to benchmark returns and for the effect of expenses paid from
      plan assets.




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




**October
                31,****2005**
            
            **2004**Change
                in benefit obligation:Beginning
                of year
            
            $
            112,753
            
            $
            102,298Service
                cost
            
            
            1,764
            
            
            2,122Interest
                cost
            
            
            6,530
            
            
            6,450Actuarial
                loss
            
            
            6,798
            
            
            7,804Curtailments
            
            
            (8,849
            )
            
            -Benefits
                paid
            
            
            (6,273
            )
            
            (5,921
            )End
                of year (1)
            
            $
            112,723
            
            $
            112,753(1)
                Includes accumulated benefit obligation related to the SERP plan
                of $5,244
                and $4,149, respectively.The
                following assumptions were used to determine benefit:Obligations,
                at the end of the year
            
            
            **2005**
            
            
            **2004**Discount
                rate
            
            
            5.75
            %
            
            5.75
            %Rate
                of compensation increase
            
            
            N/A
            
            
            3.00
            %Change
                in plan assets:Beginning
                of year at fair value
            
            $
            66,380
            
            $
            54,849Actual
                return on plan assets
            
            
            5,334
            
            
            4,449Employer
                contributions
            
            
            9,040
            
            
            13,003Benefits
                paid
            
            
            (6,274
            )
            
            (5,921
            )End
                of year at fair value
            
            $
            74,480
            
            $
            66,380




The
      target allocation for 2006, by asset category and the asset allocation for
      Doe
      Run’s U.S. pension plan at October 31, 2005 and 2004 follows.




**Percentage
                of Plan Assets at October 31,**Asset
                Category:
            
            **Target
                Allocation**
            
            **2005**
            
            **2004**Equity
                securities
            
            
            60.0
            %
            
            59.9
            %
            
            59.1
            %Fixed
                income
            
            
            40.0
            %
            
            37.0
            %
            
            38.3
            %Cash
                equivalents
            
            
            0.0
            %
            
            3.1
            %
            
            2.6
            %Total
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %











Pension
      plan assets are managed in accordance with the Employees Retirement Income
      Securities Act of 1974 (ERISA) and its fiduciary standards, including the
“prudent investor” guidelines. The Plan’s investment strategy supports the
      objectives of the fund, which are to promote stability and, to the extent
      appropriate, growth in the funded status. Investments are diversified across
      asset classes, sectors and manager styles to minimize the risk of large losses.
      The Company delegates investment management to specialists in each asset class
      and, where appropriate, provides the investment manager with specific
      guidelines, which include allowable and/or prohibited investment types. The
      Company monitors manager performance and compliance with the established
      investment guidelines.




Reconciliation
                of funded status:
            
            **October
                31,**Projected
                benefit obligation in excess of
            
            **2005**
            
            **2004**plan
                assets
            
            $
            (38,243
            )
            $
            (46,373
            )Unamortized
                net transition asset (liability)
            
            
            (136
            )
            
            427Unrecognized
                actuarial loss
            
            
            41,644
            
            
            47,353Unrecognized
                prior service cost
            
            
            -
            
            
            116Net
                amount recognized
            
            $
            3,265
            
            $
            1,523





Amounts
                recognized in the balance sheet:Intangible
                asset
            
            $
            -
            
            $
            938Accrued
                benefit liability - current
            
            
            (10,082
            )
            
            (9,025
            )Accrued
                benefit liability - noncurrent
            
            
            (28,160
            )
            
            (32,292
            )Accumulated
                other comprehensive income
            
            
            41,507
            
            
            41,902Net
                asset (liability) at end of year
            
            $
            3,265
            
            $
            1,523




Information
      regarding the expected cash flows for the pension plans is as
      follows:




**Pension
                Benefits**Employer
                Contributions2006
                (expected)
            
            $
            10,082Expected
                Benefit Payments2006
            
            $
            6,6002007
            
            $
            6,7002008
            
            $
            6,9002009
            
            $
            7,0002010
            
            $
            7,3002011-2015
            
            $
            38,500




The
      Company is a member of a controlled group with other Renco-owned companies.
      Accordingly, the Company is jointly and severally liable with all other members
      of the controlled group under Title IV of ERISA for obligations of other members
      of the controlled group that could include certain pension funding and excise
      taxes in the event that any member of the controlled group does not satisfy
      certain of its pension obligations arising pursuant to ERISA.




In
      such
      an event, statutory liens would arise in favor of the Pension Benefit Guaranty
      Corporation (the PBGC) upon the assets of the other members of the controlled
      group not in bankruptcy, and the PBGC may seek to obtain court approval to
      terminate the plan (a PBGC Termination) and may require the other members of
      the
      controlled group to satisfy such pension plan obligations. In the event that
      a
      PBGC Termination occurs, and the PBGC requires that the Company satisfy such
      pension plan obligations, such requirements could have a materially adverse
      effect on the Company’s financial condition and liquidity. Obligations under the
      controlled group have not been determined.




On
      February 3, 2006, the PBGC notified another member of the controlled group
      of
      its intention to seek a PBGC Termination of that member’s plan. On the same day,
      the PBGC filed a complaint in the US District Court seeking to terminate the
      plan as of February 3, 2006 and for the appointment of the PBGC as the plan's
      Trustee under ERISA. An agreement in principal has been reached whereby
      sponsorship of the member’s plan would be transferred to Renco and upon the
      agreement being finalized, the PBGC would withdraw its compliant and PBGC
      termination. In any event Renco has assured the Company that these actions
      will
      not have an impact on the Company's financial condition .











***Postretirement
      Benefit Plans***




The
      Company sponsors three postretirement medical plans for its U.S. employees.
      Two
      of these plans are self-insured plans. The plans generally cover medical
      expenses subject to deductibles, copayments and limits on specified coverage.
      For persons retired on or before January 1, 1992, the retiree’s
      contribution to the cost of these plans varies primarily based upon the date
      of
      retirement and the respective plan. The Company’s contribution to the cost of
      coverage of employees retiring after that date decreased gradually, until 1997,
      when retirees began to pay 100% of the cost of coverage. The Company maintains
      stop-loss insurance for claims exceeding $175 per person under the age of 65
      in
      any calendar year for those plans that are self-insured. The Company also
      sponsors a life-insurance plan for its U.S. employees who become eligible for
      this benefit after retirement and reaching age 55. The benefit upon
      retirement is based on final salary, but gradually decreases to $6 in the fifth
      year after retirement and remains at that level thereafter.




The
      Company uses a measurement date of October 31 for its postretirement benefit
      plans.




Net
      periodic postretirement benefit cost includes the following
      components:




**Year
                ended October 31,****2005**
            
            **2004**
            
            **2003**Service
                cost
            
            $
            81
            
            $
            87
            
            $
            48Interest
                cost
            
            
            509
            
            
            571
            
            
            619Amortization
                of gains
            
            
            (127
            )
            
            (153
            )
            
            (164
            )Amortization
                of unrecognized prior service cost
            
            
            19
            
            
            19
            
            
            19Net
                periodic postretirement benefit cost
            
            $
            482
            
            $
            524
            
            $
            522




The
      following assumptions were used in the determination of net periodic
      postretirement benefit cost:




**Year
                ended October 31,****2005**
            
            **2004**
            
            **2003**Discount
                rates
            
            
            5.75
            %
            
            6.25
            %
            
            7.00
            %




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




**October
                31,****2005**
            
            **2004**Change
                in benefit obligation:Beginning
                of year
            
            $
            9,186
            
            $
            9,549Service
                cost
            
            
            81
            
            
            87Interest
                cost
            
            
            509
            
            
            571Actuarial
                loss
            
            
            1,721
            
            
            232Benefits
                paid
            
            
            (937
            )
            
            (1,253
            )End
                of year
            
            $
            10,560
            
            $
            9,186







The
                following assumptions were used to determine benefit
            
            **October
                31,**obligations
                at:
            
            **2005**
            
            **2004**Discount
                rate
            
            
            5.75
            %
            
            5.75
            %Trend
                rate
            
            
            9.00
            %
            
            9.00
            %














**October
                31,**Reconciliation
                of funded status:
            
            **2005**
            
            **2004**Projected
                benefit obligation in excess of plan assets
            
            $
            (10,560
            )
            $
            (9,186
            )Unrecognized
                prior service cost
            
            
            136
            
            
            155Unrecognized
                actuarial gain
            
            
            (954
            )
            
            (2,803
            )Accrued
                postretirement benefit cost
            
            $
            (11,378
            )
            $
            (11,834
            )Current
                portion
            
            $
            (1,200
            )
            $
            (1,300
            )Noncurrent
                portion
            
            $
            (10,178
            )
            $
            (10,534
            )




Information
      regarding the expected cash flows for the other postretirement benefit plans
      is
      as follows:




**Postretirement
                Benefits**Employer
                Contributions2006
                (expected)
            
            $
            1,200Expected
                Benefit Payments2006
            
            $
            1,2002007
            
            $
            1,2002008
            
            $
            1,0002009
            
            $
            1,0002010
            
            $
            9002011-2015
            
            $
            3,800




The
      following table provides information regarding the assumed health care cost
      trend rates at October 31:




**October
                31,****2005**
            
            **2004**Health
                care cost trend rate
            9.00%
            
            9.00%Ultimate
                trend rate
            5.00%
            
            5.00%Year
                that the rate reaches the ultimate trend rate
            2010
            
            2009




Assumed
      health care cost trend rates have a significant effect on the amounts reported
      for the health care plans. A one-percentage-point change in assumed health
      care
      cost trend rates would have the following effects:




**Effect
                of**
            
            **Effect
                of****1%
                Increase**
            
            **1%
                Decrease**Accumulated
                postretirement benefit obligation
            
            $
            474
            
            $
            (437
            )Net
                periodic postretirement benefit cost
            
            $
            27
            
            $
            (25
            )




***Defined
      Contribution Plans and Profit Sharing Program***




The
      Company sponsors a 401(k) plan that covers substantially all U.S. employees.
      Participants can contribute up to 50% of compensation on a before-tax basis
      subject to certain restrictions. Effective July 1, 2005, the Company’s 401(k)
      plan was amended to change the definition of eligible compensation and change
      the Company’s mandatory match from 25% of the first 6% of a participant’s
      before-tax contribution to 50% of the first 5% of a participant’s before-tax
      contribution. In addition, the amendment provides for a fixed 1% profit sharing
      contribution. The Company may make additional contributions at management’s
      discretion. The Company’s expense representing its matching contribution was
      $1,085, $527 and $535 for the years ended October 31, 2005, 2004 and 2003,
      respectively. Plan assets consist primarily of investments in common stock
      and
      debt securities.




The
      Company has a profit sharing program, which covers substantially all U.S.
      employees. The program provides for a distribution to employees equal to 15%
      of
      U.S. income, subject to certain adjustments.  The
      first
      $1.5 million of profit sharing is made as a contribution to the 401(k) plan,
      with the remaining amount distributed to employees in cash payments.











The
      Company had expense of approximately $993 and
      $400 under this program for the years ended October 31, 2005 and 2004,
      respectively, and no expense for the year ended October 31, 2003 as a result
      of
      losses before income tax expense in the U.S. The Company made cash payments
      of
      $211 in December 2005 to employees under the profit sharing plan agreement
      with
      the remaining $782 to be paid to the employee’s 401(k) plan in
      2006.




***Net
      Worth Appreciation Agreements***




Certain
      employees are parties to net worth agreements with Doe Run, pursuant to which,
      upon termination of each person’s employment with Doe Run, they are entitled to
      receive a fixed percentage of the increase in the net worth of the Company,
      as
      defined in such agreement, from a base date until the end of the fiscal quarter
      preceding the date of his termination. Such amount is payable without interest
      in 40 equal quarterly installments, commencing three months after the
      termination of each person’s employment, and at three month intervals
      thereafter. The net worth appreciation agreements also provide that, in the
      event of payment of certain dividends or a sale of the Company, the active
      participants will be entitled to receive a percentage of such dividends or
      the
      net proceeds of the sale equal to their maximum percentages under the
      agreements.




On
      July
      1, 2005, the Company’s Board of Directors adopted changes to the Company’s net
      worth appreciation agreements, primarily consisting of changes to the base
      dates
      as defined in the agreements. In accordance with these changes, the Company
      recorded $874, $0, and $0, in expense during the years ended October 31, 2005,
      2004 and 2003, respectively.




**Foreign
      Plans**




Doe
      Run
      Peru is required to make semi-annual deposits into a bank account for severance
      indemnity benefits for Peruvian employees under Peruvian government regulations.
      The balance in the account represents the full benefit due to such employees
      upon termination. The Company accrues for the additional amount that would
      be
      contributed to the account since the last deposit date as if all such employees
      were to terminate as of the balance sheet date. The Company’s expenses related
      to severance indemnity benefits were $3,523, $3,428 and $3,974 for the years
      ended October 31, 2005, 2004 and 2003, respectively.




In
      accordance with government regulations in Peru, employees are entitled to
      receive 8% of Doe Run Peru’s taxable income, 50% of which is distributed to
      employees based on the number of days worked and the remaining distributed
      in
      proportion to their salaries. Such profit sharing, which is tax deductible,
      is
      limited to 18 times the annual salary for each worker. Any excess is to be
      reserved and used for training the workers. The Company had no expense relating
      to workers’ profit sharing payments for the years ended October 31, 2005, 2004
      and 2003 due to tax loss or offset of taxable income by tax loss carryforwards.
      See Note 13 for further discussion.




**(15)  Business
      and Credit Concentrations**




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




For
      the
      years ended October 31, 2005, 2004 and 2003, approximately 50%, 58% and
      64%, respectively, of the Company’s U.S. operations’ revenues from unaffiliated
      customers were from U.S. battery manufacturers (primarily automotive) or their
      suppliers. At October 31, 2005 and 2004, the accounts receivable balances
      related to these U.S. battery manufacturers were $36,771 and $26,708,
      respectively.




No
      single
      customer accounted for greater than 10% of consolidated revenues for the years
      ended October 31, 2005, 2004 and 2003.











**(16)  Segment
      Information**




The
      Company’s operating segments are separately managed business units that are
      distinguished by products, location and production process. The primary lead
      segment includes integrated mining, milling and smelting operations located
      in
      Missouri. The recycling operation segment, located in Missouri, recycles
      lead-bearing materials, primarily spent batteries. The fabricated products
      segment produces value-added lead products. Doe Run Peru produces an extensive
      product mix of non-ferrous and precious metals.




The
      accounting policies of the segments are the same as those described in the
      summary of significant accounting policies, except that the primary lead,
      secondary lead and fabricated products segments value finished metals and
      concentrates, work in process and raw materials inventories at FIFO cost.
      Certain functions are performed at the Company’s corporate office for the
      primary lead and secondary lead segments, such as sales and billing, as well
      as
      the general administration of the Company. Related accounts receivable and
      corporate overhead expenses are not allocated to operating
      segments.




*Operating
                  Segments - Revenues*
              
              **Year
                  Ended October 31,****2005**
              
              **2004**
              
              **2003**Revenues
                  from external customers:Doe
                  Run Peru
              
              $
              641,252
              
              $
              564,189
              
              $
              436,273Primary
                  lead
              
              
              268,678
              
              
              221,613
              
              
              164,324Recycling
                  operation
              
              
              84,945
              
              
              76,979
              
              
              67,453Fabricated
                  products
              
              
              14,203
              
              
              12,658
              
              
              14,866Total
              
              
              1,009,078
              
              
              875,439
              
              
              682,916Revenues
                  from other operating segments: (1)Doe
                  Run Peru
              
              
              9,588
              
              
              2,996
              
              
              707Primary
                  lead
              
              
              1,500
              
              
              1,425
              
              
              1,035Recycling
                  operation
              
              
              275
              
              
              327
              
              
              655Total
              
              
              11,363
              
              
              4,748
              
              
              2,397Total
                  reportable segments
              
              
              1,020,441
              
              
              880,187
              
              
              685,313Metal
                  sales not attributed to operating segments
              
              
              29,502
              
              
              4,257
              
              
              911Realized
                  gains (losses) on derivative contracts
              
              
              (9,140
              )
              
              (11,626
              )
              
              1,609Other
                  revenues (expenses)
              
              
              -
              
              
              (2
              )
              
              (54
              )Intersegment
                  eliminations
              
              
              (11,363
              )
              
              (4,748
              )
              
              (2,397
              )Total
                  revenues
              
              $
              1,029,440
              
              $
              868,068
              
              $
              685,382




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




*Revenues
                by Country*(2)
            
            **Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**United
                States
            
            $
            552,182
            
            $
            383,489
            
            $
            397,776Brazil
            
            
            92,989
            
            
            79,355
            
            
            56,994Peru
            
            
            72,859
            
            
            69,058
            
            
            39,655Taiwan
            
            
            54,065
            
            
            44,669
            
            
            15,013Japan
            
            
            46,329
            
            
            99,821
            
            
            57,034China
            
            
            41,472
            
            
            24,408
            
            
            -Other
            
            
            169,544
            
            
            167,268
            
            
            118,910Total
                revenues
            
            $
            1,029,440
            
            $
            868,068
            
            $
            685,382




(2)
            Revenues
                are attributed to countries based on destination of shipments.











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




*Operating
                  Segments -Adjusted EBITDA (Earnings before*
                *interest,
                  taxes, depletion, depreciation, accretion and*
              
              **Year
                  Ended October 31,***amortization)*
              
              **2005**
              
              **2004**
              
              **2003**Primary
                  lead
              
              $
              69,420
              
              $
              55,397
              
              $
              12,281Doe
                  Run Peru
              
              
              32,005
              
              
              22,528
              
              
              3,798Recycling
                  operation
              
              
              14,784
              
              
              15,857
              
              
              12,413Fabricated
                  products
              
              
              2,199
              
              
              1,452
              
              
              731Total
                  reportable segments
              
              
              118,408
              
              
              95,234
              
              
              29,223Realized
                  gains (losses) on derivatives
              
              
              (9,140
              )
              
              (11,626
              )
              
              1,609Other
                  revenues and (expenses)(3)
              
              
              (11,080
              )
              
              (13,572
              )
              
              (1,835
              )Corporate
                  selling, general and administrative expenses
              
              
              (27,417
              )
              
              (21,594
              )
              
              (15,584
              )Intersegment
                  eliminations
              
              
              20
              
              
              (21
              )
              
              (14
              )Consolidated
                  adjusted EBITDA
              
              
              70,791
              
              
              48,421
              
              
              13,399Depreciation,
                  depletion and amortization
              
              
              (24,170
              )
              
              (25,322
              )
              
              (30,407
              )Interest
                  income
              
              
              141
              
              
              19
              
              
              29Interest
                  expense
              
              
              (10,010
              )
              
              (13,289
              )
              
              (13,270
              )Unrealized
                  gain (loss) on derivatives
              
              
              4,876
              
              
              (231
              )
              
              (7,220
              )Losses
                  from impairment and disposal of long-lived assets
              
              
              (2,978
              )
              
              (3,591
              )
              
              (1,409
              )Asset
                  retirement obligation accretion expense
              
              
              (1,497
              )
              
              (1,754
              )
              
              (1,530
              )Gain
                  (Loss) on retirement/restructure of long-term debt
              
              
              9,233
              
              
              -
              
              
              (550
              )Income
                  (loss) before income taxes and cumulative
                effect
                  of change in accounting principle
              
              $
              46,386
              
              $
              4,253
              
              $
              (40,958
              )







(3)
            Other
                revenues and expenses include metal sales not attributed to operating
                segments*,*expenses not allocated to operating segments, including environmental
                expenses relating to historic operations of $8,220, $8,450 and $520
                for
                the years ended October 31, 2005, 2004 and 2003, respectively; certain
                employee compensation expenses of $1,462, $1,353 and $0 for the years
                ended October 31, 2005, 2004 and 2003, respectively; and adjustments
                necessary to state the primary lead and recycling operation’s inventories
                at LIFO cost of $833, $2,569 and $1,657 for the years ended October
                31,
                2005, 2004 and 2003, respectively.




*Operating
                Segments - Total Assets*
            
            **October
                31,****2005**
            
            **2004**Doe
                Run Peru
            
            $
            292,716
            
            $
            251,764Primary
                lead
            
            
            91,517
            
            
            97,745Recycling
                operation
            
            
            37,499
            
            
            34,752Fabricated
                products
            
            
            4,369
            
            
            4,367Total
                reportable segments
            
            
            426,101
            
            
            388,628Unallocated
                corporate assets (4)
            
            
            227,255
            
            
            210,731Intersegment
                eliminations
            
            
            (158,581
            )
            
            (141,940
            )Total
                assets
            
            $
            494,775
            
            $
            457,419




(4)  Unallocated
      corporate assets consist primarily of cash, primary lead and secondary lead
      segments’ accounts receivable, investments and receivables from subsidiaries,
      pension assets, and deferred financing costs.











**(17)  Commitments
      and Contingencies**




***Tolling***




The
      Company has entered into tolling arrangements with major battery manufacturers
      whereby the manufacturers will deliver spent lead-acid batteries and other
      lead-bearing material to the Company’s recycling facility and, for a processing
      fee, the Company will return finished lead metal. The largest of these contracts
      expire in March 2007 and September 2007. The agreements cover approximately
      25% *(unaudited)* of
      the
      Company’s anticipated combined primary and secondary lead metal production for
      2006.




***Sales
      Commitments***




The
      Company has commitments to sell approximately 94% ( *unaudited* )
      of its
      anticipated 2006 lead metal production and 100% ( *unaudited* )
      of its
      lead, zinc and copper concentrates. Metal sales agreements are usually less
      than
      one year; concentrate sales agreements are typically evergreen with a one-year
      cancellation. Metal sales prices are generally based on the average quoted
      exchange prices for the month of shipment, plus a premium. Concentrate sales
      terms are based on average quoted exchange prices less a treatment charge.
      Treatment charges are usually based on a world benchmark.




***Letters
      of Credit***




At
      October 31, 2005, the Company had outstanding irrevocable standby letters of
      credit totaling $5,320 in connection with the Company’s insurance and bonding
      activities. The Company also had outstanding customs bonds of $946 relating
      to
      concentrate and other purchases.




***Employment
      Agreements***




The
      Company has employment agreements with a number of its senior executives through
      October 31, 2006, with automatic renewal annually thereafter unless written
      notice is given at least three months prior to the expiration date.




**(18)  Hedging
      and Derivative Financial Instruments**




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




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




For
      derivative instruments designated as hedges (futures contracts), the Company
      assesses effectiveness by comparing the changes in fair value or cash flows
      relating to the hedged transaction with all changes in the fair values or cash
      flows of the related derivative contract. Because the futures fluctuate in
      the
      same amount as the hedged transaction (the change in the LME price), the hedges
      are considered effective.




The
      Company writes call options that, if exercised, will create sold futures
      contracts that are economic hedges of forecasted lead metal sales. The options
      generate premiums that enhance revenues. Because these instruments do not meet
      the requirements for hedge accounting, the changes in fair value of these
      instruments are recorded in results of operations as unrealized (gain) loss
      on
      derivative financial instruments.











The
      fair
      value of the Company’s derivative financial instruments reflected in the
      Company’s balance sheets as of October 31, 2005 and 2004 is the difference
      between quoted prices at the balance sheet date and the contract settlement
      value. The fair market value represents the estimated net cash the Company
      would
      receive (pay) if the contracts were cancelled on the balance sheet date.




The
      Company’s open derivative financial instruments at October 31, 2005
      were:




***Sold
      (Purchased) Futures Contracts*** **** (tons,
      ounces and dollar amounts not in thousands)




**Metal**
              
              **Quantity**
              
              **Weighted**
                **Average
                  Price**
              
              **Fair
                  Value**
              
              **Period**Lead
              
              20,145
                  tons
              
              $750.39/ton
              $
              $               
                  (2,803,955)
              
              Nov.
                  05 to Jan.06(9,673)
                  tons
              
              $786.29/ton
              
              1,073,453
              
              Nov.
                  05 to Dec. 05Copper
              
              1,302
                  tons
              
              $2,577.07/ton
              
              (1,296,940)
              
              Nov.
                  05 to Jan. 06(350)
                  tons
              
              $3,470.86/ton
              
              52,900
              
              Dec.
                  05Zinc
              
              827
                  tons
              
              $1,305.44/ton
              
              (18,570)
              
              Nov.
                  05 to Jan. 06(138)
                  tons
              
              $1,374.99/ton
              
              12,139
              
              Nov.
                  05Silver
              
              987,300
                  oz.
              
              $6.83/oz.
              
              (209,601)
              
              Nov.
                  05 to Dec. 06






***Sold
      (Purchased) Call Option Contracts***  *(tons,
      ounces and dollar amounts not in thousands)*




**Metal**
            
            **Quantity**
            
            **Price
                Range**
            
            **Fair
                Value**
            
            **Period**Lead
            
            13,228
                tons
            
            $929.87/ton
                to $938.84/ton
            $
            (351,790)
            
            Jan.
                06 to Jun. 06Silver
            
            120,670
                oz.
            
            $5.47/oz.
            
            (175,124)
            
            Jan.
                06Crude
                Oil
            
            100,000
                barrels
            
            $70.00/barrel
            
            359,750
            
            Feb.
                06 to Dec. 06




***Sold
      (Purchased) Put Option Contracts*** *(tons, ounces and dollar amounts not in thousands)*




**Metal**
            
            **Quantity**
            
            **Price
                Range**
            
            **Fair
                Value**
            
            **Period**Lead
            
            49,604
                tons
            
            $725.75/ton
                to $802.86/ton
            $
            1,356,576
            
            Jan.
                06 to Jun. 06




The
      Company’s open derivative financial instruments at October 31, 2004
      were:




***Sold
      (Purchased) Futures Contracts*** **** (tons,
      ounces and dollar amounts not in thousands)




**Metal**
              
              **Quantity**
              
              **Weighted**
                **Average
                  Price**
              
              **Fair
                  Value**
              
              **Period**Lead
              
              66,965
                  tons
              
              $618.86/ton
              $
              (13,325,766)
              
              Nov.
                  04 to Apr. 05(65,808)
                  tons
              
              $698.76/ton
              
              7,831,684
              
              Nov.
                  04 to Feb. 05Lead
                  - cash flow hedges
              
              4,960
                  tons
              
              $768.28/ton
              
              (113,250)
              
              Jan.
                  05 to Mar. 05(551)
                  tons
              
              $762.94/ton
              
              16,000
              
              Feb.
                  05Copper
              
              3,580
                  tons
              
              $2,269.54/ton
              
              (1,311,261)
              
              Nov.
                  04 to Aug. 05(3,031)
                  tons
              
              $2,450.01/ton
              
              693,575
              
              Nov.
                  04 to Dec. 04Zinc
              
              4,905
                  tons
              
              $816.33/ton
              
              (680,388)
              
              Nov.
                  04(5,016)
                  tons
              
              $948.78/ton
              
              31,375
              
              Nov.
                  04Silver
              
              850,175
                  oz.
              
              $5.26/oz.
              
              (1,191,098)
              
              Nov.
                  04(987,300)
                  oz.
              
              $5.56/oz.
              
              1,088,910
              
              Nov.
                  04Gold
              
              6,472
                  oz.
              
              $264.36/oz.
              
              (792,370)
              
              Nov.
                  04(6,198)
                  oz.
              
              $299.91/oz.
              
              538,445
              
              Nov.
                  04











***Sold
      (Purchased) Call Option Contracts***  *(tons,
      ounces and dollar amounts not in thousands)*




**Metal**
            
            **Quantity**
            
            **Price
                Range**
            
            **Fair
                Value**
            
            **Period**Lead
            
            12,125
                tons
            
            $521.63/ton
                to $952.54/ton
            $
            (1,389,883)
            
            Nov.
                04 to Feb.05(1,653)
                tons
            
            $816.47/ton
            
            27,313
            
            Nov.
                04Copper
            
            1,100
                tons
            
            $2,500.00/ton
            
            (262,086)
            
            Feb.
                05(1,102)
                tons
            
            $2,608.16/ton
                to $2,948.35/ton
            
            74,097
            
            Dec.
                04Zinc
            
            (1,653)
                tons
            
            $997.90/ton
            
            28,150
            
            Dec.
                04Silver
            
            416,860
                oz.
            
            $5.47/oz.
                to $7.06/oz.
            
            (479,378)
            
            Dec.
                04 to Mar. 05(54,850)
                oz.
            
            $7.06/oz.
            
            10,889
            
            Dec.
                04




***Sold
      (Purchased) Put Option Contracts*** *(tons, ounces and dollar amounts not in thousands)*




**Metal**
            
            **Quantity**
            
            **Price
                Range**
            
            **Fair
                Value**
            
            **Period**Copper
            
            (1,764)
                tons
            
            $2,512.90/ton
            $
            204,748
            
            Jan.
                05 to Apr.05Silver
            
            (164,550)
                oz.
            
            $6.20/oz.
            
            23,880
            
            Dec.
                04




At
      October 31, 2005 and 2004, the Company had recorded liability of $2,001 and
      $8,976, respectively, related to the fair market values of these instruments.




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




**(19)  Asset
      Retirement and Environmental Obligations**




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




***Asset
      Retirement Obligations***




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




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




The
      Company has a RCRA permit addressing the closure of portions of its recycling
      operation. The majority of the cost will arise from removing hazardous materials
      from the facility. No ARO liability or related asset cost has been recorded











because
      the fair value of the obligation cannot be
      determined due to the indeterminate timing. The cost of closure, based on third
      party estimates for bonding purposes, is approximately $3,000. The life of
      the
      operation is considered indeterminable because there is not currently a
      cost-effective alternative to the lead acid batteries and because battery
      manufacturers are required to recycle the batteries.




Mine
      Closure Law No. 28090 (Law) became effective as of October 15, 2005. The Law
      establishes the obligations and procedures that titleholders of mining
      activities must adhere to, including a financial guarantee for environmental
      issues. Doe Run Peru must submit a mine closure plan to the Ministry of Energy
      and Mines by August 17, 2006. The mine closure plan must include a description
      of the remediation measures to be done, along with their cost and timing, and
      the expected amount of the financial guarantee. Pursuant to the Tax
      Stabilization Agreement , Doe Run Peru is exempt from new obligations that
      could
      result in a reduction of its cash availability, such as the guarantee discussed
      above. Therefore, Doe Run Peru considers that the establishment of the
      corresponding environmental guarantee would be in opposition to the provisions
      set forth in the Tax Stabilization Agreement.




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




Activity
      related to the Company’s AROs during the years ended October 31, 2005 and 2004
      are as follows:





**October
                31,****2005**
            
            **2004**AROs
                as of beginning of year
            
            $
            14,604
            
            $
            14,622Liabilities
                settled
            
            
            (376
            )
            
            (225
            )Accretion
                expense
            
            
            1,497
            
            
            1,754Changes
                in estimated cash flows
            
            
            (537
            )
            
            (1,547
            )AROs
                as of end of year
            
            $
            15,188
            
            $
            14,604





***Environmental
      remediation - Domestic Operations***




The
      Company had recorded liabilities of approximately $20,000 and $18,800 related
      to
      remediation obligations as of October 31, 2005 and 2004,
      respectively.




Doe
      Run
      is subject to an Administrative Order on Consent (AOC), effective May 29, 2001,
      to study and address issues related to the slag pile, plant property, community
      soils adjacent to the primary smelter in Herculaneum, elevated blood lead levels
      in the community and lead releases from the plant. Under this AOC, Doe Run
      completed additional soil testing in the area within a one-mile radius of the
      smelter and subsequently signed a second AOC with the U.S. EPA on December
      21,
      2001, which has essentially been completed. The May 29, 2001 AOC was modified
      effective on May 20, 2004. At October 31, 2005 the estimated remaining cost
      of
      remediating these properties was approximately $688.




Doe
      Run
      signed a settlement agreement with the State of Missouri on April 26, 2002,
      whereby it agreed to offer to purchase approximately 160 residential properties
      in an area close to the smelter if the owner requests such an offer. The offers
      have expired except for a few with pending closing dates or special
      arrangements. As of October 31, 2005, a total of 149 homeowners had requested
      and were delivered offers, and 142 of those offers had been accepted. As of
      October 31, 2005, the Company had spent approximately $10,000 under the
      residential property purchase plan. Another $1,100 of accepted offers are
      awaiting a closing date, and $400 in outstanding offers have not been accepted.
      Doe Run has complied in all material respects with the property purchase
      provisions of the settlement agreement.




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











Doe
      Run
      is subject to a State Implementation Plan (SIP) with the Missouri Department
      of
      Natural Resources and the Missouri Air Conservation Commission to attain and
      maintain compliance with the ambient air quality standard for lead promulgated
      under the federal Clean Air Act for the city of Herculaneum. The plan was
      included in a consent judgment entered into by Doe Run and has been approved
      at
      the state level and by the U.S. EPA. The air quality monitors reflected
      attainment of the lead standard for 10 of the last 13 quarters. Since the air
      quality monitors reflected three quarters of non-compliance, the permitted
      annual capacity of the Herculaneum primary smelter decreased from 250,000 to
      200,000 tons, which does not affect results at current production levels.
      Further non-compliance could result in SIP revisions that could have a material
      adverse financial impact on the Company. Management is in discussions with
      the
      Missouri Department of Natural Resources to explore options intended to improve
      the smelter’s ability to attain and maintain compliance in the
      future.




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




In
      addition to being asked to conduct remediation at these sites, the U.S. EPA
      may
      also seek reimbursement from Doe Run for response actions it has conducted
      at
      these sites. The U.S. Government has advised PRP’s at the Tar Creek site,
      including Doe Run, that it will seek reimbursement for approximately $125
      million of such costs. Given legal issues about Doe Run’s responsibility for
      activities of a former subsidiary, the fact that the former subsidiary’s
      activities at the site were localized and small (less than 1% of the waste),
      and
      the major involvement at the site of the U.S. Government through the Bureau
      of
      Land Management’s and the Bureau of Indian Affairs’ management of mineral
      leasing at the site, the Company is unable to estimate the expected outcome
      of
      any such potential claim.




In
      February 2004 the U.S. Department of Agriculture issued a Unilateral
      Administrative Order (UAO) ordering certain remediation activities by Doe Run
      at
      the Block “P” mill site in Montana. Doe Run has requested that other parties be
      added to the order. Doe Run will seek reimbursement from the U.S. Government
      and
      these other parties. The final remediation was essentially completed as of
      October 31, 2005.




Doe
      Run
      has completed an Engineering Evaluation/Cost Analysis (EE/CA) for the Bonne
      Terre site and has signed two AOCs to conduct removal actions on the west and
      east portions of the site. Work is completed on the west Bonne Terre site and
      is
      nearly finished on the east site with completion expected in early 2006.




Doe
      Run
      has completed an EE/CA for the Rivermines site and, while unable to accept
      certain financial assurance provisions of a proposed AOC, has agreed to conduct
      a removal action at the site under a UAO. Work has commenced on the removal
      action. The EPA accelerated the timeframe to complete the majority of the
      remediation effort by the summer of 2006.




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




Doe
      Run
      has also signed AOCs to perform an EE/CA on each of the National and Leadwood
      sites for remediation of mine waste areas. The National EE/CA was completed
      by
      the PRPs and was submitted to the U.S. EPA for approval. The U.S. EPA then
      prepared two EE/CAs, the last of which is currently open for public discussion.
      The cost of their remedy is higher than that estimated by the EE/CA prepared
      by
      Doe Run. The Leadwood EE/CA has been submitted to the U.S. EPA for approval.
      In
      addition, Doe Run has signed an AOC with the U.S. EPA to conduct a Remedial
      Investigation/Feasibility











Study
      (RI/FS) to assess potential off-site impacts of
      these site operations on groundwater, residential soils, several creeks and
      a
      river and the need for related remediation. The initial draft of the RI/FS
      was
      submitted in early March 2002. Doe Run signed an order to conduct interim
      measures, which consisted of blood lead testing of young children, residential
      soil sampling and limited soil remediation as indicated by the testing and
      sampling results, which was terminated and replaced by an AOC to conduct certain
      additional soil remediation in the area and has included its best estimate
      of
      these efforts in its recorded liabilities. The Company believes the recorded
      liabilities related to these sites are adequate. However, should remediation
      goals or areas change, requiring substantially increased measures, there can
      be
      no assurance that the recorded liabilities would be adequate.




In
      March
      2004, Doe Run received notice that it is a PRP subject to liability under CERCLA
      for contamination along roads in Iron, Dent and Reynolds counties in Missouri,
      along with a number of mining companies involved in the transportation of
      concentrates. After sampling approximately 750 houses by the U.S. EPA and the
      Missouri DNR, approximately 150 houses were identified as potentially requiring
      some level of remediation. Doe Run and four other mining companies have signed
      an AOC to conduct soil remediation at approximately 40 of these houses. Recorded
      liabilities could change, due to changes in management’s estimates of the number
      of houses requiring remediation, remediation methods, the costs of remediation
      and Doe Run’s apportionment of the costs. Also, in regard to potential
      contamination from transportation activities in and near the City of Viburnum,
      Doe Run has signed an AOC to conduct sampling and prepare a Preliminary
      Assessment/Site Inspection report.




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




Doe
      Run’s
      recycling facility is subject to corrective action requirements under RCRA
      as a
      result of a storage permit for certain wastes initially issued in 1989. This
      will involve remediation of solid waste management units at the site, and it
      is
      expected that the plan for corrective action will be approved in fiscal 2006.
      The Company’s estimate of the cost of this corrective action is $1,000. While
      management believes that recorded liabilities are adequate based on expectations
      of the closure plan requirements, regulators could require that additional
      measures be included in the finalized plan, which could change the estimate
      of
      the costs for corrective action.




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




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




***Environmental
      remediation - Foreign Operations***




Doe
      Run
      Peru’s La Oroya operations historically and currently exceed some of the
      applicable Ministry of Energy and Mines (MEM) maximum permissible limits
      pertaining to air emissions and wastewater effluent quality. Prior to our
      acquisition of La Oroya, Metaloroya S.A., the former owner, a subsidiary of
      Empresa Mineral del Centro del Peru S.A. which we refer to as (Centromin)
      received approval from the Peruvian government for an Environmental Remediation
      and Management Program, known as a PAMA. The PAMA was designed to achieve
      compliance with MEM’s air and wastewater limits. It consisted of an
      environmental impact analysis, monitoring plan and data, mitigation measures
      and
      a closure plan. The PAMA also sets forth the actions and corresponding annual
      investments the concession holder agrees to undertake in order to achieve
      compliance with the maximum permissible limits prior to expiration of the PAMA
      (ten years for smelters, such as Doe Run Peru’s operations in La Oroya, and five
      years for any other type of mining or metallurgical operation like











Cobriza).
      The PAMA projects, which are more fully
      discussed below, have been designed to achieve compliance with these
      requirements. The Peruvian government may, in the future, require compliance
      with additional environmental regulations that could adversely affect Doe Run
      Peru’s business, financial condition and results of operations. After expiration
      of the PAMA, the operator must comply with all applicable standards and
      requirements. Because these costs improve the property or prevent future
      environmental contamination, they are capitalized.




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




·  Construct
      new sulfuric acid plants;


·  Construct
      a treatment plant for the copper refinery effluent;


·  Construct
      an industrial wastewater treatment plant for the smelter and
      refinery;


·  Improve
      the slag handling system;


·  Improve
      Huanchan lead and copper slag deposits;


·  Construct
      an arsenic trioxide deposit;


·  Improve
      the zinc ferrite disposal site;


·  Construct
      domestic wastewater treatment and domestic waste disposal; and


·  Construct
      a monitoring station.




An
      investment schedule in the PAMA provides a specific plan for achieving the
      applicable MEM maximum permissible limits pertaining to air emissions and
      wastewater effluent quality. The PAMA may be modified and amended as to the
      actual design and timing of projects to be implemented, provided compliance
      with
      the applicable maximum permissible limits is achieved by December 31, 2006.
      The
      required esti mated
      spending for the projects approved in the La Oroya PAMA, as amended on January
      25, 2002, is estimated at $108,000 for calendar 2006.




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




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




Pursuant
      to the Supreme Decree, the application for a PAMA extension must be supported
      by
      a health risk study performed by a third party. The application must contain
      an
      engineering description and funding plan of any project to be extended, a
      discussion of how and when environmental emission standards will be met, a
      plan
      to monitor emissions with the participation of the community, proof that at
      least three public workshops were held in various districts to provide
      information on Doe Run Peru’s financial situation and health programs, proof
      that two public hearings were held regarding the extension plans, and other
      financial information. Upon meeting these requirements, Doe Run Peru applied
      for
      an extension on December 20, 2005.




Upon
      approval of a modified PAMA, Doe Run Peru would be required to create a trust
      account. The trust account would administer the receipts and disbursements
      related to the extended PAMA project. The Supreme Decree requires that receipts
      from sales, in an amount sufficient to fund the monthly cash requirements of
      the
      extended PAMA project, be remitted directly to the trust account.




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




To
      achieve the financial guarantee and the trust contract required by Supreme
      Decree, Doe Run Peru has amended the Doe Run Peru Revolving Credit Facility
      to
      allow for those arrangements and has filed a draft of a trust guarantee contract
      with a Peruvian bank. Additionally, on December 10, 2005 Doe Run Peru signed
      a
      Working Capital Financial Facility











Agreement
      for the amount of $30,000 (Ferrites Loan)
      with Servicios Mineros Integrados S.A.C., a Trafigura Beheer B.V. subsidiary,
      to
      use such funds in the fulfillment of the financial security as mentioned
      above.




Doe
      Run
      Peru has performed other environmental projects to reduce fugitive emissions
      in
      2005 including the installation work on the short rotary furnace, enclosing
      the
      blast furnace and dross plant, along with other complementary work. Major
      projects scheduled for fiscal year 2006 include an upgrade of the ventilation
      system in the sinter plant, completion of the enclosure work around the lead
      and
      dross furnace, the enclosure of the anode residue plant along with the
      elimination of its nitrous gases, and the reduction of fugitive emissions from
      the copper and lead beds. The total cost of the currently remaining PAMA
      projects, including the sulfuric acid plant construction, and these projects
      is
      approximately $130,000.




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




In
      the
      future, as part of a modernization plan and to enrich sulfurous gas feed to
      the
      sulfuric acid plant, we are planning to replace the oxy-fuel reverberatory
      furnace with a reactor furnace to smelt copper concentrates. The anticipated
      cost is approximately $57 million.




The
      PAMA
      projects have been designed to achieve compliance with the maximum permissible
      limits of emission prior to the expiration of the PAMA. However, no assurance
      can be given that implementation of the PAMA projects is feasible or that their
      implementation will achieve compliance with the applicable legal requirements
      by
      the end of the PAMA period. Furthermore, there can be no assurance that the
      Peruvian government will not in the future require compliance with additional
      or
      different environmental obligations that could adversely affect Doe Run Peru’s
      business, financial condition and results of operations.




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




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




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




***Environmental
      remediation -***  ***Consolidated***




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




**(20)  Litigation**




Doe
      Run
      is a defendant in 29 lawsuits alleging certain damages stemming from the
      operations at the Herculaneum primary smelter. Three of these cases are class
      action lawsuits. In two cases, the plaintiffs seek to have certified a class
      of
      property owners in a certain section of Herculaneum, alleging that property
      values have been damaged due to the operations











of
      the smelter. In another case, plaintiffs seek to
      have certified a class of children who lived in Herculaneum during a period
      of
      time when they were less than six years old and children born to mothers who
      lived in Herculaneum during their pregnancies. The remedy sought is medical
      monitoring for the class. Twenty-six of the cases are personal injury actions
      by
      161 individuals who allege damages from the effects of lead due to operations
      at
      the smelter. Punitive damages also are being sought in each case. Doe Run is
      also a defendant in a wrongful death action concerning a drowning in the City
      of
      Herculaneum.




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




Doe
      Run
      is a defendant in 17 lawsuits alleging certain damages from discontinued mine
      facilities in St. Francois County. Four of the cases are class action lawsuits.
      The first case seeks to have certified a class consisting of property owners
      in
      Bonne Terre, Missouri, alleging that property values have been damaged due
      to
      the tailings from the discontinued operations. In the second case plaintiffs
      seek to have certified a class of children who lived, went to school or day
      care
      in Bonne Terre, or whose mothers lived in Bonne Terre during their pregnancies.
      The third and fourth cases are class actions for property damage and medical
      monitoring concerning alleged damages caused by chat, tailings and related
      operations in six areas in St. Francois County. The remainder of the cases
      allege personal injury to 28 individuals who were exposed to lead in St.
      Francois County.




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




Doe
      Run
      is a defendant in five lawsuits alleging certain damages from past mining
      operations in Ottawa County, Oklahoma.  Three of these suits are class
      actions alleging personal injury and property damage in Picher and Quapaw,
      Oklahoma.  One lawsuit, a consolidation of five suits, alleges injury to
      seven children living in Picher, Oklahoma.  One lawsuit, a consolidation of
      two suits, alleges injury to 42 children living in Ottawa County.




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




Doe
      Run
      is currently a defendant three asbestos injury suits filed in Madison County,
      Illinois, each alleging that a worker was exposed to asbestos at the premises
      of
      the St. Joe Minerals Corporation. However, Doe Run has not been properly served
      in one of these cases. Doe Run has reached a tentative settlement in another
      of
      these case prior to going to trial. Doe Run is also a defendant in an asbestos
      case filed in Lawrence County, Pennsylvania. Doe Run was named in an asbestos
      injury suit in the City of St. Louis, Missouri but that case was subsequently
      dismissed.




Doe
      Run
      is in a commercial dispute with a buyer concerning one ocean shipment of lead
      concentrates. Buyer is seeking reimbursement of expenses incurred to address
      a
      large amount of water that appeared during the voyage on top of concentrates
      in
      the forward holds. This contract dispute is in arbitration before the
      LME.




Doe
      Run
      is a defendant in a lawsuit by Korea Zinc Co. and affiliates filed on January
      19, 2006 in the Circuit Court of St. Louis County, concerning alleged violations
      of an agreement regarding the sale of zinc concentrates. Doe Run disputes the
      claim and will seek dismissal because the dispute should be subject to
      arbitration.




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











Doe
      Run
      Peru is a defendant in 198 lawsuits in the Lima, Peru labor courts that allege
      damage to workers from industrial diseases. Doe Run Peru has made claims in
      most
      of the cases against Centromin and has also made claims against both
      governmental agencies and private companies that provide workers’ insurance. The
      average claim is $18. Of 17 concluded cases in this category, 16 were dismissed
      and one resulted in an award of $9.




Doe
      Run
      Peru is also a defendant in 163 lawsuits by workers alleging that they are
      owed
      certain differences in salaries and benefits. The average claim is $21. Of
      31
      concluded cases in this category, 26 were dismissed and five resulted in awards
      totaling $15. Doe Run Peru is also a defendant in a lawsuit by the Yauli-La
      Oroya Employees Union concerning salaries and benefits. The claims of the 146
      workers remaining in the lawsuit have been valued at a total of $238 according
      to a report by an expert appointed by the court.




Doe
      Run
      Peru is also a defendant in 26 lawsuits alleging claims ranging from industrial
      diseases to salary disputes, including indemnification for arbitrary dismissal,
      nullity of dismissal, moral damage compensation, compensatory damages from
      work
      accident and readmission of worker. The average claim is $6. Of 29 concluded
      cases in this category 26 were dismissed and three resulted in awards totaling
      $22.




The
      amount of awards in the various categories of lawsuits referenced above
      represent total judgments issued by the relevant courts. For certain of these
      lawsuits, Centromin will pay a portion of the total award.




On
      January 19, 2005, Doe Run Peru was served with a lawsuit by an association
      of
      municipalities of the Junin Region of Peru against Doe Run Peru and two other
      mining companies. This lawsuit alleges environmental damages to the Mantaro
      River basin in the amount of $5 billion. Material liability to Doe Run Peru
      is
      believed to be remote because it is the opinion of management and outside
      counsel for Doe Run Peru that the probability under Peruvian law of
      this case proceeding to a conclusion at the favor of the plaintiffs is low.
      Any
      potential judgment would be subject to the indemnification obligations of
      Centromin, which are guaranteed by the Peruvian government.




On
      May
      25, 2005, Doe Run Peru was served with a civil lawsuit alleging the existence
      of
      lead in a person caused by Doe Run Peru’s operations. The claim is for $100.




On
      July
      11, 2003, Doe Run Peru filed an administrative lawsuit against the Yauli -
      La
      Oroya Provincial City Hall in order to dismiss a number of fines for the amount
      of $2,800. Doe Run Peru was fined for not having construction licenses for
      the
      PAMA projects.




Since
      most of the above cases are either in the pleading or discovery stages, the
      Company is unable at this time to estimate the expected outcome and the final
      costs, except as noted, of these actions. No amounts have been accrued as
      liabilities related to these actions. There can be no assurance that these
      cases
      will not have a material adverse effect, both individually and in the aggregate,
      on the results of operations, financial condition and liquidity of the Company.
      The Company has and will continue to vigorously defend itself against such
      claims.




**(21)  Guarantor
      Subsidiaries**




The
      Guarantor Subsidiaries (Fabricated Products, Inc. (FPI) and DR Land Holdings,
      LLC (together, the Domestic Guarantors) Buick Resource Recycling Facility,
      LLC,
      Doe Run Cayman Ltd. (Doe Run Cayman) and its subsidiary Doe Run Peru) have
      jointly and severally, fully, unconditionally and irrevocably guaranteed the
      11.75% notes of the Company. Doe Run Cayman has no operations separate from
      those of Doe Run Peru. Separate financial statements and other disclosures
      concerning certain Guarantor Subsidiaries and disclosures concerning
      non-Guarantor Subsidiaries have not been presented because management has
      determined that such information is not material to investors. Intercompany
      transactions eliminated in consolidation consist of various service and agency
      fees between Doe Run and Doe Run Peru and sales of metal to Doe Run by Doe
      Run
      Peru and to FPI by Doe Run.










**Condensed
                Consolidating Balance Sheet****As
                of October 31, 2005**The
                Company
            
            BuickExcluding
            
            Resource
            
            Other
            
            Doe
                RunGuarantor
            
            Recycling
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Facility,
                LLC
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            Company**ASSETS**Current
                assets:Cash
            
            $
            8,916
            
            $
            -
            
            $
            1
            
            $
            14,569
            
            $
            -
            
            $
            23,486Trade
                accounts receivable, net of allowance for doubtful
                accounts
            
            
            56,454
            
            
            -
            
            
            2,202
            
            
            31,637
            
            
            (4,553
            )
            
            85,740Inventories
            
            
            35,613
            
            
            -
            
            
            1,301
            
            
            68,756
            
            
            (36
            )
            
            105,634Prepaid
                expenses and other current assets
            
            
            4,564
            
            
            -
            
            
            59
            
            
            16,191
            
            
            -
            
            
            20,814Due
                from subsidiaries
            
            
            151,617
            
            
            2,037
            
            
            -
            
            
            -
            
            
            (153,654
            )
            
            -Total
                current assets
            
            
            257,164
            
            
            2,037
            
            
            3,563
            
            
            131,153
            
            
            (158,243
            )
            
            235,674Property,
                plant and equipment, net
            
            
            74,604
            
            
            16,083
            
            
            1,013
            
            
            161,563
            
            
            -
            
            
            253,263Due
                from subsidiaries
            
            
            14,057
            
            
            -
            
            
            -
            
            
            -
            
            
            (14,057
            )
            
            -Other
                noncurrent assets, net
            
            
            5,775
            
            
            -
            
            
            63
            
            
            -
            
            
            -
            
            
            5,838Investment
                in subsidiaries
            
            
            6,708
            
            
            -
            
            
            -
            
            
            -
            
            
            (6,708
            )
            
            -Total
                assets
            
            $
            358,308
            
            $
            18,120
            
            $
            4,639
            
            $
            292,716
            
            $
            (179,008
            )
            $
            494,775**LIABILITIES
                AND SHAREHOLDERS' EQUITY (DEFICIT)**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            75,126
            
            $
            -
            
            $
            -
            
            $
            39,821
            
            $
            -
            
            $
            114,947Accounts
                payable
            
            
            29,007
            
            
            -
            
            
            706
            
            
            67,115
            
            
            (4,553
            )
            
            92,275Accrued
                liabilities
            
            
            55,392
            
            
            -
            
            
            468
            
            
            31,200
            
            
            -
            
            
            87,060Due
                to parent/subsidiaries
            
            
            2,037
            
            
            -
            
            
            8,554
            
            
            143,063
            
            
            (153,654
            )
            
            -Total
                current liabilities
            
            
            161,562
            
            
            -
            
            
            9,728
            
            
            281,199
            
            
            (158,207
            )
            
            294,282Long-term
                debt, less current maturities
            
            
            271,566
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            271,566Due
                to parent
            
            
            -
            
            
            -
            
            
            -
            
            
            14,057
            
            
            (14,057
            )
            
            -Other
                noncurrent liabilities
            
            
            64,590
            
            
            -
            
            
            281
            
            
            3,466
            
            
            -
            
            
            68,337Total
                liabilities
            
            
            497,718
            
            
            -
            
            
            10,009
            
            
            298,722
            
            
            (172,264
            )
            
            634,185Series
                A redeemable preferred stock
            
            
            28,495
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            28,495Shareholders'
                equity (deficit):Common
                stock, $0.10 par value per share, 1,667 shares authorized,1,000
                shares issued and outstanding
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Common
                stock, $1 par value per share, 1,000 shares authorized,issued
                and outstanding
            
            
            -
            
            
            -
            
            
            1
            
            
            -
            
            
            (1
            )
            
            -Common
                stock, $1 par value per share, 2,005,000 shares
                authorized,issued
                and outstanding
            
            
            -
            
            
            -
            
            
            -
            
            
            2,005
            
            
            (2,005
            )
            
            -Additional
                paid in capital
            
            
            -
            
            
            23,305
            
            
            1,205
            
            
            -
            
            
            (24,510
            )
            
            -Accumulated
                preferred stock dividends in excess of paid in capital
            
            
            (3,257
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,257
            )Accumulated
                deficit and accumulated othercomprehensive
                losses
            
            
            (164,648
            )
            
            (5,185
            )
            
            (6,576
            )
            
            (8,011
            )
            
            19,772
            
            
            (164,648
            )Total
                shareholders' equity (deficit)
            
            
            (167,905
            )
            
            18,120
            
            
            (5,370
            )
            
            (6,006
            )
            
            (6,744
            )
            
            (167,905
            )Total
                liabilities and shareholders' equity (deficit)
            
            $
            358,308
            
            $
            18,120
            
            $
            4,639
            
            $
            292,716
            
            $
            (179,008
            )
            $
            494,775











**Condensed
                Consolidating Balance Sheet****As
                of October 31, 2004**The
                Company
            
            BuickExcluding
            
            Resource
            
            Other
            
            Doe
                RunGuarantor
            
            Recycling
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Facility,
                LLC
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            Company**ASSETS**Current
                assets:Cash
            
            $
            13,412
            
            $
            -
            
            $
            1
            
            $
            6,905
            
            $
            -
            
            $
            20,318Trade
                accounts receivable, net of allowance for doubtful
                accounts
            
            
            42,269
            
            
            -
            
            
            1,942
            
            
            22,217
            
            
            (2,209
            )
            
            64,219Inventories
            
            
            36,359
            
            
            -
            
            
            1,130
            
            
            65,876
            
            
            (56
            )
            
            103,309Prepaid
                expenses and other current assets
            
            
            19,898
            
            
            -
            
            
            59
            
            
            15,901
            
            
            -
            
            
            35,858Due
                from subsidiaries
            
            
            11,998
            
            
            1,162
            
            
            -
            
            
            -
            
            
            (13,160
            )
            
            -Total
                current assets
            
            
            123,936
            
            
            1,162
            
            
            3,132
            
            
            110,899
            
            
            (15,425
            )
            
            223,704Property,
                plant and equipment, net
            
            
            72,716
            
            
            14,739
            
            
            1,442
            
            
            140,743
            
            
            -
            
            
            229,640Due
                from subsidiaries
            
            
            156,495
            
            
            -
            
            
            -
            
            
            -
            
            
            (156,495
            )
            
            -Other
                noncurrent assets, net
            
            
            3,890
            
            
            -
            
            
            63
            
            
            122
            
            
            -
            
            
            4,075Investment
                in subsidiaries
            
            
            (12,647
            )
            
            -
            
            
            -
            
            
            -
            
            
            12,647
            
            
            -Total
                assets
            
            $
            344,390
            
            $
            15,901
            
            $
            4,637
            
            $
            251,764
            
            $
            (159,273
            )
            $
            457,419**LIABILITIES
                AND SHAREHOLDERS' EQUITY (DEFICIT)**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            57,367
            
            $
            -
            
            $
            -
            
            $
            39,400
            
            $
            -
            
            $
            96,767Accounts
                payable
            
            
            23,310
            
            
            -
            
            
            662
            
            
            44,092
            
            
            (2,209
            )
            
            65,855Accrued
                liabilities
            
            
            55,625
            
            
            -
            
            
            1,054
            
            
            27,199
            
            
            -
            
            
            83,878Due
                to parent/subsidiaries
            
            
            1,162
            
            
            -
            
            
            7,998
            
            
            143,063
            
            
            (152,223
            )
            
            -Total
                current liabilities
            
            
            137,464
            
            
            -
            
            
            9,714
            
            
            253,754
            
            
            (154,432
            )
            
            246,500Long-term
                debt, less current maturities
            
            
            320,561
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            320,561Due
                to parent
            
            
            -
            
            
            -
            
            
            -
            
            
            17,432
            
            
            (17,432
            )
            
            -Other
                noncurrent liabilities
            
            
            71,772
            
            
            -
            
            
            533
            
            
            3,460
            
            
            -
            
            
            75,765Total
                liabilities
            
            
            529,797
            
            
            -
            
            
            10,247
            
            
            274,646
            
            
            (171,864
            )
            
            642,826Series
                A redeemable preferred stock
            
            
            25,329
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            25,329Shareholders'
                equity (deficit):Common
                stock, $0.10 par value per share, 1,667 shares authorized,1,000
                shares issued and outstanding
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Common
                stock, $1 par value per share, 1,000 shares authorized,issued
                and outstanding
            
            
            -
            
            
            -
            
            
            1
            
            
            -
            
            
            (1
            )
            
            -Common
                stock, $1 par value per share, 2,005,000 shares
                authorized,issued
                and outstanding
            
            
            -
            
            
            -
            
            
            -
            
            
            2,005
            
            
            (2,005
            )
            
            -Additional
                paid in capital
            
            
            -
            
            
            19,348
            
            
            1,205
            
            
            -
            
            
            (20,553
            )
            
            -Accumulated
                preferred stock dividends in excess of paid in capital
            
            
            (91
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (91
            )Accumulated
                deficit and accumulated othercomprehensive
                losses
            
            
            (210,645
            )
            
            (3,447
            )
            
            (6,816
            )
            
            (24,887
            )
            
            35,150
            
            
            (210,645
            )Total
                shareholders' equity (deficit)
            
            
            (210,736
            )
            
            15,901
            
            
            (5,610
            )
            
            (22,882
            )
            
            12,591
            
            
            (210,736
            )Total
                liabilities and shareholders' equity (deficit)
            
            $
            344,390
            
            $
            15,901
            
            $
            4,637
            
            $
            251,764
            
            $
            (159,273
            )
            $
            457,419












**Condensed
                  Consolidating Statement of Operations****Year
                  Ended October 31, 2005**The
                  Company
              
              BuickExcluding
              
              Resource
              
              Other
              
              Doe
                  RunGuarantor
              
              Recycling
              
              Domestic
              
              Cayman
                  and
              
              
              
              TheSubsidiaries
              
              Facility,
                  LLC
              
              Guarantors
              
              Subsidiary
              
              Eliminations
              
              CompanyNet
                  sales
              
              $
              375,760
              
              $
              -
              
              $
              14,203
              
              $
              650,840
              
              $
              (11,363
              )
              $
              1,029,440Costs
                  and expenses:Cost
                  of sales
              
              
              310,540
              
              
              -
              
              
              10,626
              
              
              601,949
              
              
              (11,383
              )
              
              911,732Depletion,
                  depreciation and amortization
              
              
              8,906
              
              
              2,613
              
              
              417
              
              
              12,234
              
              
              -
              
              
              24,170Selling,
                  general and administrative
              
              
              26,743
              
              
              -
              
              
              2,062
              
              
              17,291
              
              
              -
              
              
              46,096Unrealized
                  (gain) loss on derivatives
              
              
              (5,379
              )
              
              -
              
              
              -
              
              
              503
              
              
              -
              
              
              (4,876
              )Other
              
              
              5,183
              
              
              -
              
              
              152
              
              
              627
              
              
              -
              
              
              5,962Total
                  costs and expenses
              
              
              345,993
              
              
              2,613
              
              
              13,257
              
              
              632,604
              
              
              (11,383
              )
              
              983,084Income
                  (loss) from operations
              
              
              29,767
              
              
              (2,613
              )
              
              946
              
              
              18,236
              
              
              20
              
              
              46,356Other
                  income (expense):Interest
                  income (expense), net
              
              
              (7,428
              )
              
              -
              
              
              (592
              )
              
              (1,849
              )
              
              -
              
              
              (9,869
              )Gain
                  on restucture of long term debt
              
              
              9,233
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              9,233Other,
                  net
              
              
              (707
              )
              
              875
              
              
              9
              
              
              489
              
              
              -
              
              
              666Equity
                  in earnings of subsidiaries
              
              
              15,521
              
              
              -
              
              
              -
              
              
              -
              
              
              (15,521
              )
              
              -Total
                  other income (expense)
              
              
              16,619
              
              
              875
              
              
              (583
              )
              
              (1,360
              )
              
              (15,521
              )
              
              30Income
                  (loss) before income tax benefit
              
              
              46,386
              
              
              (1,738
              )
              
              363
              
              
              16,876
              
              
              (15,501
              )
              
              46,386Income
                  tax benefit
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  income (loss)
              
              
              46,386
              
              
              (1,738
              )
              
              363
              
              
              16,876
              
              
              (15,501
              )
              
              46,386Preferred
                  stock dividends
              
              
              (3,166
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,166
              )Net
                  income (loss) allocable to common shares
              
              $
              43,220
              
              $
              (1,738
              )
              $
              363
              
              $
              16,876
              
              $
              (15,501
              )
              $
              43,220








**Condensed
                Consolidating Statement of Operations****Year
                Ended October 31, 2004**The
                Company
            
            BuickExcluding
            
            Resource
            
            Other
            
            Doe
                RunGuarantor
            
            Recycling
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Facility,
                LLC
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            CompanyNet
                sales
            
            $
            300,811
            
            $
            -
            
            $
            12,658
            
            $
            567,185
            
            $
            (12,586
            )
            $
            868,068Costs
                and expenses:Cost
                of sales
            
            
            246,664
            
            
            -
            
            
            9,849
            
            
            531,195
            
            
            (4,727
            )
            
            782,981Depletion,
                depreciation and amortization
            
            
            9,647
            
            
            2,859
            
            
            844
            
            
            11,972
            
            
            -
            
            
            25,322Selling,
                general and administrative
            
            
            21,026
            
            
            -
            
            
            1,937
            
            
            20,657
            
            
            (7,838
            )
            
            35,782Unrealized
                (gain) loss on derivatives
            
            
            237
            
            
            -
            
            
            -
            
            
            (6
            )
            
            -
            
            
            231Other
            
            
            5,577
            
            
            29
            
            
            (1
            )
            
            164
            
            
            -
            
            
            5,769Total
                costs and expenses
            
            
            283,151
            
            
            2,888
            
            
            12,629
            
            
            563,982
            
            
            (12,565
            )
            
            850,085Income
                (loss) from operations
            
            
            17,660
            
            
            (2,888
            )
            
            29
            
            
            3,203
            
            
            (21
            )
            
            17,983Other
                income (expense):Interest
                expense, net
            
            
            (10,422
            )
            
            -
            
            
            (689
            )
            
            (2,159
            )
            
            -
            
            
            (13,270
            )Other,
                net
            
            
            (558
            )
            
            820
            
            
            12
            
            
            (734
            )
            
            -
            
            
            (460
            )Equity
                in earnings of subsidiaries
            
            
            (2,427
            )
            
            -
            
            
            -
            
            
            -
            
            
            2,427
            
            
            -Total
                other income (expense)
            
            
            (13,407
            )
            
            820
            
            
            (677
            )
            
            (2,893
            )
            
            2,427
            
            
            (13,730
            )Income
                (loss) before income tax benefit
            
            
            4,253
            
            
            (2,068
            )
            
            (648
            )
            
            310
            
            
            2,406
            
            
            4,253Income
                tax benefit
            
            
            (661
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (661
            )Net
                income (loss)
            
            
            4,914
            
            
            (2,068
            )
            
            (648
            )
            
            310
            
            
            2,406
            
            
            4,914Preferred
                stock dividends
            
            
            (2,815
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,815
            )Net
                income (loss) allocable to common shares
            
            $
            2,099
            
            $
            (2,068
            )
            $
            (648
            )
            $
            310
            
            $
            2,406
            
            $
            2,099














**Condensed
                Consolidating Statement of Operations****Year
                Ended October 31, 2003**The
                Company
            
            BuickExcluding
            
            Resource
            
            Other
            
            Doe
                RunGuarantor
            
            Recycling
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Facility,
                LLC
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            CompanyNet
                sales
            
            $
            245,483
            
            $
            -
            
            $
            14,866
            
            $
            436,980
            
            $
            (11,947
            )
            $
            685,382Costs
                and expenses:Cost
                of sales
            
            
            212,013
            
            
            -
            
            
            12,608
            
            
            421,655
            
            
            (2,383
            )
            
            643,893Depletion,
                depreciation and amortization
            
            
            15,435
            
            
            1,721
            
            
            1,442
            
            
            11,809
            
            
            -
            
            
            30,407Selling,
                general and administrative
            
            
            15,146
            
            
            -
            
            
            1,843
            
            
            20,927
            
            
            (9,550
            )
            
            28,366Unrealized
                loss on derivatives
            
            
            7,162
            
            
            -
            
            
            -
            
            
            58
            
            
            -
            
            
            7,220Other
            
            
            2,312
            
            
            29
            
            
            58
            
            
            88
            
            
            -
            
            
            2,487Total
                costs and expenses
            
            
            252,068
            
            
            1,750
            
            
            15,951
            
            
            454,537
            
            
            (11,933
            )
            
            712,373Loss
                from operations
            
            
            (6,585
            )
            
            (1,750
            )
            
            (1,085
            )
            
            (17,557
            )
            
            (14
            )
            
            (26,991
            )Other
                income (expense):Interest
                expense, net
            
            
            (10,079
            )
            
            -
            
            
            (619
            )
            
            (2,543
            )
            
            -
            
            
            (13,241
            )Loss
                on retirement/restructure of long term debt
            
            
            (550
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (550
            )Other,
                net
            
            
            (116
            )
            
            371
            
            
            (123
            )
            
            (308
            )
            
            -
            
            
            (176
            )Equity
                in earnings of subsidiaries
            
            
            (23,720
            )
            
            -
            
            
            -
            
            
            -
            
            
            23,720
            
            
            -Total
                other income (expense)
            
            
            (34,465
            )
            
            371
            
            
            (742
            )
            
            (2,851
            )
            
            23,720
            
            
            (13,967
            )Income
                (loss) before income tax expense
            
            
            (41,050
            )
            
            (1,379
            )
            
            (1,827
            )
            
            (20,408
            )
            
            23,706
            
            
            (40,958
            )Income
                tax expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Income
                (loss) before cumulative effect ofchange
                in accounting principle
            
            
            (41,050
            )
            
            (1,379
            )
            
            (1,827
            )
            
            (20,408
            )
            
            23,706
            
            
            (40,958
            )Cumulative
                effect of change in accountingprinciple,
                net of income tax benefit
            
            
            (3,848
            )
            
            -
            
            
            -
            
            
            (92
            )
            
            -
            
            
            (3,940
            )Net
                income (loss)
            
            
            (44,898
            )
            
            (1,379
            )
            
            (1,827
            )
            
            (20,500
            )
            
            23,706
            
            
            (44,898
            )Preferred
                stock dividends
            
            
            (2,514
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,514
            )Net
                income (loss) allocable to common shares
            
            $
            (47,412
            )
            $
            (1,379
            )
            $
            (1,827
            )
            $
            (20,500
            )
            $
            23,706
            
            $
            (47,412
            )











**Condensed
                Consolidating Statement of Cash Flows****Year
                Ended October 31, 2005**The
                Company
            
            BuickExcluding
            
            Resource
            
            Other
            
            Doe
                RunGuarantor
            
            Recycling
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Facility,
                LLC
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            CompanyNet
                cash provided by (used in) operating activities
            
            $
            51,991
            
            $
            (2,037
            )
            $
            (294
            )
            $
            44,624
            
            $
            (18,086
            )
            $
            76,198Cash
                flows from investing activities:Purchases
                of property, plant and equipment
            
            
            (17,076
            )
            
            -
            
            
            (140
            )
            
            (34,045
            )
            
            -
            
            
            (51,261
            )Net
                proceeds from disposal of assets
            
            
            42
            
            
            -
            
            
            1
            
            
            86
            
            
            -
            
            
            129Net
                proceeds from sale of investments
            
            
            469
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            469Investment
                in subsidiaries
            
            
            (18,086
            )
            
            -
            
            
            -
            
            
            -
            
            
            18,086
            
            
            -Net
                cash provided by (used in) investing activities
            
            
            (34,651
            )
            
            -
            
            
            (139
            )
            
            (33,959
            )
            
            18,086
            
            
            (50,663
            )Cash
                flows from financing activities:Proceeds
                from revolving loans, net
            
            
            9,596
            
            
            -
            
            
            -
            
            
            400
            
            
            -
            
            
            9,996Payments
                on long-term debt
            
            
            (31,428
            )
            
            -
            
            
            -
            
            
            (26
            )
            
            -
            
            
            (31,454
            )Payment
                of financing costs
            
            
            (375
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (375
            )Payments
                of dividends
            
            
            (534
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (534
            )Due
                to/due from parent/subsidiaries
            
            
            905
            
            
            2,037
            
            
            433
            
            
            (3,375
            )
            
            -
            
            
            -Net
                cash provided by (used in) financing activities
            
            
            (21,836
            )
            
            2,037
            
            
            433
            
            
            (3,001
            )
            
            -
            
            
            (22,367
            )Net
                increase (decrease) in cash
            
            
            (4,496
            )
            
            -
            
            
            -
            
            
            7,664
            
            
            -
            
            
            3,168Cash
                at beginning of period
            
            
            13,412
            
            
            -
            
            
            1
            
            
            6,905
            
            
            -
            
            
            20,318Cash
                at end of period
            
            $
            8,916
            
            $
            -
            
            $
            1
            
            $
            14,569
            
            $
            -
            
            $
            23,486











**Condensed
                Consolidating Statement of Cash Flows****Year
                Ended October 31, 2004**The
                Company
            
            BuickExcluding
            
            Resource
            
            Other
            
            Doe
                RunGuarantor
            
            Recycling
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Facility,
                LLC
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            CompanyNet
                cash provided by (used in) operating activities
            
            $
            16,640
            
            $
            (1,162
            )
            $
            (393
            )
            $
            4,939
            
            $
            1,573
            
            $
            21,597Cash
                flows from investing activities:Purchases
                of property, plant and equipment
            
            
            (10,699
            )
            
            -
            
            
            -
            
            
            (19,063
            )
            
            -
            
            
            (29,762
            )Net
                proceeds from disposal of assets
            
            
            28
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            28Investment
                in subsidiaries
            
            
            1,573
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,573
            )
            
            -Net
                cash used in investing activities
            
            
            (9,098
            )
            
            -
            
            
            -
            
            
            (19,063
            )
            
            (1,573
            )
            
            (29,734
            )Cash
                flows from financing activities:Proceeds
                from revolving loans, net
            
            
            8,675
            
            
            -
            
            
            -
            
            
            3,400
            
            
            -
            
            
            12,075Payments
                on long-term debt
            
            
            (1,761
            )
            
            -
            
            
            -
            
            
            (1,559
            )
            
            -
            
            
            (3,320
            )Due
                to/due from parent/subsidiaries
            
            
            (3,950
            )
            
            1,162
            
            
            394
            
            
            2,394
            
            
            -
            
            
            -Net
                cash provided by financing activities
            
            
            2,964
            
            
            1,162
            
            
            394
            
            
            4,235
            
            
            -
            
            
            8,755Net
                increase (decrease) in cash
            
            
            10,506
            
            
            -
            
            
            1
            
            
            (9,889
            )
            
            -
            
            
            618Cash
                at beginning of period
            
            
            2,906
            
            
            -
            
            
            -
            
            
            16,794
            
            
            -
            
            
            19,700Cash
                at end of period
            
            $
            13,412
            
            $
            -
            
            $
            1
            
            $
            6,905
            
            $
            -
            
            $
            20,318

















**Condensed
                Consolidating Statement of Cash Flows****Year
                Ended October 31, 2003**The
                CompanyExcluding
            
            
            
            Doe
                RunGuarantor
            
            Domestic
            
            Cayman
                and
            
            
            
            TheSubsidiaries
            
            Guarantors
            
            Subsidiary
            
            Eliminations
            
            CompanyNet
                cash provided by (used in) operating activities
            
            $
            (16,982
            )
            $
            1,825
            
            $
            15,703
            
            $
            21,902
            
            $
            22,448Cash
                flows from investing activities:Purchases
                of property, plant and equipment
            
            
            (6,061
            )
            
            (5
            )
            
            (9,283
            )
            
            -
            
            
            (15,349
            )Net
                proceeds from (expenses of) disposal of assets
            
            
            54
            
            
            -
            
            
            -
            
            
            -
            
            
            54Investment
                in subsidiaries
            
            
            21,902
            
            
            -
            
            
            -
            
            
            (21,902
            )
            
            -Net
                cash provided by (used in) investing activities
            
            
            15,895
            
            
            (5
            )
            
            (9,283
            )
            
            (21,902
            )
            
            (15,295
            )Cash
                flows from financing activities:Proceeds
                from (payments of) revolving loans, net
            
            
            14,924
            
            
            -
            
            
            (700
            )
            
            -
            
            
            14,224Payments
                on long-term debt
            
            
            (3,735
            )
            
            -
            
            
            (4,410
            )
            
            -
            
            
            (8,145
            )Payment
                of financing costs
            
            
            (550
            )
            
            -
            
            
            -
            
            
            -
            
            
            (550
            )Due
                to/due from parent/subsidiaries
            
            
            (6,646
            )
            
            (1,820
            )
            
            8,466
            
            
            -
            
            
            -Net
                cash provided by (used in) financing activities
            
            
            3,993
            
            
            (1,820
            )
            
            3,356
            
            
            -
            
            
            5,529Net
                increase in cash
            
            
            2,906
            
            
            -
            
            
            9,776
            
            
            -
            
            
            12,682Cash
                at beginning of period
            
            
            -
            
            
            -
            
            
            7,018
            
            
            -
            
            
            7,018Cash
                at end of period
            
            $
            2,906
            
            $
            -
            
            $
            16,794
            
            $
            -
            
            $
            19,700











**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Del
      Bosque, Roncal,


D’Angelo
      y Asociados


Sociedad
      Civil


Firma
      Miembro de Horwath International


Auditores
      y Consultores de Empresas


Donatello
      206 - San Borja


Lima
      41,
      Peru


Telefono
      (1) 476 6944


Fax  (1) 476
      7783


E-mail  drd-asoc@horwathperu.com





To
      the
      Shareholders


Doe
      Run
      Peru S.R.L.





We
      have
      audited the accompanying balance sheets of Doe Run Peru S.R.L. (a Peruvian
      Company subsidiary of Doe Run Cayman Ltd.) as of October 31, 2005 and 2004
      and
      the related statements of operations, changes in shareholders’ equity (deficit)
      and cash flows for the years then ended. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





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





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Doe Run Peru S.R.L. as of October
      31, 2005 and 2004, and the results of its operations and its cash flows for
      the
      years then ended in conformity with U.S. generally accepted accounting
      principles.





The
      accompanying financial statements have been prepared assuming the Company will
      continue as a going concern.  As further discussed in Note 17 to the
      financial statements, the Company has significant capital requirements under
      environmental commitments, which, if not met, could result in defaults of the
      Company’s credit agreement; has substantial contingencies related to tax; and
      has significant debt service obligations that raise substantial doubt about
      the
      Company’s ability to continue as a going concern.  Management’s plans in
      regard to these matters are also described in Note 17.  The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





Lima,
      Peru





February
      10, 2006





Countersigned
      by





/s/
                Raúl D’Angelo A.
            (partner)Raúl
                D’Angelo A.Peruvian
                Public AccountantRegistration
                No. 2896








KPMG


**Caipo
      y Asociados**


Av
      Javier
      Prado Oeste 203 San Isidro


Lima
      27,
      Peru


Telefono  51
      (1)
      611 3000


Fax   51
      (1)
      421 6943


Internet   www.pc.kpmg.com





REPORT
      OF INDEPENDENT PUBLIC ACCOUNTING FIRM












To
      the
      Shareholders


Doe
      Run
      Peru S.R.L.:





We
      have
      audited the accompanying consolidated balance sheet of Doe Run Peru S.R.L.
      (a
      Peruvian Company) as of October 31, 2003, and the related consolidated
      statements of operations, changes in shareholders’ equity (deficit), and cash
      flows for each of the years in the two-year period ended October 31, 2003.
      These
      consolidated financial statements are the responsibility of the Company’s
      management.  Our responsibility is to express an opinion on these
      consolidated financial statements based on our audits.





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







In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Doe Run Peru S.R.L. as
      of
      October 31, 2003, and the results of their operations and their cash flows
      for
      each of the years in the two-year period ended October 31, 2003 in conformity
      with U.S. generally accepted accounting principles.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 17 to the
      consolidated financial statements, the Company has jointly and severally, fully,
      unconditionally guaranteed notes issued by Doe Run Resources. Also, the Company
      has suffered recurring losses and has a net capital deficiency. These
      conditions, along with other matters as set forth in note 17, indicate the
      existence of material uncertainties that raises substantial doubt about its
      ability to continue as going concern. Management’s plans in regards to these
      matters are also described in Note 17. The consolidated financial statements
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.







As
      discussed in Note 3 to the consolidated financial statements, the Company
      adopted the provisions of SFAS No. 143 *Accounting
      for Asset Retirement Obligations,* as
      of
      November 1, 2002.





Lima,
      Peru





February
      4, 2004





Countersigned
      by:





/s/
      Juan Jose Cordova


Juan
      José
Córdova (Partner)


Peruvian
      Public Accountant


Registration
      No 18869








**DOE
      RUN PERU S.R.L.**


**Balance
      Sheets**


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





**October
                31,****2005**
            
            **2004****ASSETS**Current
                assets:Cash
            
            $
            14,569
            
            $
            6,905Trade
                accounts receivable, net of allowance for doubtful accounts
              of
                $0 and $838 at October 31, 2005 and 2004
            
            
            31,637
            
            
            22,217Inventories
            
            
            68,756
            
            
            65,876Prepaid
                expenses and other current assets
            
            
            16,191
            
            
            15,901Total
                current assets
            
            
            131,153
            
            
            110,899Property,
                plant and equipment, net
            
            
            161,563
            
            
            140,743Other
                non current assets, net
            
            
            -
            
            
            122Total
                assets
            
            $
            292,716
            
            $
            251,764**LIABILITIES
                AND SHAREHOLDERS’ DEFICIT**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            39,821
            
            $
            39,400Accounts
                payable
            
            
            67,115
            
            
            44,092Accrued
                liabilities
            
            
            31,200
            
            
            27,199Due
                to related parties
            
            
            143,063
            
            
            143,063Total
                current liabilities
            
            
            281,199
            
            
            253,754Due
                to parent company and related parties
            
            
            14,057
            
            
            17,432Other
                non current liabilities
            
            
            3,466
            
            
            3,460Total
                liabilities
            
            
            298,722
            
            
            274,646Shareholders’
                deficit:Capital
                stock, $ 0.01 par value, 15,912,083,739 shares, fully paid
            
            
            2,005
            
            
            2,005Accumulated
                deficit
            
            
            (8,011
            )
            
            (24,887
            )Total
                shareholders’ deficit
            
            
            (6,006
            )
            
            (22,882
            )Total
                liabilities and shareholders’ deficit
            
            $
            292,716
            
            $
            251,764





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





**DOE
      RUN PERU S.R.L.**


**Statements
      of Operations**


**(U.S.
      dollars in thousands)**





**Year
                ended October 31,****2005**
            
            **2004**
            
            **2003**Net
                sales
            
            $
            650,840
            
            $
            567,185
            
            $
            436,980Costs
                and expenses:Costs
                of sales
            
            
            601,949
            
            
            531,195
            
            
            421,655Depreciation
            
            
            12,234
            
            
            11,972
            
            
            11,809Fees
                and commissions to related parties
            
            
            -
            
            
            7,838
            
            
            9,550Selling,
                general and administrative expenses
            
            
            17,291
            
            
            12,819
            
            
            11,377Exploration
            
            
            84
            
            
            133
            
            
            -Losses
                from impairment/disposal of long-lived assets
            
            
            543
            
            
            31
            
            
            88Unrealized
                (gain) loss on derivatives
            
            
            503
            
            
            (6
            )
            
            58Total
                costs and expenses
            
            
            632,604
            
            
            563,982
            
            
            454,537Income
                (loss) from operations
            
            
            18,236
            
            
            3,203
            
            
            (17,557
            )Other
                income (expense):Interest
                expense
            
            
            (1,955
            )
            
            (2,176
            )
            
            (2,564
            )Interest
                income
            
            
            106
            
            
            17
            
            
            21Exchange
                gain (loss)
            
            
            241
            
            
            (471
            )
            
            (157
            )Other,
                net
            
            
            248
            
            
            (263
            )
            
            (151
            )(1,360
            )
            
            (2,893
            )
            
            (2,851
            )Income
                (loss) before cumulative effect of change in
              accounting
                principle
            
            
            16,876
            
            
            310
            
            
            (20,408
            )Cumulative
                effect of change in accounting principle, net of
              income
                tax benefit
            
            
            -
            
            
            -
            
            
            (92
            )Net
                income (loss)
            
            $
            16,876
            
            $
            310
            
            $
            (20,500
            )





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





**DOE
      RUN PERU S.R.L.**


**Statements
      of Changes in Shareholders’ Equity (Deficit)**


**For
      the Years Ended October 31, 2005, 2004 and 2003**


**(U.S.
      dollars in thousands)**





**Capital**
              **Stock**
            
            **Accumulated
                Deficit**
            
            **Total**Balance
                as of October 31, 2002
            
            $
            2,005
            
            $
            (4,697
            )
            $
            (2,692
            )Net
                loss
            
            
            -
            
            
            (20,500
            )
            
            (20,500
            )Balance
                as of October 31, 2003
            
            
            2,005
            
            
            (25,197
            )
            
            (23,192
            )Net
                income
            
            
            -
            
            
            310
            
            
            310Balance
                as of October 31, 2004
            
            
            2,005
            
            
            (24,887
            )
            
            (22,882
            )Net
                income
            
            
            -
            
            
            16,876
            
            
            16,876Balance
                as of October 31, 2005
            
            $
            2,005
            
            $
            (8,011
            )
            $
            (6,006
            )





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








**DOE
      RUN PERU S.R.L.**


**Statements
      of Cash Flows**


**(U.S.
      dollars in thousands)**





**Year
                ended October 31,****2005**
            
            **2004**
            
            **2003**Cash
                flows from operating activities:Net
                income (loss)
            
            $
            16,876
            
            $
            310
            
            $
            (20,500
            )Cumulative
                effect of change in accounting principle
            
            
            -
            
            
            -
            
            
            92Adjustments
                to reconcile net income (loss) to net cash
              provided
                by operating activities:Depreciation
            
            
            12,234
            
            
            11,972
            
            
            11,809Amortization
                of deferred financing fees
            
            
            122
            
            
            133
            
            
            133Unrealized
                (gain) loss on derivatives
            
            
            503
            
            
            (6
            )
            
            58Losses
                from impairment and disposal of long-lived
              assets
            
            
            543
            
            
            31
            
            
            88Increase
                (decrease) resulting from changes in:Trade
                accounts receivable
            
            
            (9,420
            )
            
            (5,235
            )
            
            8,279Inventories
            
            
            (2,465
            )
            
            (11,795
            )
            
            5,130Prepaid
                expenses and other current assets
            
            
            (290
            )
            
            (7,548
            )
            
            3,402Accounts
                payable
            
            
            23,023
            
            
            12,667
            
            
            4,636Accrued
                liabilities
            
            
            3,498
            
            
            4,187
            
            
            2,418Other
                non-current assets and liabilities
            
            
            -
            
            
            223
            
            
            158Net
                cash provided by operating activities
            
            
            44,624
            
            
            4,939
            
            
            15,703Cash
                flows from investing activities:Purchases
                of property, plant and equipment
            
            
            (34,045
            )
            
            (19,063
            )
            
            (9,283
            )Proceeds
                from sale of assets
            
            
            86
            
            
            -
            
            
            -Net
                cash used in investing activities
            
            
            (33,959
            )
            
            (19,063
            )
            
            (9,283
            )Cash
                flows from financing activities:Proceeds
                from (payments on) revolving loans, net
            
            
            400
            
            
            3,400
            
            
            (700
            )Payments
                on long term debt
            
            
            (26
            )
            
            (1,559
            )
            
            (4,410
            )Increase
                (decrease) in amount due to related parties
            
            
            (3,375
            )
            
            2,394
            
            
            8,466Net
                cash provided by (used in) financing activities
            
            
            (3,001
            )
            
            4,235
            
            
            3,356Net
                increase (decrease) in cash
            
            
            7,664
            
            
            (9,889
            )
            
            9,776Cash
                at beginning of year
            
            
            6,905
            
            
            16,794
            
            
            7,018Cash
                at end of year
            
            $
            14,569
            
            $
            6,905
            
            $
            16,794Supplemental
                disclosure of cash flow informationCash
                paid during the period for:Interest
            
            $
            1,783
            
            $
            2,071
            
            $
            2,393Peruvian
                income tax
            
            $
            -
            
            $
            -
            
            $
            -





The
      accompanying notes are integral part of these financial statements.












**DOE
      RUN PERU S.R.L.**





**Notes
      to Financial Statements**


**October
      31, 2005, 2004 and 2003**


**(U.S.
      dollars and nuevos soles in thousands, except share data)**




**(1)**  **Nature
      of Business**





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





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





**(2)  Basis
      of Presentation**





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





***Use
      of Estimates***




The
      preparation of financial statements in conformity with U.S. GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities, the disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting periods. Actual results could differ from these
      estimates.





**(3)  Summary
      of Significant Accounting Policies**





***Inventories***





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





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





***Property,
      Plant and Equipment***





Property,
      plant and equipment are recorded at cost. In accordance with Statement of
      Financial Accounting Standards Statement No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      long-lived assets are reviewed for impairment when events or circumstances
      indicate that the carrying amount of the assets may not be recoverable. The
      impairment loss on such assets, as well as long-lived assets and certain
      identifiable intangibles to be disposed of, is measured as the amount by which
      the carrying value of the assets exceeds the fair value of the
      assets.





Recoverability
      of assets to be held and used is measured by a comparison of the carrying amount
      of an asset to the estimated undiscounted future cash flows expected to be
      generated by the asset. If the carrying amount of an asset exceeds its estimated
      future cash flows, an impairment charge is recognized by the amount by which
      the
      carrying amount of the asset exceeds the fair value of the asset. Assets to
      be
      disposed of would be separately presented in the balance sheet and reported
      at
      the lower of the carrying amount or fair value less costs to sell, and are
      no
      longer depreciated. The assets and liabilities of a disposed group classified
      as
      held for sale are presented separately in the appropriate asset and liability
      sections of the balance sheet.












Major
      additions and improvements to property, plant and equipment are capitalized,
      at
      cost, when they significantly increase the productive capacity or the life
      of
      the asset. Repair and maintenance expenditures which are routine, unanticipated,
      or for which the timing cannot be estimated, and which do not extend the useful
      life or increase the productive capacity of the asset, are charged to operations
      as incurred.





Interest
      incurred for the direct or indirect debt for the construction of assets to
      be
      used in operations is capitalized when the interest is charged. The amount
      of
      interest capitalized was $763, $112, and $206 for the years ended October 31,
      2005, 2004 and 2003, respectively.





Costs
      to
      treat environmental contamination are capitalized when they extend the life,
      increase the capacity, or improve the safety or efficiency of the property;
      when
      they mitigate or prevent future environmental contamination or when they are
      incurred in preparing property for sale.





Depreciation
      is calculated on a straight-line basis at the rates indicated in Note
      7.





***Exploration
      and Development Costs***





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





***Reclamation
      and Mine Closure Costs***





The
      Company’s mining and smelting facilities are subject to governance by various
      agencies that have established minimum standards for reclamation.





As
      of
      November 1, 2002 the Company adopted Financial Accounting Standards Statement
      No. 143, *Accounting
      for Asset Retirement Obligations* (Statement
      No. 143), which addresses financial accounting and reporting for obligations
      associated with the retirement of tangible long-lived assets and the associated
      asset retirement costs. The standard applies to legal obligations associated
      with the retirement of long-lived assets that result from the acquisition,
      construction, development and/or normal use of the asset.





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





The
      cumulative effect related to the adoption of Statement No. 143 for the year
      ended October 31, 2003 was a loss of $92, a net decrease to plant, property
      and
      equipment of $1,613, and a decrease of $1,521 to the liability for asset
      retirement obligations.





***Commitments
      and Contingencies***





The
      Company accrues for loss contingencies, including costs associated with
      environmental remediation obligations, when it is probable that a liability
      has
      been incurred and can be reasonably estimated. Liability estimates for
      environmental remediation obligations are based on an evaluation of, among
      other
      factors, currently available facts, existing technology, presently enacted
      laws
      and regulations and the Company’s experience in remediation. Costs of future
      expenditures for environmental remediation obligations are not discounted to
      their present value.










***Revenue
      Recognition***





Sales
      are
      recorded as products are delivered to customers as defined in the specific
      contracts or as tolling services are performed. Concentrate and certain smelter
      product sales are recorded based upon estimated weights and metal contents
      and
      metal prices in effect at the time of delivery. Revenues are adjusted between
      the month of delivery and the month of settlement based on changes in market
      prices. Adjustments with respect to such sales are recorded based on final
      settlement weights, metal contents and metal prices using applicable customer
      agreements.





***Derivative
      Instruments and Hedging Activities***





Statement
      of Financial Accounting Standards No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      was
      issued by the Financial Accounting Standards Board in June 1998, and amended
      by
      Statement No. 138, *Accounting
      for Certain Derivative Instruments and Certain Hedging Activities, an amendment
      of FASB Statement No. 133* ,
      issued
      in June 2000 (collectively, Statement No. 133). Under Statement No. 133, the
      Company carries all derivative instruments in the balance sheet at fair value.
      The accounting for changes in the fair value (i.e. gains and losses) of a
      derivative instrument depends on whether it has been designated and qualifies
      as
      part of a hedging relationship, and if so, whether the derivative instrument
      is
      designated as a hedge of exposures to changes in fair values, or cash flows.
      If
      the hedged exposure is an exposure to changes in the fair value of a fixed
      commitment, the gain (loss) is recognized in earnings in the period of change,
      with an equal and offsetting (loss) gain recognized on the change in value
      of
      the hedged item. If the hedged exposure is an exposure to changes in forecasted
      cash flows, the effective portion of the gain (loss) is reported as a component
      of other comprehensive income (outside earnings) until the forecasted hedged
      transaction affects earnings, when it is reclassified into
      earnings.





***Deferred
      Income Taxes***





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





***Deferred
      Workers’ Profit Sharing***





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





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





***Reclassifications***





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





**(4)  Remeasurement
      into U.S. Dollars**





The
      methodology utilized for the remeasurement of nuevos soles (S/) into U.S.
      dollars, as established by Statement of Financial Accounting Standards No.
      52, *Foreign
      Currency Translation* ,
      is as
      follows:





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





(b)
            Monetary
                accounts in Peruvian currency have been remeasured at free market
                average
                exchange rates in effect at the respective year-end. See Note
                5.












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





**(5)  Foreign
      Currency Transaction and Exchange Risk Exposure**





Under
      current law, foreign currency transactions are made through the Peruvian
      financial banking system at free market exchange rates. The exchange rates
      in
      effect were S/3.380, S/3.325 and S/3.473 to U.S. dollar for assets at October
      31, 2005, 2004 and 2003, respectively, and S/3.376, S/3.322 and S/3.472 to
      U.S.
      dollar for liabilities at October 31, 2005, 2004 and 2003,
      respectively.





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




**October
                  31,****2005**
              
              **2004**
              
              **2003**Assets:Cash
              
              
              S/
                  13,557
              
              
              S/221
              
              
              S/
                  10,463Prepaid
                  expenses and other current assets
              
              
              3,404
              
              
              3,213
              
              
              5,53316,961
              
              
              3,434
              
              
              15,996Liabilities:Accounts
                  payable
              
              
              6,794
              
              
              3,207
              
              
              5,567Accrued
                  liabilities
              
              
              41,362
              
              
              37,915
              
              
              37,17648,156
              
              
              41,122
              
              
              42,743Net
                  position
              
              
              S/
                  (31,195
              )
              
              S/
                  (37,688
              )
              
              S/
                  (26,747
              )





The
      Company recorded net foreign currency transaction gains (losses) relating to
      transactions denominated in Peruvian nuevos soles of $241 for the year ended
      October 31, 2005, $(471) for the year ended October 31, 2004 and $(157) for
      the
      year ended October 31, 2003, which have been reflected in the statements of
      operations.





**(6)  Inventories**





Inventories
      consist of the following:





**October
                31,****2005**
            
            **2004**Refined
                metals for sale
            
            $
            10,397
            
            $
            8,356Metals
                and concentrates in process
            
            
            44,668
            
            
            44,523Materials,
                supplies and spare parts
            
            
            13,691
            
            
            12,997$
            68,756
            
            $
            65,876





Materials,
      supplies and spare parts are stated net of reserves for obsolescence of $1,162
      and $1,436 at October 31, 2005 and 2004, respectively.





The
      FIFO
      cost of inventories, valued under the LIFO cost method, were approximately
      $97,122 and $78,977 at October 31, 2005 and 2004, respectively. If the FIFO
      cost
      method had been used to determine cost, inventories would have been $42,789
      and
      $26,417 higher at October 31, 2005 and 2004, respectively.












As
      a
      result of reducing certain inventory quantities valued on the LIFO basis in
      2003, inventory costs prevailing in previous years was charged to cost of sales.
      The Company calculates the effect of LIFO liquidations on results of operations
      based on the current cost method. The effects of this liquidation on the results
      of operations in the year ended October 31, 2003 was not
      significant.





**(7)  Property,
      Plant and Equipment, Net**





Property,
      plant and equipment consists of the following:





**Average
                Annual****Depreciation**
            
            **October
                31,****Rate**
            
            **2005**
            
            **2004**Cost:Land
            
            
            -
            
            $
            5,847
            
            $
            5,847Buildings
                and improvements
            
            
            5%
                and 10
            %
            
            41,051
            
            
            35,966Machinery
                and equipment
            
            
            6.67
            %
            
            104,957
            
            
            105,317Transportation
                units
            
            
            33.33
            %
            
            4,176
            
            
            4,147Other
                equipment
            
            
            10%
                and 20
            %
            
            21,477
            
            
            20,328Construction
                in progress
            
            
            -
            
            
            63,911
            
            
            37,252241,419
            
            
            208,857Less
                accumulated depreciation
            
            
            
            
            
            79,856
            
            
            68,114$
            161,563
            
            $
            140,743





The
      implementation of Statement No. 143 resulted in changes to the estimates of
      expected cash flows related to asset retirement obligations resulted in an
      additional decrease to plant, property and equipment of $0, $0, and $600 as
      of
      October 31, 2005, 2004 and 2003, respectively. See additional disclosures
      related to Statement No. 143 in Note 12.





**(8)  Accrued
      Liabilities**





Accrued
      liabilities consist of the following:


**October
                31,****2005**
            
            **2004**Salaries,
                wages and employee benefits
            
            $
            11,228
            
            $
            10,513Accounts
                payable to contractors
            
            
            7,061
            
            
            5,983Income
                taxes payable
            
            
            1,601
            
            
            1,601Due
                to power company
            
            
            3,863
            
            
            4,415Other
                accrued liabilities
            
            
            7,447
            
            
            4,687$
            31,200
            
            $
            27,199












**(9)  Debt**





Long-term
      debt consists of the following:


**October
                31,****2005**
            
            **2004**Revolving
                credit facility
            
            $
            39,800
            
            $
            39,400Capital
                leases
            
            
            21
            
            
            -39,821
            
            
            39,400Less
                current maturities
            
            
            39,821
            
            
            39,400Long-term
                debt, less current maturities
            
            $
            -
            
            $
            -000





There
      is
      a long-term portion of the capital lease in the amount of $6 which is included
      in “Other non current liabilities” on the Balance Sheet.





The
      revolving credit facility (the Doe Run Peru Revolving Credit Facility) allows
      Doe Run Peru to borrow up to $40,000 for working capital, with a limit on
      letters of credit of $5,000 and expire on November 23, 2005. The Doe Run Peru
      Revolving Credit Facility bears interest at LIBOR (1-month, 3-month or 6-month
      rate, depending on the term of the loan) plus 3.5% per annum for an effective
      rate of 7.59% at October 31, 2005. An unused line fee of 0.375% per annum on
      the
      average unused portion of the line is payable quarterly, in arrears. The Doe
      Run
      Peru Revolving Credit Facility is secured by accounts receivable and
      inventories. Availability of loans under the facility is limited to a percentage
      of Doe Run Peru’s eligible accounts receivable and eligible inventories, less
      any outstanding loans and letters of credit. Revolving loans outstanding under
      the Doe Run Peru Revolving Credit Facility were $39,800 and $39,400 at October
      31, 2005 and 2004, respectively. The availability was approximately $200 and
      $60
      at October 31, 2005 and 2004, respectively.





On
      November 22, 2005 Doe Run Peru entered into an amendment of its revolving credit
      facility which extended the maturity date of the Doe Run Peru Revolving Credit
      Facility to December 15, 2005.





On
      December 15, 2005, Doe Run Peru entered into an amendment of its revolving
      credit facility. The amendment extended the maturity date to June 23, 2006
      with
      certain conditions precedent, that if met would extend the maturity date to
      September 23, 2006. The conditions precedent are, that the PAMA extension be
      approved, that Doe Run Peru diligently seek financing to replace the existing
      credit line and that Doe Run Peru obtain the letter of guarantee required by
      the
      Peruvian government if the PAMA extension is approved. The amendment also
      changed the interest rates to LIBOR (1-month, 2-month or 3-month rate, depending
      on the term of the loan) plus 3.5%, 3.75% and 4.25%, respectively, per annum.
      The amendment also allows Doe Run Peru an additional indebtedness and the
      ability to create a trust account to administer the receipts and disbursements
      related to the PAMA project.





The
      Doe
      Run Peru Revolving Credit Facility contains certain covenants governing minimum
      net worth requirements, limitations on indebtedness and investments, capital
      expenditures, and restrictions on the payments of dividends in the event of
      default. The Company was in compliance with all of the covenants as of October
      31, 2005.





If
      Doe
      Run Peru is not successful with its administrative appeal of the tax assessment
      discussed in Note 10, the lender can, at its discretion, require that the amount
      of the assessment reduce net worth as defined under Doe Run Peru’s Revolving
      Credit Facility. Such reduction along with other factors, including results
      of
      operations, would affect Doe Run Peru’s ability to comply with the net worth
      requirement.





In
      2002,
      The Doe Run Resources Corporation (Doe Run), Doe Run Cayman’s parent, tendered a
      special term deposit in payment of a loan made to Doe Run Peru by a foreign
      bank, and, in return, Doe Run Peru delivered an intercompany note to Doe Run
      in
      an equivalent amount, plus accrued and unpaid interest, for an aggregate balance
      of $139,063. This intercompany note will not bear interest during the term
      of
      the Doe Run Peru Revolving Credit Facility. The due date of the intercompany
      note is December 1, 2006, however obligations under the intercompany note are
      subordinate to obligations under the Doe Run Peru Revolving Credit Facility.












On
      January 16, 2006, Doe Run Peru entered into an amendment to the intercompany
      note which extended the due date to December 9, 2006. This balance of this
      note
      is in current liabilities under due to related parties.





**(10)  Taxation**





Doe
      Run
      Cayman is subject to the regulations of the Cayman Islands, which currently
      have
      no corporate income or capital gains tax. Doe Run Cayman’s subsidiaries located
      in Peru are subject to Peruvian taxation. The statutory income tax rate in
      Peru
      is 30%. Doe Run Peru is a party to a Tax Stabilization Agreement and a Contract
      of Guarantees and Measures to Promote Investments with the Peruvian Government
      as follows:







***Tax
      Stabilization Agreement***




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




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




·
            Custom
                duties will be calculated at rates ranging from 12% to
                20%.




·
            Free
                trade of its products.




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




·
            Free
                conversion of foreign currency generated by local
                sales.




·
            No
                discrimination in foreign currency
                transactions.




***Contract
      of Guarantees and Measures to Promote Investments***




On
      December 30, 1997, Doe Run Peru signed a Contract of Guarantees and Measures
      to
      Promote Investments, as modified in 2005. This agreement is effective beginning
      in the calendar year ended December 31, 2007, provided that Doe Run Peru
      complies with the committed investments related to the improvements of the
      facilities, and provides tax stability through December 31, 2021. The principal
      provisions are similar to those established in the Tax Stabilization Agreement,
      except that Doe Run Peru will utilize the tax statutes prevailing as of December
      23, 1997.




The
      last
      accepted modification of the current contract requires Doe Run Peru to spend
      a
      total $108,442 on a specific set of projects. Included in this list of projects
      is a portion of the total sulfuric acid plant cost of $39,000. All expenditures
      for this contract must be completed by December 31, 2006. Through October 31,
      2005, Doe Run Peru had invested $117,315 on projects within the projects list
      of
      this contract. Even though the total spending has been exceeded, specific
      projects expenditures on the list have not been accomplished. As of October
      31,
      2005 only $4,600 of the $39,000 has been spent on a new sulfuric acid plant.
      Under the current agreement the remaining $34,400 must be spent by December
      31,
      2006.




On
      August
      23, 2005, Doe Run Peru filed for a modification to the contract, to reduce
      the
      total investment commitment to $102,342. This modification included addition
      of
      some projects and reduction of others. Included in the reduction was a reduction
      of the sulfuric acid plant project from $39,000 to $5,600. On January 19, 2006
      the Energy and Mines Ministry ruled on the modification and did not approve
      the
      reduction, but did approve certain new projects expenditures. As a result of
      the
      January 19, 2006 ruling, the overall commitment under the modification is now
      $133,542 which still includes a sulfuric acid plant commitment of $39,000.
      On
      February 9, 2006, Doe Run Peru filed before the Mining Council of the Mining
      Ministry an appeal against this ruling. Doe Run Peru is expecting reductions,
      one of which reduction is the sulfuric acid plant investment to $5,600. With
      these changes the total investment amount to meet the contract will be reduced
      to $95,642, with remaining specific project investments required by December
      31,
      2006 of $17,000.











***Peruvian
      Income Tax***




The
      Company had no expense relating to Peruvian income tax for the years ended
      October 31, 2005, 2004 and 2003, due to changes in valuation allowance described
      below.




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




**Year
                  ended October 31,****2005**
              
              **2004**
              
              **2003**Income
                  tax expense at statutory rate
              
              $
              5,063
              
              $
              93
              
              $
              (6,122
              )Increase
                  (reduction) in income tax expenseResulting
                  from:Change
                  in valuation allowance
              
              
              (9,686
              )
              
              (1,287
              )
              
              5,473Other,
                  net
              
              
              4,623
              
              
              1,194
              
              
              649$
              -
              
              $
              -
              
              $
              -


***Deferred
      Taxes***




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





**October
                31,****2005**
            
            **2004**Deferred
                tax assets:Trade
                accounts receivable
            
            $
            787
            
            $
            -Inventories
            
            
            12,378
            
            
            7,865Property,
                plant and equipment
            
            
            9,721
            
            
            6,565Accrued
                liabilities
            
            
            2,479
            
            
            2,488Tax
                loss carryforwards
            
            
            14,178
            
            
            27,344Other
                noncurrent assets and liabilities
            
            
            1,038
            
            
            1,03540,581
            
            
            45,297Less
                valuation allowance
            
            
            (29,034
            )
            
            (38,720
            )Total
                deferred tax assets
            
            
            11,547
            
            
            6,577Deferred
                tax liabilities:Property,
                plant and equipment
            
            
            (11,547
            )
            
            (6,577
            )Total
                deferred tax liabilities
            
            
            (11,547
            )
            
            (6,577
            )Net
                deferred tax assets
            
            $
            -
            
            $
            -





The
      deferred tax assets and liabilities related to property, plant and equipment
      are
      principally due to differences in book and tax allocations of the excess of
      the
      fair value of the sum of assets acquired, less liabilities assumed over the
      purchase price paid and accelerated depreciation methods used for tax
      purposes.












The
      net
      operating loss carryforwards may be offset against the taxable income that
      the
      Company obtains up to December 31, 2007, inclusive.





Management
      believes that sufficient uncertainty exists regarding the realization of certain
      deferred tax assets that a valuation allowance is required. The valuation
      allowance decreased $9,686 and $1,287 for the years ended October 31, 2005
      and
      2004, respectively and increased $5,473 for the year ended October 31,
      2003.




***Tax
      Assessments***




Doe
      Run
      Peru has received income tax assessments from Peru’s tax authority, SUNAT for
      tax years 1998 through 2001. The assessments primarily relate to Doe Run Peru’s
      income tax treatment of the December 1997 merger of Doe Run Peru and Metaloroya
      S.A., which was purchased by Doe Run Peru in October 1997, and its effects
      on
      subsequent years’ taxable income. Under the assessment by SUNAT, the tax basis
      of Doe Run Peru’s fixed assets acquired would decrease, resulting in lower tax
      depreciation expense than originally claimed. The estimated assessed amount
      consisting of additional income taxes due, penalties and interest as of October
      31, 2005 totals approximately $109,030. The Company estimates that the effect
      of
      a similar assessment for tax years after 2001 would be approximately $30,300.
      Furthermore, Doe Run Peru would also be required to make additional workers’
profit sharing payments equal to 8% of the increase in taxable income generated
      by the changes discussed above, or approximately $11,200 for calendar years
      1998
      through 2005.





Doe
      Run
      Peru has also received Value Added Tax (VAT) assessments for the tax years
      1999
      through 2001 and for the period from January through July 2004. The assessments
      primarily relate to Doe Run Peru’s exports with holding certificates and
      differences in a tax credit application. The total assessment for these periods
      was approximately $43,489. SUNAT offset the amount assessed for 2004 of
      approximately $2,300 against Doe Run Peru’s VAT receivable balance from July
      2004. Future VAT reimbursements cannot be used to offset the assessment by
      SUNAT. The Company discontinued the use of holding certificates for exports
      in
      June 2004. The Company estimates expected additional assessments related to
      VAT
      for tax years 2002 and 2003 to total approximately $20,166 in regard to its
      exports with holding certificates.





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





**(11)  Employee
      Benefits**





***Severance
      Indemnities***





Doe
      Run
      Peru is required to make semi-annual deposits into a bank account for severance
      indemnity benefits for Peruvian employees under Peruvian government regulations.
      The balance in the account represents the full benefit due to such employees
      upon termination. The Company accrues for the additional amount that would
      be
      contributed to the account since the last deposit date as if all such employees
      were to terminate as of the balance sheet date. The Company’s expense related to
      severance indemnity benefits was $3,523, $3,428 and $3,974 for the years ended
      October 31, 2005, 2004 and 2003, respectively.





***Workers’
      Profit Sharing***





In
      accordance with government regulations in Peru, employees are entitled to
      receive 8% of the Doe Run Peru’s taxable income, 50% of which is distributed to
      employees based on number of days worked, and the remaining distributed in
      proportion to their salaries. Such profit sharing, which is tax deductible,
      is
      limited to 18 times the annual salary for each worker. Any excess is to be
      reserved and used for training of the workers. The Company had no expense
      relating to workers’ profit sharing payments for the years ended October 31,
      2005, 2004 and 2003, due to tax loss or offset of taxable income by tax loss
      carryforwards. See Note 10 for further discussion.












**(12)
      Commitments and Contingencies**





***Environmental
      Matters***





Doe
      Run
      Peru’s La Oroya operations historically and currently exceed some of the
      applicable Ministry of Energy and Mines (MEM) maximum permissible limits
      pertaining to air emissions and wastewater effluent quality. Prior to our
      acquisition of La Oroya, Metaloroya S.A., the former owner, a subsidiary of
      Empresa Mineral del Centro del Peru S.A which we refer to as (Centomin),
      received approval from the Peruvian government for an Environmental Remediation
      and Management Program, known as a PAMA. The PAMA was designed to achieve
      compliance with MEM’s air and wastewater limits. It consisted of an
      environmental impact analysis, monitoring plan and data, mitigation measures
      and
      a closure plan. The PAMA also sets forth the actions and corresponding annual
      investments the concession holder agrees to undertake in order to achieve
      compliance with the maximum permissible limits prior to expiration of the PAMA
      (ten years for smelters, such as Doe Run Peru’s operations in La Oroya, and five
      years for any other type of mining or metallurgical operation like Cobriza).
      The
      PAMA projects, which are more fully discussed below, have been designed to
      achieve compliance with these requirements. The Peruvian government may, in
      the
      future, require compliance with additional environmental regulations that could
      adversely affect Doe Run Peru’s business, financial condition and results of
      operations. After expiration of the PAMA, the operator must comply with all
      applicable standards and requirements. Because these costs improve the property
      or prevent future environmental contamination, they are
      capitalized.





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





·
            Construct
                new sulfuric acid plants;


·
            Construct
                a treatment plant for the copper refinery
                effluent;


·
            Construct
                an industrial wastewater treatment plant for the smelter and
                refinery;


·
            Improve
                the slag handling system;


·
            Improve
                Huanchan lead and copper slag
                deposits;


·
            Construct
                an arsenic trioxide deposit;


·
            Improve
                the zinc ferrite disposal site;


·
            Construct
                domestic wastewater treatment and domestic waste disposal;
                and


·
            Construct
                a monitoring station.





An
      investment schedule in the PAMA provides a specific plan for achieving the
      applicable MEM maximum permissible limits pertaining to air emissions and
      wastewater effluent quality. The PAMA may be modified and amended as to the
      actual design and timing of projects to be implemented, provided compliance
      with
      the applicable maximum permissible limits is achieved by December 31, 2006.
      The
      required estimated spending for the projects approved in the La Oroya PAMA,
      as
      amended on January 25, 2002, is $108,000 for calendar 2006.





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





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





Pursuant
      to the Supreme Decree, the application for a PAMA extension must be supported
      by
      a health risk study performed by a third party. The application must contain
      an
      engineering description and funding plan of any project to be extended, a
      discussion of how and when environmental emission standards will be met, a
      plan
      to monitor emissions with the participation of the community, proof that at
      least three public workshops were held in various districts to provide
      information on Doe Run Peru’s financial situation and health programs, proof
      that two public hearings were held regarding











the
      extension plans, and other financial information.
      Upon meeting these requirements, Doe Run Peru applied for an extension on
      December 20, 2005.


Upon
      approval of a modified PAMA, Doe Run Peru would be required to create a trust
      account to administer the receipts and disbursements related to the extended
      PAMA. The Supreme Decree requires that receipts from sales be remitted monthly
      directly to the trust account, in an amount sufficient to fund the month’s cash
      requirements of the extended PAMA.





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





To
      achieve the financial guarantee and the trust contract required by Supreme
      Decree, the company has amended the Doe Run Peru Revolving Credit Facility
      to
      allow for those arrangements and has filed a draft of a trust guarantee contract
      with a local bank. Additionally, on December 10, 2005 the company signed a
      Working Capital Financial Facility Agreement for the amount of $30,000 (named
      Ferrites Loan) with Servicios Mineros Integrados S.A.C., a Trafigura Beheer
      B.V.
      subsidiary, to use such funds in the fulfillment of the financial security
      as
      mentioned above.





Doe
      Run
      Peru has performed other environmental projects to reduce fugitive emissions
      in
      2005 including the installation work on the short rotary furnace, enclosing
      the
      blast furnace and dross plant, along with other complementary work. Major
      projects scheduled for fiscal year 2006 include an upgrade of the ventilation
      system in the sinter plant, completion of the enclosure work around the lead
      and
      dross furnace, the enclosure of the anode residue plant along with the
      elimination of its nitrous gases, and the reduction of fugitive emissions from
      the copper and lead beds. The total cost of the currently remaining PAMA
      projects, including the sulfuric acid plant construction, and these projects
      is
      approximately $130,000.





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





In
      the
      future, as part of a modernization plan and to enrich sulfurous gas feed to
      the
      sulfuric acid plant, we are planning to replace the oxy-fuel reverberatory
      furnace with a reactor furnace to smelt copper concentrates. The anticipated
      cost is approximately $57 million.





The
      PAMA
      projects have been designed to achieve compliance with the maximum permissible
      limits of emission prior to the expiration of the PAMA. However, no assurance
      can be given that implementation of the PAMA projects is feasible or that their
      implementation will achieve compliance with the applicable legal requirements
      by
      the end of the PAMA period. Furthermore, there can be no assurance that the
      Peruvian government will not in the future require compliance with additional
      or
      different environmental obligations that could adversely affect Doe Run Peru’s
      business, financial condition and results of operations.





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





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





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












***Asset
      Retirement Obligations***




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







Mine
      Closure Law No. 28090 (Law) became effective as of October 15, 2005.  The
      Law establishes the obligations and procedures that titleholders of mining
      activities must adhere to .including a financial guarantee for environmental
      issues.   Doe Run Peru must be submitted a mine closure plan to the
      Ministry of Energy and Mines by August 17, 2006.  The mine closure plan
      must include a description of the remediation measures to be done, along with
      their cost and timing, and the expected amount of the financial guarantee.
      Pursuant to the Tax Stabilization Agreement, Doe Run Peru is exempt from new
      obligations that could result in a reduction of its cash availability, such
      as
      the guarantee discussed above.  Therefore, Doe Run Peru considers that the
      establishment of the corresponding environmental guarantee would be in
      opposition to the provisions set forth in the Tax Stabilization
      Agreement.





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





Activity
      related to Doe Run Peru’s AROs for the years ended October 31, 2005 and 2004 are
      as follows:





**October
                31,****2005**
            
            **2004**AROs
                as of beginning of year
            
            $
            1,866
            
            $
            1,643Accretion
                expense
            
            
            -
            
            
            223AROs
                as of end of year
            
            $
            1,866
            
            $
            1,866





***Guarantee
      of Doe Run Debt***





Doe
      Run
      Cayman and its wholly-owned subsidiary, Doe Run Peru, have jointly and
      severally, fully, unconditionally guaranteed notes issued by Doe Run. The total
      principal amounts owed under these notes as of October 31, 2005 and 2004 was
      $
      226,967 and $241,967, respectively. These notes are secured by a second priority
      interest in substantially all of the assets of Doe Run’s U.S. operations, except
      for substantially all accounts receivable and inventory.





The
      guarantee of Doe Run Peru is contractually subordinated to the indebtedness
      of
      Doe Run Peru under the Revolving Credit Facility described in Note
      9.





***Litigation***





All
      existing and pending litigations at the time of the acquisition of Doe Run
      Peru
      were retained by Centromin, the prior owner of the La Oroya smelter and Cobriza
      mine.





Doe
      Run
      Peru is a defendant in 198 labor lawsuits in the Peruvian labor courts that
      to
      workers allege damage from industrial diseases. Doe Run Peru has made claims
      in
      most of the cases against Centromin and has also made claims against both
      governmental agencies and private companies that provide workers’ insurance. The
      average claim is $18. Of 17 concluded cases in this category, 16 were dismissed
      and one resulted in an award of $9.












Doe
      Run
      Peru is also a defendant in 163 lawsuits by workers alleging that are owed
      certain differences in salaries and benefits. The average claim is $21. Of
      31
      concluded cases in this category, 26 were dismissed and five resulted in awards
      totaling $15. Doe Run Peru is also defendant in a lawsuit by the Yauli-La Oroya
      Employees Union concerning salaries and benefits. The claims of the 146 workers
      remaining in the lawsuit have been valued at a total of $238 according to a
      report by an expert appointed by the court.





Doe
      Run
      Peru is also a defendant in 26 labor lawsuits alleging claims ranging from
      industrial diseases to salary disputes including in indemnification for
      arbitrary dismissal, nullity of dismissal, moral damage compensation, and
      compensatory damages from work accident and readmission of worker. The average
      claim is $6. Of 29 concluded cases in this category 26 were dismissed and three
      resulted in awards totaling $22.





The
      amount of awards in the various categories of lawsuits referenced above
      represent total judgments issued by the relevant courts. For certain of these
      lawsuits, Centromin will pay a portion of the total award.





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





On
      May
      25, 2005, Doe Run Peru was served with a civil lawsuit alleging the existence
      of
      lead in a person caused by Doe Run Peru’s operations. The claim is for
      $100.





On
      July
      11, 2003, Doe Run Peru filed an administrative lawsuit against the Yauli -
      La
      Oroya Provincial City Hall in order to dismiss a number of fines for the amount
      of $2,800. Doe Run Peru was fined for not having the Construction Licenses
      for
      the PAMA projects.





Since
      most of the above cases are either in the pleading or discovery stages, the
      Company is unable at this time to estimate the expected outcome and the final
      costs, except as noted, of these actions. No amounts have been accrued as
      liabilities related to these actions. There can be no assurance that these
      cases
      would not have a material adverse effect, both individually and in the
      aggregate, on the results of operations, financial condition and liquidity
      of
      the Company. The Company has and will continue to vigorously defend itself
      against such claims.





***Letters
      of Credit and Other Contingent Obligations***





At
      October 31, 2005, the Company had outstanding customs bonds of $946 relating
      to
      materials and supplies and other purchases.





***Sales
      Commitments and Concentration***





The
      Company has commitments to sell approximately 79%, 98%, 99%, 39% and 94% of
      its
      anticipated 2006 copper, lead, zinc, silver and gold metal production,
      respectively, under agreements, with terms of generally less than one year.
      Sales prices are generally based on the average quoted exchange prices for
      the
      month of shipment, plus a premium.





Doe
      Run
      Peru derives its revenue from the sale of its refined metals and other products
      to numerous customers. Doe Run Peru’s three largest customers accounted for 16%,
      8% and 7%, respectively, of net sales in the year ended October 31, 2005, 17%,
      14% and 10%, respectively, of net sales in the year ended October 31, 2004,
      and
      15%, 9% and 8%, respectively, of net sales in the year ended October 31, 2003.
      The customers have sales contracts, under which the Company will supply products
      at prices based on international market quotations.





**(13)
      Hedging and Derivative Financial Instruments**





The
      Company uses derivative financial instruments primarily to enhance revenue
      by
      receiving premiums on option contracts. The Company sells futures contracts
      and
      options and combinations thereof that effectively establish contract prices
      for
      sales and purchases that are acceptable to the Company, should the options
      be
      exercised. The options generate











premium
      income, which enhance revenues. Because these
      instruments do not meet the requirements for hedge accounting under Statement
      No. 133, the changes in fair market value related to these instruments
      (including the time value portion), which reflect market prices and volatility
      at the balance sheet date, are recorded in results of operations, and are
      expected to increase the volatility of reported results.


The
      unrealized gain or loss reflected in the statement of operations relates to
      the
      change in fair market value of derivative financial instruments that are not
      designated as hedges. For derivative instruments designated as hedges (futures
      contracts), the Company assesses effectiveness by comparing the changes in
      fair
      value or cash flows relating to the hedged transaction with all changes in
      the
      fair values or cash flows of the related derivative contract. Because the
      futures contracts fluctuate by the same amount as the hedged transaction (the
      change in the London Metal Exchange price), the hedges are considered
      effective.





The
      fair
      market value of the Company’s derivative financial instruments reflected in the
      Company’s balance sheet as of October 31, 2005 and 2004 is the difference
      between quoted prices at the balance sheet date and the contract settlement
      value. The fair market value represents the estimated net cash the Company
      would
      receive (pay) if the contracts were canceled on the balance sheet
      date.





The
      Company’s open derivative positions as of October 31, 2005 were:





***Sold
      / (Purchased) futures contracts*** *(tons, ounces and dollar amounts not in thousands)*




Metal
              **Quantity**
              **Weighted
                  Average Price**
              **Fair
                  Value**
              **Period**Copper
              1,302
                  tons
              $2,577.07/ton
              ($1,296,940)
              Nov
                  05 - Jan 06(350)
                  tons
              $3,470.86/ton
              $52,900
              Dec
                  05Silver
              987,300
                  oz
              $6.83/oz
              ($209,601)
              Nov
                  05 - Dec 06




***Sold
      / (Purchased) call option contracts*** *(tons, ounces and dollar amounts not in thousands)*




Metal
              **Quantity**
              **Price
                  range**
              **Fair
                  Value**
              **Period**Silver
              120,670
                  oz
              $5.47/oz
              ($175,124)
              Jan
                  06Crude
                  Oil
              100,000
                  barrel
              $70.00/barrel
              359,750
              Feb
                  06- Dec 06




The
      Company’s open derivative positions as of October 31, 2004 were:





***Sold
      / (Purchased) futures contracts*** *(tons, ounces and dollar amounts not in thousands)*





Metal
            **Quantity**
            **Weighted
                Average Price**
            **Fair
                Value**
            **Period**Copper
            1,102
                tons
            $2,400.41/ton
            ($148,421)
            Nov
                04 - Aug 05Silver
            850,175
                oz
            $5.26/oz
            ($1,191,098)
            Nov
                04(987,300)
                oz
            $5.56/oz
            $1,088,910
            Nov
                04Gold
            6,472
                oz
            $264.36/oz
            ($792,370)
            Nov
                04(6,198)
                oz
            $299.91/oz
            $538,445
            Nov
                04





***Sold
      / (Purchased) call option contracts*** *(tons, ounces and dollar amounts not in thousands)*





Metal
            **Quantity**
            **Price
                range**
            **Fair
                Value**
            **Period**Silver
            416,860
                oz
            $5.47
                - $7.06/oz
            ($479,378)
            Dec
                04 - Mar 05(54,850)
                oz
            $7.06/oz
            $10,889
            Dec
                04





***Sold
      / (Purchased) put option contracts*** *(tons,
      ounces and dollar amounts not in thousands)*





Metal
            **Quantity**
            **Price
                range**
            **Fair
                Value**
            **Period**Copper
            (1,764)
                tons
            $2,512.90/ton
            $204,748
            Jan
                05 - Apr 05












At
      October 31, 2005 and 2004, the Company had recorded an asset of $0 and $1,
      respectively, and a liability of $1,269 and $768, respectively, related to
      the
      fair values of these instruments.





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








**(14)  Fair
      Value of Financial Instruments**





The
      fair
      values of the Company’s long-term debt were estimated using discounted cash flow
      analysis, based on the estimates of incremental borrowing rates for similar
      types of borrowing arrangements. At October 31, 2005 and 2004, the fair values
      of the Company’s financial instruments were not materially different from their
      carrying amounts.





**(15)  Related
      Party Transactions**





The
      Company has signed the following agreements with Doe Run:




Pursuant
      to the terms and conditions included in an International Sales Agency Services
      Contract dated November 1, 2000, Doe Run agreed to perform marketing and sales
      services for Doe Run Peru. The term of this agreement is for two years after
      which it is automatically renewed on an annual basis unless either party gives
      notice of non-renewal. The commission is 2.25% of the sales revenue. Effective
      July 1, 2004, Doe Run and Doe Run Peru cancelled the International Sales Agency
      Services Contract under which Doe Run acted as a sales agent on behalf of Doe
      Run Peru. Under the cancellation, the balance owed to Doe Run of $22,600 will
      be
      paid in $1,000 quarterly installments or as otherwise agreed by the parties.
      Doe
      Run Peru expensed $0, $7,502 and $9,046 for the years ended October 31, 2005,
      2004 and 2003, respectively.





Pursuant
      to the terms and conditions included in a Hedging Services Contract renewed
      November 1, 2002, Doe Run agreed to perform trading and hedging services. The
      agreement is automatically renewed on an annual basis unless either party gives
      notice of non-renewal. The commission is $42 per month. On July 1, 2004 Doe
      Run
      and Doe Run Peru amended the Hedging Service Contract changing the terms of
      the
      commission calculation through January 1, 2006. Doe Run Peru expensed $0, $336
      and $504 for the years ended October 31, 2005, 2004 and 2003,
      respectively.





In
      addition to the above, Doe Run has paid expenses on behalf of Doe Run Peru
      of $0
      and $666 in 2005 and 2004, respectively. The following balances relating to
      inter-company transactions were outstanding as of October 31, 2005 and
      2004:





(a)
            As
                a result of these transactions, the Company had a due to related
                parties
                balance of $18,057 and $21,432 at October 31, 2005 and 2004, respectively.




(b)
            Sales
                of refined metals to Doe Run were $9,588, $2,996 and $707 for the
                years
                ended October 31, 2005, 2004 and 2003, respectively. As a result
                of these
                sales the Company had a due from related parties of $4,224 and $1,994
                as
                of October 31, 2005 and 2004, respectively and are included as trade
                accounts receivable in the balance sheet as of October 31, 2005 and
                2004.




(c)
            The
                Company has signed a subordinated promissory note payable to Doe
                Run in
                the aggregate principle amount of $139,063. See Note
                9.




Doe
      Run
      Peru has guaranteed notes of Doe Run. See the related discussion in Note 12.





Certain
      of Doe Run’s debt agreements contain covenants that limit the ability of Doe Run
      Peru to, among other things, incur additional indebtedness, make certain
      restricted payments, consummate certain asset sales, enter into certain
      transactions with affiliates, incur lines, impose restrictions on the ability
      of
      a subsidiary to pay dividends or make certain payments to Doe Run, merge or
      consolidate with any other person or sell, assign, transfer, lease, convey
      or
      otherwise dispose of all or substantially all of its assets.








**(16)**  **Geographic
      Data**





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





**Year
                Ended October 31,****2005**
            
            **2004**
            
            **2003**USA
            
            $
            240,287
            
            $
            133,394
            
            $
            161,604Brazil
            
            
            92,989
            
            
            79,355
            
            
            56,994Peru
            
            
            72,853
            
            
            69,058
            
            
            39,655Taiwan
            
            
            54,065
            
            
            44,669
            
            
            15,013Japan
            
            
            46,329
            
            
            99,821
            
            
            57,034Switzerland
            
            
            30,224
            
            
            25,034
            
            
            25,188Venezuela
            
            
            24,041
            
            
            20,045
            
            
            4,714Colombia
            
            
            22,783
            
            
            18,672
            
            
            13,230Other
            
            
            67,269
            
            
            77,137
            
            
            63,548Total
                net sales
            
            $
            650,840
            
            $
            567,185
            
            $
            436,980





**(17)  Financial
      Condition**





***Fiscal
      Year 2003***





For
      the
      year ended October 31, 2003 and for several years prior, Doe Run Peru reported
      recurring losses, primarily due to the decline of treatment charges Doe Run
      Peru
      received for processing raw materials over the prior five years, which had
      severely impacted Doe Run Peru's liquidity. Doe Run Peru had failed to meet
      certain financial covenant requirements contained in its revolving credit
      agreement during fiscal 2003, which default continued into fiscal 2004. The
      Company has substantial environmental commitments that will affect the Company's
      liquidity. These issues combined raise substantial doubt about the Company's
      ability to continue as a going concern.





Doe
      Run
      Peru's results of operations and liquidity had been severely impacted by
      declining treatment charges that Doe Run Peru received for processing raw
      materials resulting from a shortage in the global supply of concentrates. The
      effects of low metals prices for the past several years had also caused some
      of
      Doe Run Peru's current suppliers of concentrates to suffer financial distress,
      which had affected the availability of concentrate feed. During 2003, deliveries
      of lead and zinc concentrates to La Oroya from a major Peruvian supplier were
      below contracted amounts. While Doe Run Peru was able to replace a portion
      of
      this shortfall with concentrates from other suppliers, total concentrate
      receipts were less than expected and the resulting changes in concentrate mix
      and interruptions in delivery schedules adversely affected Doe Run Peru's metal
      production and results of operations. If one or more of Doe Run Peru's
      significant local suppliers were to cease delivery of concentrates, there could
      be no assurance La Oroya would be able to secure sufficient replacement
      feedstock at economically acceptable terms. If such shortages resulted in a
      significant interruption in feed supply, a material reduction in the production
      of metals from La Oroya or an interruption of production in the lead and zinc
      circuits could result, which could have a significant adverse effect on the
      Company's results of operations, financial condition and liquidity.





Doe
      Run
      Peru proceeded with efforts to identify alternative methods of achieving
      compliance with environmental requirements. These efforts included, but were
      not
      limited to, reducing or curtailing production from a portion of the plant thus
      eliminating the need for the equipment presently contemplated and replacing
      it
      with another alternative. These efforts took into consideration the impacts
      on
      profitability and liquidity, as well as other economic impacts. Failure to
      comply with the PAMA could result in the cessation of operations at the La
      Oroya
      smelter.





During
      fiscal year 2003, Doe Run Peru implemented cost savings, including a reduction
      of approximately 10% of its workforce, acceleration of cash receipts, as well
      as
      other measures, to improve its liquidity. In addition, the retirement of Doe
      Run
      Peru's loan from a foreign bank, reduced Doe Run Peru's interest payments by
      approximately $14,000 per year. These changes improved Doe Run Peru's cash
      flow
      and availability in 2003. The cash balance and net unused availability under
      Doe
      Run Peru's revolving credit facility were approximately $16,800 and $3,800
      at
      October 31, 2003, respectively.













***Fiscal
      Years 2004-2005***





Metal
      prices rose dramatically in 2005 and 2004. Doe Run Peru’s revenues and feed
      costs increased as a result of the price increases, as did accounts receivable,
      inventory and accounts payable as of October 31, 2005.





Net
      unused availability at October 31, 2005 and 2004 under the Doe Run Peru
      Revolving Credit Facility was approximately $200 and $60, respectively. In
      addition to the availability under its revolving credit facilities, cash
      balances at Doe Run Peru were $14,569 and $6,905, respectively, at October
      31,
      2005 and 2004. Higher metal prices resulted in higher outlays for concentrate
      purchases and higher VAT payments funded by cash from operations, as Doe Run
      Peru has reached its maximum borrowing level under the Doe Run Peru Revolving
      Credit Facility.





As
      discussed in Note 12, Doe Run Peru’s existing PAMA requires it to perform
      projects in 2006 at a total cost of $108,000. Doe Run Peru expects that it
      will
      not be able to comply with the spending requirements of the PAMA investment
      schedule in 2006 with respect to the construction of the sulfuric acid plant
      required by the PAMA and, as a result, could be subject to penalties. Failure
      to
      comply with the PAMA could result in the cessation of operations at the La
      Oroya
      smelter, which would adversely affect our business, financial condition and
      results of operations.





The
      Peruvian Government has issued the Supreme Decree, which recognized that
      exceptional circumstances may justify an extension of one or more projects
      within the scope of a PAMA. On December 20, 2005 the Company filed the request
      of extension of the term to comply with the sulfuric acid plants projects
      included in the original PAMA. Doe Run Peru will perform other environmental
      projects to reduce fugitive emissions, including heavy metal dust, to address
      the health issues of the community. The total cost of the currently remaining
      PAMA projects, including the sulfuric acid plant construction, and these
      projects is approximately $130,000. If the extension of the PAMA is approved,
      management expects to fund the PAMA projects from cash from
      operations.





Upon
      approval of a modified PAMA, Doe Run Peru would be required to create a trust
      account. The trust account would administer the receipts and disbursements
      related to the extended PAMA project. The Supreme Decree requires that receipts
      from sales, in an amount sufficient to fund the monthly cash requirements of
      the
      extended PAMA project, be remitted directly to the trust account.





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





To
      achieve the financial guarantee and the trust contract required by Supreme
      Decree, the company has amended the Doe Run Peru Revolving Credit Facility
      to
      allow for those arrangements and has filed a draft of a trust guarantee contract
      with a local bank. Additionally, on December 10, 2005 the company signed a
      Working Capital Financial Facility Agreement for the amount of $30,000 (named
      Ferrites Loan) with Servicios Mineros Integrados S.A.C. a Trafigura Beheer
      B.V.
      subsidiary, to use such funds in the fulfillment of the financial security
      as
      mentioned above.





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





In
      the
      future, as part of a modernization plan and to enrich sulfurous gas feed to
      the
      sulfuric acid plant, we are planning to replace the oxy-fuel reverberatory
      furnace with a reactor furnace to smelt copper concentrates. The anticipated
      cost is approximately $57,000.





A
      default
      under the requirements of the PAMA could result in a default under the Doe
      Run
      Peru Revolving Credit Facility.





As
      discussed in Note 10 Doe Run Peru has received income tax assessments from
      SUNAT
      for the tax years 1998 through 2001, the assessed amount consisting of
      additional income taxes due, penalties and interest as of October 31, 2005,
      totals approximately $109,030. Doe Run Peru has also received VAT assessments
      for tax years 1999 through 2001 and for the period from January through July
      2004, the total assessment was approximately $43,489, SUNAT offset the amount
      assessed for 2004 of approximately $2,300 against Doe Run Peru’s VAT receivable
      balance from July 2004. Future VAT











reimbursements
      cannot be used to offset the
      assessment by SUNAT. The Company discontinued use of the holding certificates
      for exports in June 2004. As discussed in Note 9, if Doe Run Peru is not
      successful with its administrative appeal of the tax assessment, the lender
      can,
      at its discretion, require that the amount of the assessment reduce net worth
      which would affect Doe Run Peru’s ability to comply with the net worth
      requirement. In addition, the Company estimates that the effect of similar
      assessments for periods not yet assessed would be approximately $32,000 and
      $20,166 for the income tax and VAT matters, respectively. Furthermore, Doe
      Run
      Peru would also be required to make additional workers’ profit sharing payments
      equal to 8% of the increase in taxable income generated by the changes discussed
      above, or approximately $11,700 for calendar years 1998 through
      2005.


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





These
      issues raise substantial doubt about the Company's ability to continue as a
      going concern. Management believes that the price improvements and other revenue
      enhancements, and the issuance of the Supreme Decree, by allowing an application
      to extend La Oroya’s PAMA requirement for the construction of the sulfuric acid
      plant, will enable Doe Run Peru to continue as a going concern through October
      31, 2006. However, there can be no assurance that these actions will achieve
      the
      desired results.








S
      I G N A T U R E S




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




THE
                DOE RUN RESOURCES CORPORATION
              (Registrant)By:
            /s/
                A. Bruce NeilA.
                Bruce Neil
              Chief
                Executive OfficerOctober
                19, 2006(Date)








**EXHIBIT
      INDEX**








Exhibit
                No.
              Description31.1
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.31.2
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.32.1
              Certification
                  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.32.2
              Certification
                  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.